Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (December 2017)
69 slides from Rio Tinto's investor day presentation, Dec 4, 2017
Slide 1: Investor Seminar
Investor Seminar Sydney, 4 December 2017 J-S Jacques | chief executive
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: Supporting statements
3 Supporting statements Ore Reserves (slide 10) Reserve grade for Oyu Tolgoi Underground – Hugo Dummett North and Hugo Dummett North Extension. Probable Ore Reserves for Hugo Dummett North and Hugo Dummett North Extension (499 Mt at 1.66% Cu, 0.35g/t Au) were released to the market in the 2016 Rio T
Slide 4: Safety and health come first
4 Safety and health come first Continuing history of improvement Balanced safety strategy Focusing on fatality elimination – 1.2 million CRM verifications Rio Tinto ICMM (23 companies) 2.78 Reducing injuries – Targeted hazard elimination campaigns All injury frequency rate per 200,000 Catastrophic e
Slide 5: Cash focus with capital discipline delivers strong shareholder returns
Cash focus with capital discipline delivers strong 5 shareholder returns Capital discipline and Team and performance Long-term strategy Cash focus shareholder returns culture World-class assets Value over volume Strong balance sheet Safety first $5 billion free cash flow from mine $8.2 billion of ca
Slide 6: Global macro indicators remain supportive
6 Global macro indicators remain supportive PMIs remain elevated Global growth momentum remains healthy 65 US growth supported by record high consumer confidence and healthy manufacturing and investment 60 EU performing better than expectations on stronger manufacturing and 55 consumer confidence In
Slide 7: Our product quality delivers strategic competitive advantage in significant markets
Our product quality delivers strategic competitive 7 advantage in significant markets Our premium products …have a strategic Our 62% iron ore benefits High-quality, expandable Strong global aluminium Our copper growth from structural change bauxite assets in low demand: Chinese curtailments profile
Slide 8: World-class high-margin assets with attractive growth options
World-class high-margin assets with attractive 8 growth options Iron Ore Bauxite Aluminium Copper Specialty products Main Oyu Tolgoi, TiO2 Pilbara Weipa, Gove, CBG Canadian smelters businesses Escondida Borates Low-cost assets, Large, low-cost, significant resources Expandable first quartile High-gr
Slide 9: We returned 40% of cash generated to shareholders
9 We returned 40% of cash generated to shareholders 1 Most disciplined and balanced allocation of capital in H1 2017 40% 26% 21% 10% 0% Sustaining capex Growth capex M&A Balance sheet Shareholder returns Rio Tinto Peer 1 Peer 2 Peer 3 Peer 4 1 Cash generated = net cash generated from operating activ
Slide 10: High-return growth
10 High-return growth Significant brownfield Longer-term Amrun Oyu Tolgoi opportunities growth opportunities Creating seaborne bauxite Largest and highest quality Pilbara iron ore, Queensland Jadar (lithium/borates), market, high-grade, expandable copper development in the world bauxite, Canadian al
Slide 11: Productivity will further enhance our ROCE and TSR
11 Productivity will further enhance our ROCE and TSR Rio Tinto has achieved the …providing superior Additional $1.5 billion free cash flow in highest ROCE every shareholder returns 2021 from productivity will drive the year since 2013… next phase of outperformance Average ROCE since 20131 TSR since
Slide 12: Delivering $5 billion of additional free cash flow from productivity
Delivering $5 billion of additional free cash flow from 12 productivity Mine to market …with a focus on …delivering $5 billion of additional free productivity… Marketing four levers… cash flow Best practice Mining Infrastructure Asset Productivity Partnering with management Processing Opportunity ou
Slide 13: Investor Seminar
Investor Seminar Sydney, 4 December 2017 Chris Lynch | chief financial officer
Slide 14: Disciplined capital allocation
14 Disciplined capital allocation Essential 1 sustaining capex Further cash Compelling Ordinary returns to 2 dividends shareholders growth Iterative 3 cycle of Debt management ©2017, Rio Tinto, All Rights Reserved
Slide 15: Strong balance sheet enables high cash returns to shareholders
