Rio Tinto Plc · LSE:RIO
Rio Tinto — Non-Deal Roadshow (September 2012)
66 slides from Rio Tinto's roadshow presentation, Sep 13, 2012
Slide 1: ASX cover letter: financial community visit, Montreal
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 ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 13 September 2012 Dear Sir, Attached is a presentation given by
Slide 2: Rio Tinto Diamonds & Minerals
For personal use only Rio Tinto Diamonds & Minerals Fuelling consumer-driven economic growth Alan Davies Chief executive 12 September 2012
Slide 3: Cautionary statement
Cautionary statement For personal use only 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/attending this presentation you agree to be bound by the following conditions. Forwar
Slide 4: Outline
Outline For personal use only • Safety performance • Introduction to our global operations • Macro-economic trends • Financial performance • A well positioned portfolio • Reputation built on sustainable stewardship • Leadership in technology Boron, California ©2012 Rio Tinto, All Rights Reserved Sli
Slide 5: Safety is our core value
Safety is our core value For personal use only Diamonds & Minerals1 rolling injury rates, 2002 - 2012 2.2 2.0 1.8 AIFR2 1.6 1.4 1.2 1.0 0.8 LTIFR3 0.6 0.4 0.2 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1. Data for RTIT, RTM, Diamonds, DSL & Simandou. 2. AIFR (all injury frequency rat
Slide 6: A global portfolio of large, low cost, expandable assets
A global portfolio of large, low cost, expandable assets For personal use only Product Operations Projects Borates Boron (USA) Jadar (Serbia) RBM (South Africa) Titanium Mutumba RTFT (Canada) dioxide (Mozambique) QMM (Madagascar) Dampier (Australia) Salt Port Hedland (Australia) Lake MacLeod (Austra
Slide 7: Demand growth strength in later stages of economic development
Demand growth strength in later stages of economic development For personal use only Inflection point not yet reached for many of our products Percentage of saturation level* Titanium dioxide Nickel Titanium Dioxide Crude steel Aluminium Copper Diamonds Borates 2,000 10,000 18,000 26,000 34,000 42,0
Slide 8: Robust macro-trends in China driving consumer driven growth
Robust macro-trends in China is driving wealth and a trend towards consumer driven growth For personal use only Real GDP RMB trillions CAGR 2010-25 CAGR 2025-40 Percent Percent Urban 153 7.1 3.7 Rural 132 111 88 8.4 4.3 67 98 48 93 96 19 32 86 90 75 80 0.4 -6.1 72 2005 10 15 20 25 30 35 2040 Real GD
Slide 9: Increasing Chinese wealth will underpin long term fundamentals
Increasing Chinese wealth will underpin long term fundamentals for our products For personal use only Number of urban households by income bracket1 Thousands CAGR CAGR 2010-25 2025-40 Percent Percent 190 235 291 339 385 426 463 492 3.3 1.7 19.2 9.9 Affluent Middle class Lower income 4.4 -3.3 -4.5 -1
Slide 10: Beyond China, equivalent of today's population living in cities by 2050
Beyond China, the equivalent of today’s population will be living in cities by 2050 For personal use only Distribution of the world population, 1980 – 2050 Billions (%) urban as a percentage of total population Source: United Nations ©2012 Rio Tinto, All Rights Reserved Slide 9
Slide 11: Portfolio of industry leading businesses
Portfolio of industry leading businesses For personal use only Titanium dioxide Minerals Diamonds Salt • #1 producer of TiO2 • #2 producer of • #3 rough diamond • #1 exporter of solar feedstocks refined borates producer globally salt • #2 producer of zircon • Tier one mine in • Leader in the • JV be
Slide 12: Strong fundamentals drive price, earnings growth
Strong fundamentals drive price, earnings growth For personal use only Diamonds and Minerals1 results US$ millions 600 • Strong earnings growth in titanium dioxide will continue as supply tightens and long term priced contracts unwind 500 • Sustained price growth for borates expected 400 • Doubled s
Slide 13: RTIT is well positioned to capture market growth
RTIT is well positioned to capture market growth For personal use only TiO2 demand development • Future wealth and demographic profiles Million tonnes, pigment (LHS), crude steel (RHS) translate to an unprecedented surge in demand for TiO2 in pigment • Little investment in new mine and smelting capa
Slide 14: Doubling our stake in the world class RBM operation
