Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2023 Earnings Presentation
63 slides from Rio Tinto's earnings presentation, Jul 26, 2023
Slide 1: Notice to ASX: 2023 Half Year Results Presentation
Notice to ASX 2023 Half Year Results Presentation 26 July 2023 The Rio Tinto 2023 half year results presentation will be given at 9.30am (BST) / 6.30pm (AEST) today by Rio Tinto Chief Executive Jakob Stausholm, and Chief Financial Officer Peter Cunningham. The presentation slides are attached and al
Slide 2: Notice to ASX: Contacts
Notice to ASX 2/2 Contacts Please direct all enquiries to media.enquiries@riotinto.com Media Relations, Media Relations, Media Relations, United Kingdom Australia Americas Matthew Klar Matt Chambers Simon Letendre M +44 7796 630 637 M +61 433 525 739 M +1 514 796 4973 David Outhwaite Jesse Riseborou
Slide 3: 2023 Half Year Results
For personal use only 2023 Half Year Results 26 July 2023 Oyu Tolgoi, Mongolia
Slide 4: Cautionary and supporting statements
Cautionary and supporting statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (together with their subsidiaries, “Rio inability to attract and retain requisite skilled people; declines in commodity prices and adverse exchange rate Tinto”). By accessing/attending thi
Slide 5: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive For personal use only Oyu Tolgoi, Mongolia 3
Slide 6: Strong financials and consistent progress
Strong financials and consistent progress For personal use only Production (CuEq)1 ↑ 5% Underlying ROCE 20% 2,317kt in H1 2023 Underlying Underlying EBITDA $11.7 bn earnings $5.7 bn Underlying EBITDA margin at 42% Free cash Dividends flow $3.8 bn 177 US cps Equal to $2.9 bn ©2023, Rio Tinto, All Rig
Slide 7: Investing in the health of our business
Investing in the health of our business… Safety remains Improving asset Building a Strengthening our For personal use only our top priority health thriving culture social licence …while shaping our portfolio for the future Oyu Tolgoi underground Kennecott underground La Granja AP60 Matalco joint ven
Slide 8: Peter Cunningham, Chief Financial Officer
Peter Cunningham Chief Financial Officer For personal use only Beijing, China ©2023, Rio Tinto, All Rights Reserved 6
Slide 9: Robust results
Robust results $bn, except where stated H1 2023 H1 2022 Comparison For personal use only Production (CuEq kt)1 2,317 2,200 +5% Consolidated sales revenue 26.7 29.8 -10% Underlying EBITDA 11.7 15.6 -25% Underlying earnings2 5.7 8.7 -34% Net earnings2 5.1 8.9 -43% Underlying ROCE2 20% 34% -12 pp Cash
Slide 10: Commodity prices recovering from low point in H2 but still down year on year
Commodity prices recovering from low point in H2 but still down materially year on year For personal use only Iron Ore1 index (-14% vs H1 ‘22 ) Copper2 LME (-10% vs H1 ‘22) Aluminium3 LME (-24% vs H1 ‘22) 250 500 4,000 900 450 3,500 750 200 400 3,000 600 150 350 2,500 450 100 300 2,000 300 50 250 1,
Slide 11: Our major commodities: trading below their real-term 2010 average
Our major commodities: trading below their real-term 2010 average Commodity prices (real $2023, 12 months moving average)1 180 Period of oversupply Global Brumadinho COVID-19 Weaker For personal use only after investment boom economic tragedy stimulus fuels demand 170 recovery affects iron demand, a
Slide 12: Pricing remains the biggest driver – cost inflation slowing
Pricing remains the biggest driver – rate of cost inflation slowing but still a headwind Underlying EBITDA For personal use only $bn External $3.2bn Controllables $0.7bn 15.6 (3.3) (0.3) 12.4 0.4 (0.4) 0.4 (0.4) 11.7 (0.3) Energy 0 - Kennecott smelter Simandou & Battery Iron ore1 -1.6 - Diesel +0.1
Slide 13: Cash conversion impacted by working capital movements