Strong balance sheet enables high cash returns 15 to shareholders Strongest balance sheet in the sector $6.3 billion of cash returns in 2017 $ billion $7.6bn 0.6 Net debt at 30 June 2017 2.2 2016 final dividend 1.5 2017 interim dividend 2017 plc on-market buy-back 0.4x 2017 Ltd off-market buy-back 2
Slide 16: Sustaining capital and compelling growth
16 Sustaining capital and compelling growth Capital expenditure profile Maintained sustaining capital guidance of $2.0 to $2.5 $ billion billion per year, including ~6.0 ~6.0 – Iron Ore sustaining capex of ~$1 billion per year ~5.5 Pilbara replacement capital includes Koodaideri < 4.5 development fr
Slide 17: On track to deliver additional cash in 2017 and 2018
17 On track to deliver additional cash in 2017 and 2018 $320m of headwinds from $0.3bn $0.9bn raw material inputs 0.6 0.3 0.9 0.6 $0.3bn Volume Cost headwinds Cost 2017 & 2018 cumulative total* Approximately equal contribution across product groups $0.3bn No volume productivity benefit in Iron Ore u
Slide 18: Rigorous measurement of productivity gains
18 Rigorous measurement of productivity gains Accounting basis – Free cash flow basis, Rio Tinto share, post-tax Price – Actual price achieved each year – not a constant or rebased price Commercial excellence – Variation of product mix included Volumes – Tonnes from growth capex excluded – Adjustmen
Slide 19: Delivering $1.5bn additional free cash flow each year from 2021
Delivering $1.5bn additional free cash flow each year 19 from 2021 $1.5bn productivity opportunity in 2021 Productivity levers ($5bn cumulative, 2017-2021) Our focus across the value chain Commercial excellence and customer focus Best practice Partnering with our suppliers Optimised Mining Processin
Slide 20: Growth & Innovation
Growth & Innovation Sydney, 4 December 2017 Stephen McIntosh | Group Executive, Growth & Innovation Rob Atkinson | Head of Productivity & Technical Support
Slide 21: Growth & Innovation enabling value generation across asset lifecycle
Growth & Innovation enabling value generation across 21 asset lifecycle Find Study Develop Optimise Close Technical Excellence geosciences, mining, processing, infrastructure, asset management, integrated operations Information Systems & Technology enterprise services, platforms, digital workplace ©
Slide 22: Our focus builds on leadership in data, technology & automation
Our focus builds on leadership in data, technology 22 & automation MAS* / RTVisTM First Autonomous Perth Operating Data Science Fusion Modelling Predictive Insights Haul Truck Loaded Centre Opens Unit Established and Deployment * Mine Automation System 2008 2009 2010 2014 2015 2016 2017 2017+ Primar
Slide 23: Driving Rio Tinto mine to market productivity
23 Driving Rio Tinto mine to market productivity Partnering Refocus on Best Additional $5bn with our the basics practice suppliers mine to market in 5 years Operating assets & Deliver Redesign Data & projects Automation technology operations our future of the future Performance Leverage workforce Te
Slide 24: Delivering $1.5bn additional free cash flow each year from 2021
Delivering $1.5bn additional free cash flow each year 24 from 2021 $1.5bn productivity opportunity in 2021 Productivity levers ($5bn cumulative, 2017-2021) Our focus across the value chain Commercial excellence and customer focus Best practice Partnering with our suppliers Optimised Mining Processin
Slide 25: Truck and dig unit payload increases: moving more with the same
Truck and dig unit payload increases: 25 moving more with the same Assets Scope Results 686 trucks 118 dig units 5 suppliers +6% payload 1 (2017 improvement over 2016) Payload of trucks increased by 15-20t Collaborated with truck, loading equipment and tyre suppliers across 18 months of field trials
Slide 26: Truck change over to increase operating hours
Truck change over to increase operating hours: 26 using our trucks more efficiently Assets Scope Results 686 trucks Operating time +7% EU 1 (2017 improvement over 2016) Targeting trucks to work over 75% of calendar hours Targeting improvement across whole of mining cycle Truck operator change over f
Slide 27: Processing plant throughput: increasing rates
Processing plant throughput: 27 increasing rates Assets Scope Results +7% tonnes per hour 46 plants Feed rate Weipa, Oyu Tolgoi (2017 improvement over 2016) Andoom producing at 2x nameplate with practices being replicated at East Weipa Gove – conveying system reliability improvements and new chute d