Doubling our stake in the world class RBM operation For personal use only • Rio Tinto doubled holdings in Richards Bay Minerals • Purchase price paid on completion of $1.7 billion; acquisition price at 1 February 2012 effective date was $1.9 billion and includes: ̶ $0.6b for BHP’s 37% equity interes
Slide 15: Driving productivity and performance in borates
Driving productivity and performance in borates For personal use only Borate demand drivers Cumulative kmt boric oxide B2O3 equivalent CAGR • Demand growth driven by energy efficiency, food supply, consumer trends 1000 5.9% 800 6.4% • Tier 1 orebody at Boron, California, with 600 consistent product
Slide 16: Potash – a world class addition to the portfolio
Potash – a world class addition to the portfolio For personal use only Population growth Billions • Strong population growth, a majority of the world moving to higher calorie and meat 10 9 consumption, and potassium depleted soils 8 will underpin strong demand for potash in 7 the future 6 0.8% pa 5
Slide 17: Dampier Salt - the world's largest exporter of Salt
Dampier Salt1 - the world’s largest exporter of Salt For personal use only Asian salt demand Million tonnes CAGR • Three operations in Western Australia with a 16% combined capacity of 10.3Mt 10% 8% • Demand growth driven by Chinese imports 0% 0% to fuel automotive, construction and 0% electronic se
Slide 18: Strategic review of the Diamonds business underway
Strategic review of the Diamonds business underway For personal use only • Significant presence in the global diamonds industry • Long term demand driven by growth in emerging markets with little new supply coming on line • Rio Tinto undertaking a strategic review of the business to to create greate
Slide 19: Track record of sustainable development underpins strategy
Track record of sustainable development underpins strategy For personal use only • Projects are located in geographically diverse locations • Our responsible approach provides access to resources, people and capital • Examples of industry leading sustainable stewardship in Madagascar, South Africa,
Slide 20: Demonstrating world-class operating stewardship
Demonstrating world-class operating stewardship For personal use only Mine Refine Market • Safer operations • Smelting technology to • On-line auctions for price • Optimisation of mining access high value markets discovery productivity • Development of new • Dedicated R&D to improve • Automated haul
Slide 21: Fuelling consumer driven economic growth
Fuelling consumer driven economic growth For personal use only • Entering a new phase of demand growth for commodities • Global shift in wealth and demographic profiles driving demand for our products • Assets provide exposure to different economic drivers and later-cycle inflection points • Maximis
Slide 22: Rio Tinto Iron & Titanium
For personal use only Rio Tinto Iron & Titanium Investor update Jean-Francois Turgeon Managing Director, RTIT 12 September 2012
Slide 23: Overview
Overview For personal use only • Asset base • Operations • Applications • RTFT mining and refining • RBM mining and refining • Value of co-products • Demand drivers • Industry fundamentals • Price progression • Value proposition ©2012 Rio Tinto, All Rights Reserved Slide 22
Slide 24: Unparalleled asset base
Unparalleled asset base For personal use only Operation Offices Technology Centre Exploration Rio Tinto Fer et Titane (100% Rio Tinto) • World’s largest hard rock ilmenite mine • LOM = +35 years • Refining and technology centres London Havre St Pierre Global headquarters Chicago Frankfurt Sales & Ma
Slide 25: Large, long-life, low-cost expandable operations
Large, long-life, low-cost expandable operations For personal use only RBM QMM RTFT Growth • Increasing stake to • 39% increase in • Record production • Progressing order of 74% production from H1 in 2011 magnitude studies at • One of world’s lowest 2011 to H1 2012 greenfield site in • C$800m planne
Slide 26: Building blocks for the growing middle class
Building blocks for the growing middle class For personal use only Ilmenite mining (33 – 60% TiO2 feedstocks) Upgrading (80 - 95% TiO2 feedstocks) Fluxes and welding rods TiO2 pigments Titanium metals (5% of production) (90% of production) (5% of production) • Industrial uses • Paints and coatings (
Slide 27: Proprietary processes and products (RTFT)
Proprietary processes and products (RTFT) For personal use only Sorelflux® = crushed and screened lump ilmenite ore used by steelmakers to combat blast furnace hearth QMM Ilmenite RTFT Ilmenite erosion (mineral sands) (hard rock) Sorelslag® Sorelmetal®: high- (80% TiO2) sulphate purity iron-carbon p