Cash conversion impacted by working capital movements For personal use only $bn, except where stated H1 2023 H1 2022 Comparison Working capital outflow of $0.9bn in H1 2023 Underlying EBITDA 11.7 15.6 -25% reflected: Tax paid (2.4) (3.8) -37% • Build in blasted and mine stocks in the Pilbara to supp
Slide 14: Pilbara Iron Ore, Canadian smelters and Oyu Tolgoi driving momentum
Pilbara Iron Ore, Canadian smelters and Oyu Tolgoi driving our momentum Iron Ore Aluminium Copper Minerals For personal use only $bn, except Sustained operational Kitimat Unlocking Challenging market where stated improvement vs H1 22 ramping up vs H1 22 growth vs H1 22 conditions vs H1 22 Production
Slide 15: Continued momentum in our Pilbara Iron Ore business
Continued momentum in our Pilbara Iron Ore business For personal use only Mine production ranges by quarter1 (2019 to 2022, Mtpa) • 2023 shipments guidance at upper half of 360 320 to 335Mt range 2022 • Ongoing operational improvements, and uplift from the Safe Production System 340 • SP10 was 10% o
Slide 16: Oyu Tolgoi expected to yield significant free cash flow
Oyu Tolgoi expected to yield significant free cash flow in 2nd half of decade For personal use only 2030 Copper Equivalent Cost Curve1 Copper equivalent unit cost including sustaining capex (c/lb) 600 • Oyu Tolgoi’s operating assets of $14.3 billion represented ~25% of the Group 500 total at 30 June
Slide 17: We will continue to invest consistently through the cycle
We will continue to invest consistently through the cycle Iterative cycle of… 01 Essential 02 Interim ordinary 03 For personal use only capex dividends Integrity, Replacement, Decarbonisation 40-60% of underlying earnings Compelling 5.1 on average through the cycle1 growth2 6.1 2.5 1.8 6.8 1.4 1.3 6
Slide 18: Disciplined investing for asset health, growth and decarbonisation
Disciplined investing for asset health, growth and decarbonisation Essential capex (US$bn, annual average) Growth capex2 (US$bn) For personal use only Investing in the health of our existing business Shaping our portfolio for the future <$7bn 3.0 <$3bn Decarbonisation Simandou 6.3 Other OT Replaceme
Slide 19: Attractive dividends remain paramount
Attractive dividends remain paramount For personal use only Shareholder returns1 of 40-60% of underlying earnings on average through the cycle • $2.9bn of dividends declared for H1 Payout ratio (%) 100 • 50% payout, in line with our policy and with the intention that the balance 90 between interim a
Slide 20: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive For personal use only Oyu Tolgoi, Mongolia 18
Slide 21: Gathering momentum with a clear pathway
Gathering momentum with a clear pathway For personal use only Finding better ways to provide the materials the world needs Best Impeccable operator ESG Excel in development Care Courage Curiosity ©2023, Rio Tinto, All Rights Reserved 19
Slide 22: Executing our strategy
Executing our strategy • Pilbara For personal use only Our eSAT score1 7% production uplift YoY 74 • Much to do elsewhere to 73 achieve operating 72 excellence 71 71 • Safe Production System deployment on schedule Average prior 2 years Oct 21 Apr 22 Sep 22 Apr 23 • Building a values-based performanc
Slide 23: Our four objectives in action: Oyu Tolgoi
Our four objectives in action Oyu Tolgoi – a world leading copper business For personal use only Entering an Best in class water exciting phase consumption rates as the with continuous underground improvement ramps up Ramp-up on track to deliver 500kt per AIFR = 0.201 annum from One of the safest 20
Slide 24: Growing our North American aluminium business
Finding better ways to provide the materials the world needs Growing our North American aluminium business For personal use only Matalco joint venture AP60 aluminium smelter1 Casthouse expansions Launching into recycled aluminium investing $1.1bn Arvida, Alma supply 1 AP60 technology generates appro