Slide 28: Video – MAS
28 Video – MAS ©2017, Rio Tinto, All Rights Reserved
Slide 29: Innovating for productive growth options
29 Innovating for productive growth options Innovation in ore body knowledge Designing for the future Lean in construction 3D orebody shells - Resolution Oyu Tolgoi Isometric Looking North: Feasibility Study Footprint Jadar – Illustration of proposed processing plant Amrun – Chith export facility >2
Slide 30: Video – Amrun development
30 Video – Amrun development ©2017, Rio Tinto, All Rights Reserved
Slide 31: Leading data platform to enable productivity journey
31 Leading data platform to enable productivity journey 3rd party 21st century platform digital Bots & Rio Tinto Fusion machine data platform database learning Visualisation & Optimisation user interfaces ©2017, Rio Tinto, All Rights Reserved
Slide 32: Leveraging technical excellence to drive value
32 Leveraging technical excellence to drive value Technical Excellence geosciences, mining, processing, infrastructure, asset management, integrated operations Centres of excellence & connected Critical roles & career paths Talent development & mentoring working groups ©2017, Rio Tinto, All Rights R
Slide 33: Driving Rio Tinto mine to market productivity
33 Driving Rio Tinto mine to market productivity Partnering Refocus on Best Additional $5bn with our the basics practice suppliers mine to market in 5 years Operating assets & Deliver Redesign Data & projects Automation technology operations our future of the future Performance Leverage workforce Te
Slide 34: Iron Ore
Iron Ore Sydney, 4 December 2017 Chris Salisbury | chief executive, Iron Ore
Slide 35: Strong business foundations and clear strategy
35 Strong business foundations and clear strategy Foundations Value over Volume Strategy Revenue Exclusive fully Price impact of integrated system incremental tonnes Protecting quality Delivering right tonnes to customers who value them Highly valued product suite and significant resources Capex Ope
Slide 36: Attractive margins and pollution controls supporting a sustained focus on productivity
Attractive margins and pollution controls supporting 36 a sustained focus on productivity China mill cash margins Steel demand and prices in China supported by growth $ per tonne 130 Private Billet Private Rebar SOE HRC across key end-use sectors 100 70 40 10 Low steel stocks, attractive mill margin
Slide 37: Demand for quality iron ore remains strong, with the high / low spread continuing
Demand for quality iron ore remains strong, with the 37 high / low spread continuing Iron ore prices Iron ore futures market no longer characterised by the $ per tonne 100 structural backwardation of recent years 90 80 70 60 The wide spread between high and low quality ores 50 Platts 62% SGX forward
Slide 38: Our Pilbara Blend remains the product of choice
38 Our Pilbara Blend remains the product of choice Blending reduces product variability Consistency of our Pilbara Blend (PB) products gives our Product quality variance from mean customers predictability in managing their blast furnace Fe Alumina Silica Phosphorus burden PB lump is a good source of
Slide 39: Capital for high-quality asset options to maintain Pilbara Blend
Capital for high-quality asset options to maintain 39 Pilbara Blend and the broader portfolio Pilbara development options Multiple low-cost, value-accretive options leveraging $ per tonne installed capital intensity existing infrastructure 120 Bubble size indicates capacity Koodaideri replacement (~
Slide 40: Focused on sustaining our competitive advantage
40 Focused on sustaining our competitive advantage Rio Tinto Iron Ore EBITDA performance Cost driver trend 80% Cost driver 2017 2018 70% Strip ratio 60% Haul distance 50% Bulk materials 40% Labour costs Cyclic maintenance costs 30% 20% H113 H213 H114 H214 H115 H215 H116 H216 H117 ~10% increase in ha
Slide 41: Productivity options to continue to deliver cash benefits
41 Productivity options to continue to deliver cash benefits Partnering Best Practice Data & Technology Automation with Suppliers Effective equipment utilisation Payload optimisation and maintenance optimisation Mine planning optimisation Autonomous trucks (including retro-fit) Autonomous drills Min
