Slide 1: 2015 full year results
11 February 2016 Highlights Performance Outlook Financial targets Summary 2015 full year results
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 contains certain forward-look
Slide 3: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary Sam Walsh Chief executive
Slide 4: Safety and our values are fundamental
4 Safety and our values are fundamental All injury frequency rates Per 200,000 hours worked Accountability 2.0 • Relentless pursuit of shareholder value • Disciplined decision-making 1.8 1.6 Respect 1.4 • For the environment and communities • For health, safety and wellbeing 1.2 1.0 Integrity 0.8 •
Slide 5: Continued delivery of our promises in 2015
5 Continued delivery of our promises in 2015 Underlying earnings of $4.5 billion Net cash from operating activities of $9.4 billion Reduced costs by $1.3 billion and working capital by $1.5 billion Reduced capex spend to $4.7 billion Returned $6.1 billion of cash to shareholders Strong balance sheet
Slide 6: Rio Tinto has taken decisive early action…
6 Rio Tinto has taken decisive early action… Reduced costs Decreased capex 1.3 6.2 17.6 1.5 13.0 3.3 8.2 4.7 ~4 2013 2014 2015 Total savings 2012 2013 2014 2015 Operating, exploration & evaluation cost reductions achieved by 31 December 2015 vs 2012 base Total capital expenditure in each year Re
Slide 7: …which has enabled returns to shareholders, strengthened the balance sheet…
7 …which has enabled returns to shareholders, strengthened the balance sheet… Shareholder returns Net debt and gearing ratio1 US$ billion US$ billion 6.1 13.1 22.1 8.3 2.0 4.1 3.7 28% 13.8 24% 3.3 2013 2014 2015 Total Jun-13 Dec-15 Dividends Share buy-backs Net debt Gearing ratio 1 Gearing ratio = n
Slide 8: … and maintained 34% Group EBITDA margins
8 … and maintained 34% Group EBITDA margins Iron Ore Aluminium • Pilbara operating FOB EBITDA margins • Integrated operating EBITDA margins of 60% of 31% • Cash flows from operations of $6,061m • Cash flows from operations of $2,413m and free cash flow of $4,335m and free cash flow of $817m • Underl
Slide 9: Full year dividend maintained year-on-year
9 Full year dividend maintained year-on-year Dividends declared per share • Final dividend of 107.5 cents per US cents share declared by the board 215 107.5 215 − To be paid in April 2016 • Total full year 2015 dividend declared of 215 cents per share − In pounds, equates to 6% increase 107.5 − In A
Slide 10: Chris Lynch, Chief financial officer
11 February 2016 Highlights Performance Outlook Financial targets Summary Chris Lynch Chief financial officer
Slide 11: Prices reduced earnings by over 80%, partially offset by exchange, energy and management actions
11 Prices reduced earnings by over 80%, partially offset by exchange, energy and management actions Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 Total cost reductions of $953m post-tax or $1,336m pre-tax 6,000 833 120 4,540 359 3,791 132 4,000 2,007 (336) (185) 2,000 (7
Slide 12: Net earnings
12 Net earnings US$m 2015 underlying earnings 4,540 Impairments (1,802) Losses/gains on disposals 48 Exchange losses on (3,282) debt and derivatives Increased closure provision (233) for legacy operations Restructuring costs and (258) global headcount reductions Other 121 2015 net earnings/(loss) (8
Slide 13: Continued focus on costs generating significant savings in 2015
13 Continued focus on costs generating significant savings in 2015 Pre-tax operating cash cost improvements Reduction vs. 2014 (US$ million) +34% 110 1,336 585 1,000 Increased target 90 Original 551 target: $750m Increased 2015 target H1 2015 H1 2015 E&E H2 2015 H2 2015 E&E Total (operating and E&E)
Slide 14: Achieved $6.2 billion of cost reductions against 2012 base
14 Achieved $6.2 billion of cost reductions against 2012 base Pre-tax operating cash cost improvements Reduction vs. 2012 (US$ billion) • Cost performance helped deliver a 7 2015 EBITDA margin of 34% (39% in 2014) 6 • Strong delivery across all Product 5 Groups • Cost culture embedded across the 4 e
Slide 15: Track record of balanced capital allocation
15 Track record of balanced capital allocation Demonstrable capital discipline Leads to more balanced allocation US$ billion Capital to cash returns to shareholders (Percentage) 79% 80% 69% 44% 17.6 13.0 8.2 19% 4.7 56% 7% 37% 31% 21% 20% 14% 2012 2013 2014 2015 2012 2013 2014 2015 Sustaining Growth