Slide 28: Proprietary processes and products (RBM)
Proprietary processes and products (RBM) For personal use only Dredge and Floating Concentrator Plant Heavy mineral concentrate Mineral separation plant Rutile and zircon Ilmenite Dryer Smelter Liquid iron 4 furnaces Electrostatic separation Titanium dioxide slag Pig iron used to (85% TiO2) produce
Slide 29: Co-products add significant value
Co-products add significant value For personal use only RTIT revenue by product line (US$b) • Leveraging technology to create valuable 2.5 products instead of waste • Provides greater flexibility to respond to changing market environment 2 • Co-products account for nearly 50% of revenues for the las
Slide 30: Urbanisation drives per capita consumption growth
Urbanisation drives per capita consumption growth For personal use only • Chinese population peaking at 1.4 billion in 2025, with urban population increasing to >75% by 2040 • Urbanisation will sustain a continued build out of floor space • Chinese middle class growing to 70% by 2020 • Demand growth
Slide 31: Demand projected to outstrip supply in near term
Demand projected to outstrip supply in near term For personal use only Titanium dioxide supply & demand (kmt TiO2) 10,000 9,500 Inflection point – 9,000 limited new supply to meet demand growth 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 32: Demand for higher grades outpacing lower grades
Demand for higher grades outpacing lower grades For personal use only TiO2 feedstock demand growth 2000 - 2020 • RTIT is global leader in high grade feedstock supply with 50% share of sales • Demand growth for higher grades driven by rising environmental and productivity standards • Higher grade fee
Slide 33: Leaders in creating value from higher grades
Leaders in creating value from higher grades For personal use only UGS® 95% TiO2 RTCS™ 2010 90% TiO2 RBM chloride slag 85% TiO2 Sorelslag® Sorelslag® 80% TiO2 78% TiO2 Sorelslag® Sorelslag® 72% TiO2 70% TiO2 1950 1960 1970 1980 1990 2000 2010 2020 ©2012 Rio Tinto, All Rights Reserved Sources: Austra
Slide 34: Pricing outlook remains strong
Pricing outlook remains strong For personal use only Price progression estimates from TZMI and brokers • Previous multi-year pricing mechanisms have US$ nominal guaranteed volumes, but limited exposure to market pricing • These are being replaced with new long-term contracts with shorter-term pricin
Slide 35: Well-positioned to maximise value
Well-positioned to maximise value For personal use only • Strong asset base and reserves position • Demand projected to outstrip supply in medium to long term, driven by global urbanisation • World leader in supply of high grade products – fastest growing sector • Advancing expansion options • Posit
Slide 36: Rio Tinto Diamonds
Rio Tinto Diamonds For personal use only Bruce Cox Managing Director 12 September 2012
Slide 37: Strategic review
36 Strategic review For personal use only • Strong industry fundamentals – a matter of scale for Rio Tinto • All options being reviewed, including divestment • No time pressure for transaction • Argyle underground block cave development continues together with progress of growth options including th
Slide 38: Rio Tinto operates a fully integrated diamond business
37 Rio Tinto operates a fully integrated diamond business For personal use only DiavikDiavik Diamond Mine Diamond Mine(60%) Diavik Antwerp London Argyle Diamond Mine (100%) New York Hong Kong Murowa Diamond Mine (77.8%) Bunder Mumbai Murowa Diamond operations Argyle Bunder Diamond Project (100%) Per
Slide 39: Significant presence in the global diamonds industry
38 Rio Tinto has a significant presence in the global diamonds industry For personal use only • Production of 11.7 million carats and revenue of US$726 million in 2011 • Third largest rough diamond producer globally by volume, behind Alrosa and De Beers • Supplies all major markets with a leadership
Slide 40: Strong industry fundamentals drive price
39 Strong industry fundamentals drive price For personal use only • Supply is forecast to be flat over the next decade: o Lack of significant discoveries in the last decade o Long lead times for bringing discoveries to commercial production o Rio Tinto well positioned to provide significant increase