Slide 25: Global decarbonisation portfolio accelerating
Global decarbonisation portfolio accelerating – near-term delivery remains a challenge For personal use only BlueSmeltingTM at RTIT Boron biofuel MoU with China Baowu • Ilmenite reduction technology • First open pit mine • Working together to help decarbonise to convert to renewable diesel the steel
Slide 26: Decarbonisation to drive demand for metals
Decarbonisation to drive demand for metals Solar energy contribution to aluminium demand (%) Global EV sales For personal use only 26% 8 China Penetration (%) Actual (million units) 21% Forecast (million units) +25% 6 17% 24.9 +34% 13% 19.8 4 World +41% 8% 14.8 +58% 4% 2 2% 10.5 6.6 3.3 2.2 0 2010 2
Slide 27: Partnering for shared success
For personal use only Partnering for Continuing our Growing value and future shared success culture journey dividend potential ©2023, Rio Tinto, All Rights Reserved 25
Slide 28: Rio Tinto
RioTinto Ajuo asn jyeuosiad 104
Slide 29: Appendices: 2023 interim results
Appendices 2023 interim results For personal use only 27
Slide 30: Markets
For personal use only Markets ©2023, Rio Tinto, All Rights Reserved 28
Slide 31: Strong Chinese iron ore imports absorbing supply gains
Strong Chinese iron ore imports absorbing supply gains China’s crude steel production (Mt annualised) Iron Ore1 (-15% YoY) $/dmt For personal use only 1200 250 1100 200 150 1000 100 900 50 800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 5
Slide 32: Price support for our commodities compared to H2
Price support for our commodities compared to H2 Aluminium1 (-24% YoY) Copper2 (-10% YoY) TiO2 (chloride slag) (+12% YoY) For personal use only 4,000 900 500 1,100 3,500 750 450 1,000 3,000 600 400 350 900 2,500 450 2,000 300 300 800 1,500 150 250 700 1,000 0 200 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 J
Slide 33: Other financials
For personal use only Other financials ©2023, Rio Tinto, All Rights Reserved 31
Slide 34: Balance sheet remains strong
Balance sheet remains strong $bn 2023 2022 2021 For personal use only Disciplined approach is unchanged, we intend to maintain it throughout the cycle Net cash generated from operating 7.0 16.1 25.3 Balance sheet strength is an asset. Offers resilience and activities creates optionality Capital expe
Slide 35: Underlying EBITDA H1 2023 vs H1 2022: prices
Prices recovering from low point in H2 but still down materially year on year For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 15,597 ( 3,295) 43 ( 206) ( 174) ( 1,355) ( 1,603) 1 2 Iron ore Aluminium Copper Industrial Minerals Other, net H1 2022 Price underlying EBITDA ©2023, Rio Tinto
Slide 36: Higher sales volumes
Higher sales volumes1 with Gudai-Darri and Oyu Tolgoi underground coming online For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 15,597 589 418 377 138 (3,295) (168) 12,552 (48) (44) (13) (90) (155) 2 3 Iron Ore Aluminium Iron & Gold Molybdenum Copper Other Titanium H1 2022 Price Exchan
Slide 37: Simplified earnings by Business Unit for H1 2023
Simplified earnings by Business Unit for H1 2023 For personal use only Primary Metal Atlantic Pacific Aluminium Copper Pilbara Sales volume 1,172kt 501kt 314kt6 139.8Mt9 Average benchmark price $2,329/t $2,329/t 396c/lb7 $109.8/dmt10 Premiums, provisional pricing, by-product sales, product mix, othe
Slide 38: Iron Ore
Iron Ore For personal use only Financial metrics H1 2022 2023 Shipments3 2023 ($bn) H1 2023 comparison guidance (Mt, 100% basis) guidance H1 2023 2022 2021 2020 2019 2018 Segmental revenue 15.6 -6% Pilbara Blend 105.5 203.9 202.9 232.7 228.1 245.4 EBITDA 9.8 -6% Robe Valley 13.1 25.5 25.2 30.3 27.4
Slide 39: Iron Ore: Sustained improvement in operational performance