Slide 16: Low net debt levels keep gearing ratio at the lower end of our guidance range
16 Low net debt levels keep gearing ratio at the lower end of our guidance range Net debt and gearing ratio1 • $2 billion share buy-back completed US$ billion funded from 2014 cash flows 22.1 • Net debt levels almost flat half-on- half in 2015, despite buy-back 18.1 • $9.4 billion of cash on hand as
Slide 17: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary Sam Walsh Chief executive
Slide 18: Preserving and creating value
18 Preserving and creating value Long-life, low-cost and Commercial excellence expandable assets Strong customer relationships, high Strong cash flow generation throughout quality benchmark products, technical the cycle from our key commodities marketing and value-in-use pricing Operating excellence
Slide 19: There has been a significant deterioration in the macro environment…
19 There has been a significant deterioration in the macro environment… 2015 1 Oct 2015 to date FX USD Index(1) 9.3% (0.1%) Index(2) (23.4%) (18.7%) Commodities Brent Oil (35.0%) (36.4%) Developed economies Copper (25.3%) (11.5%) Iron ore (38.9%) (18.4%) MSCI Global (2.7%) (6.3%) Equity MSCI Emergin
Slide 20: …so further pre-emptive actions are required to protect shareholder value
20 …so further pre-emptive actions are required to protect shareholder value Operating and Capital allocation commercial excellence discipline Reduce costs Additional capex reductions by by $2bn $3bn $1 billion in 2016 and a further over 2016 and 2017 against $1 billion in 2017 previous guidance Ope
Slide 21: New dividend policy and capital allocation commitment
21 New dividend policy and capital allocation commitment • Progressive policy replaced with new At the end of each financial period, the board will determine an appropriate total level of ordinary dividend policy dividend per share, taking into account the results for the financial year, the outlook
Slide 22: Chris Lynch, Chief financial officer
11 February 2016 Highlights Performance Outlook Financial targets Summary Chris Lynch Chief financial officer
Slide 23: Current volatility demands further pre-emptive actions
23 Current volatility demands further pre-emptive actions 2015 underlying earnings flexed for iron ore prices US$ billion • Macro, market and commodity weakness 4.5 • Reduces outlook for near-term cash 4.1 (1.8) flows • Dividends sustainability determined by earnings and cash flows 2.7 • Further pre
Slide 24: Targeting a further $2 billion reduction in costs
24 Targeting a further $2 billion reduction in costs Pre-tax operating cash cost improvements Reduction vs. 2012 (US$ billion) • Achieved $6.2 billion in operating, exploration and evaluation costs since 31 December 2012 1.0 8.2 • Cost culture embedded across the 1.0 entire organisation 6.2 • Settin
Slide 25: Further $3 billion capex reduction to preserve capital and sustain operations
25 Further $3 billion capex reduction to preserve capital and sustain operations Capital expenditure profile • Completed two projects in 2015 US$ billion1 7 • 2016 capex reduced by a further $1 billion to around $4 billion 6 • 2017 capex reduced by $2 billion to ~5.5 5 ~$5 billion from previous $7 b
Slide 26: Our capital allocation framework
26 Our capital allocation framework 1. Essential 2. Ordinary 3. Iterative cycle of sustaining capex dividends Further cash returns to Compelling shareholders growth Debt management ©2016, Rio Tinto, All Rights Reserved
Slide 27: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary Sam Walsh Chief executive
Slide 28: Preserving and creating shareholder value
28 Preserving and creating shareholder value World-class portfolio Free Quality cash flow growth generation Sustainable shareholder returns Operating Capital and allocation commercial discipline excellence Balance sheet strength ©2016, Rio Tinto, All Rights Reserved
Slide 29: 2015 full year results
11 February 2016 Highlights Performance Outlook Financial targets Summary 2015 full year results
Slide 30: Exchange rates, lower energy costs and volumes partially offset impact of lower prices