Slide 42: Priority is to optimise infrastructure capacity and flexibility
Priority is to optimise infrastructure capacity 42 and flexibility Current system capacity Future system capacity ~360* ~360 ~330 Mt/a Mt/a Mt/a Mine capacity of ~360Mt/a, Building excess rail capacity Optimise and 2018 guidance with full Silvergrass ramp- to provide for flexibility test overall por
Slide 43: Significant improvements achieved across our mines
43 Significant improvements achieved across our mines…. Truck effective utilisation and payload improvements Haul Truck Effective Utilisation Truck Payload Time %, indexed, Sep YTD Time %, indexed, Sep YTD have delivered cost savings and capital deferrals 7% 8% 20 extra tonnes per load for 240t truc
Slide 44: …with other productivity improvements continuing to deliver results
…with other productivity improvements continuing to 44 deliver results Drill Effective Utilisation Balancing quality and value from our mines Time %, Oct YTD, site comparison 30% Run the production 1.3 drills for more 1.0 hours… IO Manned Ave. IO ADS Ave. Drill Penetration Rate Metres / Operating ho
Slide 45: Along with AutoHaul, many levers to optimise rail circuit capacity
Along with AutoHaulTM, there are many levers 45 to optimise rail circuit capacity and improve flexibility AutoHaulTM Closer Rail track Yard scheduling Eliminating • Current project train spacing maintenance and productivity brake cars • Future opportunities Mine Yard Dumper Mainline Further • Schedu
Slide 46: AutoHaul making strong progress…
46 AutoHaulTM making strong progress… World’s first fully autonomous heavy haul mainline run completed in Sept 2017 ~60% >1million ~6% production kilometres kilometres Speed improvement currently completed in completed in autonomous in autonomous autonomous mode1 mode1 this year mode1 AutoHaulTM usa
Slide 47: …with rail productivity and improved track condition the keys to unlocking value
…with rail productivity and improved track condition the 47 keys to unlocking value Yard improvement (minutes) Dumping - placing train improvement (minutes) Yard scheduling automation and 15% Continued improvements in cycle time 25% optimisation 202 20.5 Brake cars to be eliminated in 2019 19.2 Furt
Slide 48: Improving the capability of our port assets
Improving the capability of our 48 port assets Leveraging technology to gain capacity Dumper Cycle Time Cape Lambert, CD1C Real-time asset health monitoring supporting 1.00 14% condition-based maintenance 0.94 0.86 Proactive dumper system adjustments optimising throughputs of differing ore types 201
Slide 49: Technology, innovation and people enabling an agile, market-driven organisation
Technology, innovation and people enabling an agile, 49 market-driven organisation Step-change technology Innovation projects Skills and development Operations Centre optimisation Drone monitoring Recognising employee innovation AutoHaulTM Remote isolation Data analytics Retrofit of autonomous truck
Slide 50: Strong foundations, clear strategy and key initiatives will continue to realise optimal value
Strong foundations, clear strategy and key 50 initiatives will continue to realise optimal value Iron Ore High-value product suite ~$0.5 billion additional free cash flow Strong customer relationships per year from 2021 Fully integrated and flexible system Rail system optimisation ‒ AutoHaulTM Produ
Slide 51: Aluminium
Aluminium Sydney, 4 December 2017 Alf Barrios | chief executive, Aluminium
Slide 52: Strong global aluminium demand with Chinese production at a turning point
Strong global aluminium demand with Chinese 52 production at a turning point Primary aluminium production and stocks Weeks of Aluminium demand growth ~4% p.a. next 5 years Million tonnes consumption 80 18 Strict enforcement of Chinese capacity control and winter cut regulations in smelting and alumi
Slide 53: We will maintain our low-cost position
53 We will maintain our low-cost position Commodity Index (base 2016) 250 Aluminium LME +22% Caustic +44% 200 Coke +73% Pitch +98% Raw materials & energy lifting cost curve by 10% vs 2016 150 Costs are expected to stay elevated in 2018 50 2016 2017 Rio Tinto well placed Aluminium cost curve ($/t) ‒
Slide 54: We continue to widen the gap over our competitors
