Slide 1: 2011 interim results
2011 interim results 4 August 2011
Slide 2: Cautionary statement
Cautionary statement 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. Forward-looking statements T
Slide 3: Jan du Plessis, Chairman
Jan du Plessis Chairman Bengalla
Slide 4: Tom Albanese, Chief executive
Tom Albanese Chief executive Grande-Baie, Quebec
Slide 5: Continued improvement in safety
Continued improvement in safety Injury frequency rates 2002–2011 H1 Per 200,000 hours worked 4 August 2011 Rio Tinto 2011 interim results 5
Slide 6: 2011 first half highlights
2011 first half highlights • Record first half underlying EBITDA and earnings from higher prices • Record first half cash flows from operations • Recovering from challenging first quarter weather events • Growth projects progressing well – Pilbara expansion accelerates – Riversdale acquisition compl
Slide 7: Volatility expected to continue
Volatility expected to continue Commodity market prices • First half prices considerably (Daily spot price index (1 January 2010=100)) higher than 2010 • Generally positive outlook for metals and minerals prices – Global growth expected to average 3.5% in 2011 – Chinese GDP to expand by 9.5% in 2011
Slide 8: Iron ore recovers from severe weather
Iron ore recovers from severe weather • Stable and strong prices reflect Iron ore underlying result (US$bn) robust demand and weak supply growth • Significant weather disruptions in first half – Shipments lower following train derailment – Production rebounded in Q2 • Pilbara expansion to 225 Mt/a c
Slide 9: Clear pathway for 454 Mt/a global capacity
Clear pathway for 454 Mt/a global capacity • Pilbara 333 Mt/a accelerated by six Car Dumpers (x2) months to H1 2015 • Headcount at site to double in 1.8 km second half Existing Cape 2.5km Lambert Port • Proven track record of delivery Tug harbour – Capital expenditure remains on A$ budget 1st 53 Mt/
Slide 10: Targeting long-term margin transformation in Aluminium by 2014
Targeting long-term margin transformation in Aluminium by 2014 Aluminium underlying result • Increased first half prices due to (US$bn) tight physical market • Results impacted by exchange rates and higher input costs for caustic, coke and pitch • Bauxite & Alumina affected by wet weather in Queensl
Slide 11: Lower Copper grades: recovery expected in 2012
Lower Copper grades: recovery expected in 2012 Copper underlying result • Strong pricing continues (US$bn) – Market finely balanced – Disruptions to global supply, including recent labour disputes • Lower volumes from dip in grades at all three major operations • Recovery in copper production expect
Slide 12: Advancing world class copper projects
Advancing world class copper projects Oyu Tolgoi • Construction almost 1/3 complete • Workforce to peak this year at 14,000 • Training programs developing Resolution • $103 million newly approved • Encouraging drill results La Granja • 30,000 meter drilling programme 50% complete • Promising interse
Slide 13: Significant disruptions from weather events at Energy operations
Significant disruptions from weather events at Energy operations Energy underlying result • Strong coal prices following (US$bn) significant supply disruptions • Queensland operations recovering from force majeure • Expansions in the Hunter Valley progress • Mt Pleasant decision due towards the end
Slide 14: Riversdale acquisition successfully completed
Riversdale acquisition successfully completed • Tier one hard coking coal Car Dumpers (x2) resources in Mozambique • Benga (65% Rio Tinto, 35% Tata 1.8 km Steel) Existing Cape 2.5km Lambert Port – First exports planned end 2011 Tug harbour – Growth potential beyond 10Mt/a – 60% hard coking, 40% ther
Slide 15: Rapidly improving demand environment for Diamonds & Minerals
Rapidly improving demand environment for Diamonds & Minerals Diamonds & Minerals underlying result • Strong pricing environment (US$bn) – Continued strong demand for borates and TiO2 – Improved market conditions for diamonds – TiO2 contracts steadily being replaced with shorter-term mechanisms • Hea
Slide 16: Guy Elliott, Chief financial officer
Guy Elliott Chief financial officer Richards Bay Minerals rehabilitation
Slide 17: Record first half earnings
Record first half earnings Underlying earnings 2010 first half vs 2011 first half ($m) Note: Exploration and evaluation variance includes $229 million decrease in gain on undeveloped property sales (+$229 million gain in H1 2010 from sale of undeveloped coal properties) 4 August 2011 Rio Tinto 2011
Slide 18: Earnings cash cost performance driven by rising input prices and weather events
Earnings cash cost performance was driven by rising input prices and weather events Breakdown of cash cost variance • Unit cost efficiency impacted by lower volumes • Maintenance cost and volumes Other production effected by weather events and one-offs Input prices ($182m) and other • Mining and loc
Slide 19: Outstanding cash flow generation