Slide 41: Diamonds are a late cycle luxury product
40 Diamonds are a late cycle luxury product For personal use only Intensity curve 100 90 80 Aluminium 70 Crude steel Titanium Dioxide Percentage of 60 saturation level (1) 50 40 Borates Diamonds 30 20 10 0 2,000 10,000 18,000 26,000 34,000 42,000 50,000 58,000 World GDP/capita Timeframe 2010 2020 20
Slide 42: Strong demand growth driven by China and India
41 Strong demand growth driven by China and India For personal use only 200 USA 175 China • US expected to remain a key Diamond Jewellery consumption forecast (US$b 2007R) India market for diamond jewellery 150 Japan 125 Europe • China expected to surpass the size Gulf of the US market by 2025 100 O
Slide 43: Supply is forecast to be flat / declining over the next decade
42 Supply is forecast to be flat / declining over the next decade For personal use only Open cut operation 180 • Existing mines becoming older and Underground operation deeper 160 Marine/Alluvial/Artisinal • Greater share of production 140 transitioning from open pit to underground mining, with lowe
Slide 44: Significant and growing supply deficit drives stronger prices
43 Significant and growing supply deficit drives stronger prices For personal use only Demand supply imbalance is expected to widen 30 CAGR (2010-20) 6.1% 25 20 US$b 15 CAGR (2010-20) 10 0.8% 5 0 2010 2012 2014 2016 2018 2020 Rough Demand value (US$b) Rough Supply value (US$b) Source: Rio Tinto Diam
Slide 45: Full range of rough diamonds in sizes, colours and qualities
44 Rio Tinto produces a full range of rough diamonds in terms of sizes, colours and qualities For personal use only Diavik rough Murowa rough Argyle rough Bunder rough • Large • Large • Small • Large • White • Predominantly white • Coloured • White and brown • Gem quality • Gem quality • Diverse qua
Slide 46: More than 90% of world's supply of rare pink diamonds
45 Rio Tinto also produces more than 90% of the world’s supply of rare pink diamonds For personal use only • Niche polished pink diamond business • Consumer fronting luxury brand • Distribution via trademark licensing agreements • Iconic annual Pink Diamonds Tender
Slide 47: Operations overview
46 Operations overview For personal use only Argyle Diavik Murowa Bunder •Almost 800 million carats • Commenced • Commenced • Discovered in 2004 produced in 26 years production in 2003 production in 2004 • Resource 37 mts, 27.4 mcts •Iconic and differentiated • In transition to • Plans for expansion
Slide 48: Argyle underground mine scheduled to reach full production in 2014
47 The Argyle underground mine is scheduled to reach full production in 2014 For personal use only • US$2.2 billion committed investment • Extension of mine life to at least 2020 • Average 20m carats per year over the life of the block cave • No change to diamonds at depth • Possible mine life exten
Slide 49: Underground mining at Diavik secures production for the next decade
48 Underground mining at Diavik secures production for the next decade For personal use only • Underground mining commenced in 2010 • Mine life to 2023 • Sub-level retreat and blast hole stoping methods are used • Plant to produce 6-7 million carats of rough diamonds per annum • Development of A21 p
Slide 50: The Bunder project is a valuable addition to future supply
49 The Bunder project is a valuable addition to future supply For personal use only Investment US$ Investment to date US$74 Million Estimated development cost US$500 Million Job creation No. of jobs Current workforce ~400 people (70% local) Expected construction 800-1200 workforce Expected mining &
Slide 51: Unrivalled record of success in diamond exploration
50 Rio Tinto has an unrivalled record of success in diamond exploration For personal use only • Past success in the discovery of Argyle, Diavik, Murowa and Bunder • Current focus is on highly prospective targets in three countries - Canada - India - DRC • Programmes supported by proprietary sample p
Slide 52: Sales and marketing extracts a premium
51 RTD Sales and marketing extracts a premium through our partnership model, differentiated For personal use only products and robust price discovery • 80% relationship sales via long term contracts • Balance of production sold through invitation sales, spot sales and tenders – price discovery mecha
Slide 53: Well positioned for profitable growth