54 We continue to widen the gap over our competitors Upstream EBITDA margins (per cent) Margin gap: portfolio quality and performance delivery 45 Rio Tinto EBITDA margin increase to 35% 40 35 Cash cost improvements $1.7bn since 2012 30 +16 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2015 2015
Slide 55: Productivity options to continue to deliver cash benefits
55 Productivity options to continue to deliver cash benefits 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
Slide 56: Increasing returns on bauxite and alumina
56 Increasing returns on bauxite and alumina Managed bauxite production Million tonnes Maximising value from our existing bauxite operations 45 43 ‒ Production track record: Weipa 6% p.a. / Gove 8% p.a. +7% ‒ Maximising value-in-use by customer 40 39 35 ‒ Value over volume, optionality post-Amrun 35
Slide 57: Asset performance drives next phase of productivity
57 Asset performance drives next phase of productivity Leveraging Rio Tinto Weipa performance ‒ Weipa: rail expertise to unlock system capacity (higher speeds and wagon loads) +13% +2% 2016 ‒ Gove: asset management expertise to unlock throughput 1.13 (plant reliability) 2017 YTD 1.02 ‒ Integrated Op
Slide 58: Smelters creeping at 1% per annum, double industry average
Smelters creeping at 1% per annum, double industry 58 average Amperage creeping history Long history of cutting-edge smelter productivity ‒ Industry-leading technology, expertise and innovation +14% +10% +7% ‒ Creep innovation the engine of technology productivity Low capital intensity, high-return
Slide 59: Technology, process intelligence and expertise underpin our competitive advantage
Technology, process intelligence and expertise 59 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 60: Analytics and integrated operations drive the next wave of productivity
Analytics and integrated operations drive the next wave 60 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 Control Centre Asset
Slide 61: Enhancing margins through VAP
61 Enhancing margins through VAP Rio Tinto VAP product premiums1 Value added product (VAP) enhances margins $ per tonne ‒ VAP 57% of portfolio, targeting >70% 341 ‒ Additional revenue $217 per tonne1 250 199 180 159 ‒ Cumulative free cash flow improvement of $0.3bn by 2021 Slab Billet Foundry High P
Slide 62: Strong outlook, value delivery through productivity and growth options
Strong outlook, value delivery through productivity and 62 growth options Strong demand outlook Aluminium China supply-side turning point ~$0.5 billion additional free cash flow per year from 2021 … World-class first quartile assets ‒ Hot metal and bauxite creep ‒ VAP volume & mix Near-term growth f
Slide 63: Investor Seminar
Investor Seminar Sydney, 4 December 2017 J-S Jacques | chief executive
Slide 64: Achieving $1.5bn of productivity improvements a year from 2021
Achieving $1.5bn of productivity improvements a year 64 from 2021 ($5bn cumulative) Iron Ore Aluminium Copper & Diamonds Energy & Minerals Indicative exit rate $0.5 billion $0.5 billion $0.15 billion $0.35 billion Rail system optimisation - Hot metal and bauxite creep Mining Coal - AutoHaulTM - VAP
Slide 65: A track record of sector-leading delivery
65 A track record of sector-leading delivery Reduced Reduced by costs $8.2bn Operating, exploration and evaluation cost net debt Since net debt peaked $14.5bn reductions achieved by at 30 June 2013 30 June 2017 vs 2012 Recycling Materially capital via increased by divestments cash returns 40% Divest
Slide 66: Maintaining a disciplined and consistent strategy
66 Maintaining a disciplined and consistent strategy Superior cash generation World-class assets Operating excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth ©2017, Rio Tinto, All Rights
Slide 67: Appendix
RioTinto Appendix
Slide 68: 2018 guidance
68 2018 guidance Iron Ore: Pilbara shipments 330-340 Mt (100% basis) Aluminium: 49-51 Mt bauxite, 8.0-8.2 Mt alumina, 3.5-3.7 Mt aluminium Copper & Diamonds: 510-610 kt mined copper, 225-265 kt refined copper, 17-20 Mcts diamonds Coal: 7.5-8.5 Mt hard coking, 3.8-4.5 Mt thermal IOC: 11.5-12.5 Mt iro
Slide 69: Volumes relevant for productivity
69 Volumes relevant for productivity Project Capex type In Out OT underground Growth OT open pit N/A Amrun - Weipa replacement Replacement - Incremental up to design capacity Growth - Incremental in excess of design capacity Pilbara - Growth pre-AutoHaulTM completion Growth - Incremental post comple