Rio Tinto Plc · LSE:RIO
Rio Tinto — Non-Deal Roadshow (August 2017)
27 slides from Rio Tinto's roadshow presentation, August 2017
Slide 1: Iron Ore - delivering optimal value
Iron Ore - delivering optimal value Investor roadshow – August 2017 Chris Salisbury, chief executive, Iron Ore
Slide 2: Cautionary statements
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 contains certain forward-lookin
Slide 3: Supporting statements
Supporting statements Mineral Resources and Ore Reserves The Pilbara Mineral Resource and Ore Reserve estimates which appear on slide 14 are reported on a 100% basis. These Mineral Resource and Ore Reserve estimates, together with the ownership percentages for each joint venture were set out in the
Slide 4: Rio Tinto value proposition
Rio Tinto value proposition 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 $2 billion cost savings delivered six Delivering >2% CAGR1 CuEq growth 40-60% returns through the c
Slide 5: World-class assets at the core of our business
World-class assets at the core of our business Iron Ore Bauxite Aluminium Copper Main Oyu Tolgoi, Pilbara Bauxite Canadian smelters businesses Escondida Low-cost, world-class assets Large, low-cost bauxite Large, long-life, low-cost Competitive Integrated infrastructure assets First quartile smelter
Slide 6: Focusing on value over volume
Focusing on value over volume Revenue Price impact of incremental tonnes Protecting quality Capex Maximising free Sustaining cash flow through the cycle Replacement Operating cost Growth Unit cost Impact on cost base 6 | © Rio Tinto 2017
Slide 7: Delivering optimal value from one of the world's best businesses
Delivering optimal value from one of the world’s best businesses Strong foundation Mine to market productivity Value over volume – Exclusive use of assets, fully integrated system, – Resource development sequencing to optimise – Maximise cash flow from existing asset base consistent returns through
Slide 8: Safety effort targeting fatality elimination and injury prevention
Safety effort targeting fatality elimination and injury prevention Iron Ore All Injury Frequency Rate Per 200,000 hours worked Focus on fatality and injury elimination 0.80 Fatality and critical incident learnings 0.70 12 month rolling AIFR Embed critical risk management program 0.60 Leadership and
Slide 9: Low-quality ores driving iron ore supply and inventories
Low-quality ores driving iron ore supply and inventories Iron ore supply growth Percentage Lower-quality iron ore supplied into the contestable market has 120% doubled since 2010 (now ~400Mtpa) Fe >65% 80% Fe 60% - 65% Lower-quality products account for 29Mt (80%) of the 36Mt Fe <60% increase in por
Slide 10: China steel demand remains strong, driving steel inventories lower
China steel demand remains strong, driving steel inventories lower China’s Property and Machinery Sector Growth Robust end-use steel demand Percentage (% YoY Ytd) – Developers remain confident and have accelerated new starts to >10% YoY in 2017 20 – Sharp rebound in machinery sales YTD; auto growth
Slide 11: Steel production: China prioritising productivity
Steel production: China prioritising productivity Underpinned by healthy industry liquidity and mill profitability, China mill cash margins China’s steel production has been running close to historical highs: $ per tonne 150 – Mills incentivised to simultaneously rationalise/eliminate Billet Rebar H
Slide 12: Our product portfolio is well-placed, translating into strong H1 2017 prices
Our product portfolio is well-placed, translating into strong H1 2017 achieved FOB prices of $67.8/dmt… Shipments by product and market H1 2017 Product Strengths Percentage Pilbara Blend – The most traded iron ore product globally 3% Fines – Base load sinter blend in Asian markets 6% 4% 3% 17% Pilba
Slide 13: …including the industry benchmark Pilbara Blend
…including the industry benchmark Pilbara Blend Blending reduces product variability Product quality variance from mean Customers value the consistency and liquidity of the Pilbara Blend Fe Alumina Silica Phosphorus – Easier to manage blast furnace mix – Technical expertise provided to maximise valu
Slide 14: We have substantial resources sustaining future production
We have substantial resources sustaining future production… Pilbara resources, reserves1 and production Million tonnes (LHS, dry; RHS, wet) Large Mineral Resources support system optionality and sustain premium Pilbara Blend 25,000 375.0 Ore Reserves maintained in line with depletion 20,000 300.0 Ma