52 Well positioned for profitable growth For personal use only • Robust industry fundamentals to drive strong price growth • High quality asset portfolio well positioned to capture price growth • Argyle and Diavik underground mining secures production for the next decade • Bunder project is an impor
Slide 54: Rio Tinto Minerals
For personal use only Rio Tinto Minerals Investor update Xiaoling Liu President & CEO 12 September 2012
Slide 55: Overview
Overview For personal use only • Asset base • Applications • Borate mining and refining • Borate demand drivers • Industry fundamentals • Value proposition Boron Operations, California ©2012 Rio Tinto, All Rights Reserved Slide 54
Slide 56: Tier one assets in complementary mineral sectors
Tier one assets in complementary mineral sectors For personal use only Potash(40% Rio Tinto) Jadar (100% Rio Tinto) • Potash exploration JV in Saskatchewan • Lithium-borate development project in Serbia • Tier One resource suitable for solution mining • Potential to supply 20% of world’s lithium car
Slide 57: Solid value creation across all sectors
Solid value creation across all sectors For personal use only Borates Lithium carbonate Potash Technology • Target markets by • Jadar deposit • Exploration JV in • Asia Technology profitability and discovered in Saskatchewan Center in China to sustainable growth Serbia in 2004 support growth in oppo
Slide 58: Products linked to rising standards of living
Products linked to rising standards of living For personal use only • Fertilizers that increase crop quality and yield • Products linked to rising standards of living (borates): − Fiberglass, wood preservatives and ceramics that make homes safer and more energy efficient − Heat-resistant glass used
Slide 59: World class sodium borate deposit
World class sodium borate deposit For personal use only • Annual production of ~1 mt refined borates • Life of mine is +40 years • Strong track record for safety and continuous cost improvement • Two main ores refined into two main product lines (boric acid, sodium borate) • 34 products in total; sp
Slide 60: First mover in borate process and product advances
First mover in borate process and product advances For personal use only • Sodium borates = borax pentahydrate (5 mol), borax decahydrate (10 mol), anhydrous borax ̶ Feedstock for fiberglass, agriculture products • Non-sodium borates = boric acid, anhydrous boric acid ̶ Feedstock for specialty/cover
Slide 61: Commercial strategy focuses on key growth trends
Commercial strategy focuses on key growth trends For personal use only Energy efficiency Urbanisation Global Food Supply Efficiency Emerging cities Agriculture • Insulation standards • Insulation • Improve crop yields and • Government incentives quality • Ceramics • Building practices • Expansion in
Slide 62: Demand for refined borates growing at a faster rate
Demand for refined borates growing at a faster rate For personal use only Borate demand – minerals vs refined products • Demand growth for refined products (kmt B2O3 equivalent) versus minerals driven by rising 2,500 environmental and productivity standards • Refined borates offer superior handling
Slide 63: Strong position and fundamentals
Strong position and fundamentals For personal use only Supply-Demand 5-mol products (kmt B2O3) Supply-Demand Boric Acid products (kmt B2O3) 1,300,000 1,100,000 1,200,000 1,000,000 1,100,000 900,000 1,000,000 800,000 900,000 700,000 800,000 600,000 700,000 500,000 600,000 400,000 500,000 300,000 400,
Slide 64: Further potential through development of Jadar
Further potential through development of Jadar For personal use only • Significant lithium-borate resource located in western Serbia • If developed, has the potential to supply more than 20% of global lithium demand • Rio Tinto discovered the deposit in 2004 and a new lithium-borate mineral called J
Slide 65: Potash complements existing portfolio
Potash complements existing portfolio For personal use only • Exploration JV with Russian fertilizer producer Acron in Saskatchewan. • Saskatchewan is home to about half the world’s potash reserves • Good fit with borate micronutrient markets • Builds on Rio Tinto expertise in potash solution mining
Slide 66: Promising value proposition
Promising value proposition For personal use only • Borate demand outpacing supply in medium horizon, despite expansions • Strong commercial strategy built on major trends • Continuing cost discipline through mature business improvement program • Recognized leaders in safety performance and culture