Outstanding cash flow generation 2011 first half cash flows Half yearly operating cash flows ($bn) ($bn) Other: $0.5bn Interest: $0.3bn Dividends from EAUs Increase in net debt Cash flows from and other Tax: $3.7bn consolidated operations inflows: $5.3bn Dividends: $1.2bn Buyback: $2.4bn Cash flows
Slide 20: Capital expenditure ramping up
Capital expenditure ramping up •Ramp up in major project growth capex expected to continue •Increasing levels of capital investment over the medium term Simfer payment •Major projects progressing well •Some spend delays due to weather interruptions in first half •Increasing procurement activity and
Slide 21: Capital cost estimates revised for strengthening of Australian dollar
Capital cost estimates revised for strengthening of Australian dollar Pilbara infrastructure to 283Mt/a Yarwun 2 (Control budget A$bn) (Control budget A$bn) 4 August 2011 Rio Tinto 2011 interim results 21
Slide 22: Industry supply response remains challenged
Industry supply response remains challenged 2011 Lead time outlook • Equipment lead times are increasing Equipment type 0 1 2 3 (years) • Resource nationalism will slow Grinding mills investment in growth Draglines Barges • Project financing challenged in Locomotives current volatile markets Generat
Slide 23: Balancing growth with capital returns
Balancing growth with capital returns • More than $10 billion of high quality investments in first half Cash from operations • Capital expenditure ramping up • Regained single A credit rating • Capital return programme increased by $2 billion to $7 billion to be completed by end of Q1 2012 Investmen
Slide 24: Tom Albanese, Chief executive
Tom Albanese Chief executive Oyu Tolgoi construction site
Slide 25: Shift in metals consumption towards the developing world continues
Shift in metals consumption towards the developing world continues GDP per capita by region Building height categories RMB thousand Floors, steel intensity (kg/m2) < 100 F Steel intensity (high-end) Steel intensity (low-end) < 50 F < 32 F < 18 F < 12 F <8F Average 5-40 40-50 50-70 60-100 80-120 110-
Slide 26: $26 billion of major capital projects underway
$26 billion of major capital projects underway Project timeline(1) % Complete $ Capex(2) Production $91m +5mtpa $284m +5mtpa $763m +5.3mtpa $2.1bn 15mtpa(4) $7.3bn (3) +53mtpa $1.1bn 15mtpa(4) $166m(5) Access high grade ore $6bn +100ktpd ore $340m 30mlb Ph1, 60mlb Ph2 (capacity) $469m +17kt Ni, 13kt
Slide 27: High quality tier one projects currently in advanced study
High quality tier one projects currently in advanced study Indicative Indicative first Indicative Project Product capex(1) production production(1) Nammuldi (Pilbara 283) Iron ore $ 2013 NA Pilbara 333 Iron ore $$ 2015 +50mtpa IOCC Phase 3 Iron ore $ 2013 +2.7mtpa Simandou Iron ore $$ 2015 +95mt
Slide 28: Deep portfolio of strong earlier stage projects
A deep portfolio of strong earlier stage projects provide options for further quality growth • Pilbara 433mtpa Iron Ore • Orissa • IOCC expansions • Resolution • KUC North Rim Skarn Copper • La Granja • Northparkes expansion • Escondida options • AP60 Phase 2 • Armargosa (bauxite) Aluminium • Sarawa
Slide 29: Investment in technology and exploration gives competitive edge
Our investment in technology and exploration gives us competitive edge Exploration drill rig Iron Ore Operations Centre, Perth Mine planning Driverless trucks, Pilbara 4 August 2011 Rio Tinto 2011 interim results 29
Slide 30: Record results – global expansion options grow
Record results – global expansion options grow • Record first half earnings, EBITDA and operating cash flow • Strong demand outlook with continued volatility, strong currencies and higher input prices • $10 billion of high quality investment in first half • World class growth programme gathering mom
Slide 31: 2011 interim results
2011 interim results 4 August 2011
Slide 32: Breakdown of price variance
Breakdown of price variance Earnings impact from price $9,496 million ($m) Traded Non-traded 4 August 2011 Rio Tinto 2011 interim results 32
Slide 33: Breakdown of volume variance
Breakdown of volume variance Earnings impact from volumes $782 million ($m) 4 August 2011 Rio Tinto 2011 interim results 33
Slide 34: Reconciliation of underlying to net earnings
Reconciliation of underlying to net earnings $m 2010 Underlying earnings 7,781 Net impairment charges (147) Exchange differences and gains on derivatives 63 Other (110) Net earnings 7,587 4 August 2011 Rio Tinto 2011 interim results 34
Slide 35: Modelling earnings
Modelling earnings Impact on full year 2010 average underlying earnings Earnings sensitivity price/rate ($m) Copper 426c/lb +/-43c/lb 324 Aluminium $2,551/t +/-$255/t 737 Gold $1,447/oz +/-$145/oz 64 Molybdenum $18/lb +/-$1.8/lb 54 Iron ore +/-10% 1,710 Coal* +/-10% 318 A$ 103 USc +/-US10.3USc 846 C
Slide 36: Net debt: definition change from 2011
Net debt: definition change from 2011 • The Group’s net debt definition has been modified, such that it is now stated net of adjustments for funding arrangements relating to certain Equity Accounted Units (EAUs) and consolidated operations. • This avoids including borrowing liabilities twice, where