Iron Ore Sustained improvement in operational performance For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 575 80 174 10,395 (70) 9,792 (1) (113) 9,207 (1,248) H1 2022 Price Exchange rates Energy Inflation Flexed H1 2022 Volumes Cash costs Other¹ H1 2023 underlying underlying and Mix un
Slide 40: Aluminium
Aluminium Financial metrics H1 2022 2023 Production 2023 ($bn) H1 2023 comparison guidance (Mt, Rio Tinto share) guidance H1 2023 2022 2021 2020 2019 2018 For personal use only Segmental revenue 6.3 -20% Bauxite 54-57* 25.6 54.6 54.3 56.1 55.1 50.4 EBITDA 1.1 -60% Alumina 7.4-7.7 3.7 7.5 7.9 8.0 7.7
Slide 41: Aluminium: Price declines drive margins down
Aluminium Price declines drive margins down; lower raw material costs to flow through in H2 For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 2,866 101 16 (1,341) 1,537 76 (105) (91) (290) (92) 1,140 H1 2022 Price Exchange rates Energy Inflation Flexed H1 2022 Volumes Cash costs One-offs
Slide 42: Composition of alumina and aluminium production costs
Composition of alumina and aluminium production costs For personal use only Input H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 Inventory FY23 Annual Cost Production cash costs (alumina refining) Costs Index Index Index Index Index Flow 4 Sensitivity price price Price price Price 3–4 Caustic Soda 1 274 $/
Slide 43: Copper
Copper Financial metrics H1 2022 2023 Production 2023 ($bn) H1 2023 comparison guidance (Mt, Rio Tinto share) guidance H1 2023 2022 2021 2020 2019 2018 For personal use only Segmental revenue 3.5 -2% Mined copper4 590 to 640 290 521 494 528 577 608 EBITDA 1.1 -29% Refined copper 160 to 190 95 209 20
Slide 44: Copper: Margins remain robust despite LME price decline
Copper Margins remain robust despite 10% decline in LME price For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 78 1,534 (163) (4) (33) 10 (47) 1,287 (293) 1,082 H1 2022 Price Exchange rates Energy Inflation Flexed H1 2022 Volumes Cash costs Other¹ H1 2023 underlying underlying & Mix und
Slide 45: Oyu Tolgoi: Set to triple copper production
Oyu Tolgoi: Set to triple copper production For personal use only 2022 2023 - 2028 - LOM3 Construction of infrastructure to Metrics1,2 Unit Act 2027 2036 support ramp up to full production on track Ore processed Mt 39 40 42 40 Gold remains a valuable by-product Head grade (Cu) % 0.42 0.97 1.28 0.82
Slide 46: Oyu Tolgoi: Expect to turn free cash flow positive
Oyu Tolgoi: Expect to turn free cash flow positive after significant investment For personal use only Annualised basis forecast1, real terms, US$bn Financials2: 2023 – 2025 (3 years) 2026 – 2029 (4 years) 2030 – 2033 (4 years) Gross Revenue 1.5 – 2.9 3.8 – 4.6 4.2 – 5.1 Development Capex3 0.5 – 0.7
Slide 47: Oyu Tolgoi: Funding profile
Oyu Tolgoi: Funding profile Project finance1 Shareholder funds2 Equity Funding Requirement For personal use only $3.9b $7.7b $4.2b $1.6-1.7b (Jun 2023 - Dec 2024) Participants Facility $1.6-1.7 billion to be secured by A-loan Rio Tinto Sponsored Senior Loan Agreement with terms and A-loan conditions
Slide 48: Minerals
Minerals For personal use only Financial metrics H1 2022 Production 2023 ($bn) H1 2023 comparison (Rio Tinto share) guidance H1 2023 2022 2021 2020 2019 2018 Segmental revenue 2.9 -15% IOC (Mt) 10.0-11.0 4.7 10.3 9.7 10.4 10.5 9.0 EBITDA 0.7 -45% Borates – B2O3 content (kt) ~0.5Mt 257 532 488 480 52
Slide 49: Minerals: Challenging market conditions; forest fires at IOC
Minerals Challenging market conditions; forest fires at IOC impact production For personal use only Underlying EBITDA H1 2023 vs H1 2022 $m 74 1,259 1,094 (197) (21) (21) (100) (221) (84) 689 H1 2022 Price Exchange rates Energy Inflation Flexed H1 2022 Volumes Cash costs Other¹ H1 2023 underlying un
Slide 50: Cash flow reconciliation