Slide 15: …and a fully integrated asset network
…..and a fully integrated asset network 11,000 Workforce 15 Mines 1,700km Rail 4 Port terminals 3 Power stations 370 Haul trucks 51 Production drills 190 Locomotives 15 | © Rio Tinto 2017
Slide 16: Iron Ore: continues to sustain our low-cost advantage
Iron Ore: continues to sustain our low-cost advantage Pilbara cash unit cost Pre-tax operating cash cost improvements US$ per tonne Reduction vs. 2012 US$m $1.5bn 156 315 371 22.9 20.4 16.2 14.3 13.8 359 323 H1 H2 H1 H2 H1 H2 H1 H2 H1 2013 2014 2015 2016 H1 2017 2013 2013 2014 2014 2015 2015 2016 20
Slide 17: Replicating best practice drives greater value
Replicating best practice drives greater value…… Haul Truck Effective Utilisation Plant Effective Utilisation Time %, indexed, Jun YTD, site comparison Time %, indexed, Jun YTD, site comparison 15% 1.15 20% 1.20 1.03 1.00 1.00 J F M A M J 2015 2016 2017 IO Ave. IO Best Perf. Collaboration and standa
Slide 18: …as does productivity and technology
…as does productivity and technology Train dumping cycle time Haul truck payload (1) Indexed to 2015 monthly average Indexed to 2015 average -54% +4% 1.04 variability High Low -26% 1.00 variability Avg 1.01 0.95 1.00 0.93 2015 2016 2017 Ytd 2015 2016 2017 H1 Improving cycle times from Mine to Port W
Slide 19: AutoHaul® already delivering benefit
AutoHaul® already delivering benefit Significant progress made in 1H 2017: of rail kilometres 1 now in of production tonnes1 32% Autonomous mode (with drivers on-board) 80% now AutoHaul®- enhanced Early benefits are being realised… … and on-track to achieve full network capacity uplift by end 2018.
Slide 20: Installed infrastructure offers high-value optionality
Installed infrastructure offers high-value optionality Optimising system capacity Mt/a Production optionality Mine capacity can be delivered through productivity Mines Silvergrass and low capital brownfields pathway and productivity Rail capacity can be delivered through productivity, low capital in
Slide 21: Silvergrass on track to deliver world-class investment returns
Silvergrass on track to deliver world-class investment returns Silvergrass first production on-track for Q4 2017 ~21Mt/a at US$29/t Mine sustains Autonomous Haul trucks IRR >100%1 capital intensity (CI) Pilbara Blend quality now operating Conveyor being installed 1IRR calculated using consensus iron
Slide 22: High-quality, low-cost options available to offset depletion
High-quality, low-cost options available to offset depletion Pilbara mine development options Low cost option leveraging existing infrastructure US$/t Installed capital intensity – Yandi Billiard South Capital Intensity <$10/t; IRR 120 Bubble size indicates capacity >100%1 Brownfield replacement min
Slide 23: Sustaining best value production
Sustaining best value production Capital expenditure US$bn (RT share) Silvergrass - majority of growth spend in 2017 1.5 ~$100m approved replacement mine capital over next three years, e.g. – ~$64m Yandicoogina Oxbow 1.0 ~$1bn unapproved replacement mine capital over next three years 0.5 ~$2.2bn sus
Slide 24: Unlocking productivity through strong engagement
Unlocking productivity through strong engagement Safety remains fundamental priority Strengthening workforce engagement – Recognising great contributions from our people – Enabling our inclusive and diverse culture Enhancing our business through transformation – Technology enabling our exciting futu
Slide 25: Highly-valued partners and sustainable local and regional investment
Highly-valued partners and sustainable local and regional investment remain a priority Figures for all Rio Tinto product groups based in Western Australia 25 | © Rio Tinto 2017 Rio Tinto data 2016, currency AUD
Slide 26: Delivering optimal value from one of the world's best businesses
Delivering optimal value from one of the world’s best businesses Quality people and partners Exclusively operated integrated asset, significant resource base, highly-valued product suite Strong cash flows through the cycle Focus on raising mine to market productivity Multiple options to optimise sys
Slide 27: Iron Ore - delivering optimal value
Iron Ore - delivering optimal value Investor roadshow – August 2017 Chris Salisbury, chief executive, Iron Ore