Cash flow reconciliation H1 2023 Cash Flow (US$m) Statutory cash Reconciling Underlying Utilisation of provisions flow items cash flow For personal use only Close down and restoration (333) Profit after tax for the year/Underlying EBITDA 4,947 11,728 Post-retirement benefits and other employee benef
Slide 51: Modelling EBITDA
Modelling EBITDA For personal use only Underlying EBITDA sensitivity Average published price/ US$m impact on full year 2023 underlying exchange rate for HY 2023 EBITDA of a 10% change in prices/exchange rates Aluminium - US$ per tonne 2,329 1,151 Copper - US cents per pound 396 523 Gold - US$ per tr
Slide 52: Income Statement: exclusions
Income Statement: exclusions June 2023 June 2022 For personal use only Per Interim Per Interim Exclusions Underlying Exclusions Underlying release release Consolidated sales revenue 26,667 26,667 29,775 29,775 Net operating costs (excluding items disclosed separately) (17,535) (141) (17,676) (17,202
Slide 53: Debt maturity profile
Debt maturity profile 30 June 2023 debt maturity profile1 For personal use only $m 2,000 • On 6 March, issued $1.75bn SEC- registered debt securities, extending the corporate bond debt maturity by ~2 years. Issuance consisted of: • $650m 10-year 5.000% coupon 1,500 maturing in 2033 • $1,100m 30-year
Slide 54: Guidance
For personal use only Guidance ©2023, Rio Tinto, All Rights Reserved 52
Slide 55: Balancing near-term returns to shareholders
Balancing near-term returns to shareholders For personal use only Essential capex 1 Integrity, Replacement, Decarbonisation Further cash Compelling returns to 2 Ordinary dividends shareholders growth 3 Iterative cycle of Debt management ©2023, Rio Tinto, All Rights Reserved 53
Slide 56: Group level financial guidance
Group level financial guidance For personal use only 2023 2024 2025 Capex Total Group ~$7.0bn1 Up to 10.0bn Up to 10.0bn Group Growth Capex $1.5bn2 Up to $3bn Up to $3bn Group Sustaining Capex ~$3.5bn ~$3.5bn ~$3.5bn Pilbara Sustaining Capex ~$1.5bn3,4 ~$1.5bn4,5 ~$1.5bn4,5 • Replacement capital of
Slide 57: Product group level guidance
Product group level guidance For personal use only 2023 2023 Production Guidance Unit cost guidance4 Pilbara iron ore 320 – 335Mt1 Pilbara Iron ore ($/tonne) $21.0 – $22.5 shipments (100% basis) Copper 590 – 640kt2 Copper C1 (US cents/lb) 180 – 200 Mined Copper (consolidated basis) Refined Copper 16
Slide 58: Application of the returns policy
Application of the returns policy Capital return considerations Comments For personal use only • Operating cash flow of $7.0bn 1 Results for HY 2023 • FCF of $3.8bn • Underlying earnings down 34% to $5.7bn • Focused on Oyu Tolgoi • Simandou project progressing Long-term growth prospects • Investing
Slide 59: Safe Production System and Decarbonisation
For personal use only Safe Production System and Decarbonisation ©2023, Rio Tinto, All Rights Reserved 57
Slide 60: Safe Production System (SPS)
Safe Production System (SPS) For personal use only Best operator Strong, Front line stable customer- Building a lasting competitive advantage with our assets focused support people. We want to empower them to safely run assets that are in control, capable and performing better than any of our compet
Slide 61: Decarbonisation abatement programmes
Decarbonisation abatement programmes Programme Description & key sites Funding mechanism Example project - economics For personal use only Pacific Operations Renewables: smelters • Long-term market contracts • Commercial solutions achieved through government partnerships and long- Repower Boyne | To
Slide 62: Common acronyms and definitions
Common acronyms Definitions AHS Automous Haulage System EC European Commission Mtpa Million tonnes per annum RTFT Rio Tinto Fer et Titane Calculated The levelised marginal cost of abatement abatement at a zero carbon price AIFR All Injury Frequency Rate EMEA Europe, Middle East and Africa MACC Margi
Slide 63: Rio Tinto
RioTinto Ajuo asn jeuossad J04