30 Exchange rates, lower energy costs and volumes partially offset impact of lower prices Underlying earnings H1 2015 vs H2 2015 US$ million (post tax) 3,000 2,923 2,000 212 118 1,616 402 60 1,410 (82) (17) (42) 1,000 (1,958) 0 H1 2015 Price Exchange Energy Inflation H1 2015 Volumes Cash cost Explor
Slide 31: Weaker prices significantly reduced underlying earnings in 2015
31 Weaker prices significantly reduced underlying earnings in 2015 Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 6,000 (37) (52) (79) (128) (136) (141) (164) 4,000 (548) 2,000 (855) (5,555) (7,695) 0 2014 Price underlying earnings ©2016, Rio Tinto, All Rights Reserved
Slide 32: … partly offset by favourable exchange rates, lower energy costs and higher volumes
32 … partly offset by favourable exchange rates, lower energy costs and higher volumes Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 398 81 6,000 39 25 (20) (26) (89) 2,007 359 3,791 4,000 (276) (185) 132 2,000 (7,695) 0 2014 Price Exchange Energy Inflation Flexed Volume
Slide 33: $1.5 billion of cash released from working capital
33 $1.5 billion of cash released from working capital Working capital balance reconciliation US$ million Net decrease of $1,122m 841 377 658 1,366 Price Non-price 244 (1,499) Opening Non-cash Cash Closing balance balance 31 Dec. 2015 31 Dec. 2014 ©2016, Rio Tinto, All Rights Reserved
Slide 34: Pilbara: our low-cost advantage has been sustained over many years
34 Pilbara: our low-cost advantage has been sustained over many years Pilbara cash unit cost US$ per tonne • 2015 cash unit cost of $14.90/t (24% lower than $19.50/t in 2014) • Maintain consistently attractive FOB EBITDA margins (60% in 2015) 20.4 18.7 • Average realised FOB price of $48.40 per wet
Slide 35: Iron Ore: increased volumes and cost reductions delivered against lower prices
35 Iron Ore: increased volumes and cost reductions delivered against lower prices Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 8,107 8,000 6,000 398 3,952 4,000 772 230 3,506 314 (266) (62) 2,000 (5,541) 0 2014 Price Exchange Energy Inflation Flexed Volumes Cash cost Tax & other 20
Slide 36: The world’s best aluminium business
36 The world’s best aluminium business Clear focused strategy: Bauxite and first quartile smelters are key pillars Bauxite Alumina Aluminium Provides competitive security Sector-leading primary metal Industry-leading bauxite position of supply for our first cost 2015 EBITDA margin of 23% quartile sm
Slide 37: Aluminium: exchange rates and cost improvements almost completely offset lower prices
37 Aluminium: exchange rates and cost improvements almost completely offset lower prices Underlying earnings 2014 vs 2015 US$ million (post tax) 2,000 1,248 239 25 1,118 661 11 910 1,000 (7) (49) (52) 0 (958) 2014 Price Exchange Energy Inflation Flexed Volumes Cash cost Exploration Tax & other 2015
Slide 38: Delivering increased copper volumes through growing existing mines
38 Delivering increased copper volumes through growing existing mines H2 2015: Higher grade areas exploited in the mine plan for Oyu Tolgoi open pit Oyu Tolgoi 2020+: First production from Oyu Tolgoi underground1 2016/2017: Metal share expected from Grasberg, with continued investment in underground
Slide 39: Copper & Coal: cost savings and exchange rates partially offset lower prices
39 Copper & Coal: cost savings and exchange rates partially offset lower prices Underlying earnings 2014 vs 2015 US$ million (post tax) 1,000 831 750 500 110 248 85 274 250 267 157 (26) (15) 0 (201) -250 (934) 2014 Price Exchange Energy Inflation Flexed Volumes Cash cost Exploration Tax & other 2015
Slide 40: Diamonds & Minerals: delivering strong margins
40 Diamonds & Minerals: delivering strong margins Well positioned for consumer-driven growth Diamonds Borates Titanium Dioxide Salt & Uranium 34% FOB EBITDA 29% FOB EBITDA 33% FOB EBITDA 42% EBITDA margins margins margins margins in salt Production up 25% with Uranium market higher volumes from the
Slide 41: Diamonds & Minerals: favourable exchange and cost reductions partially offset lower prices and volumes
41 Diamonds & Minerals: favourable exchange and cost reductions partially offset lower prices and volumes Underlying earnings 2014 vs 2015 US$ million (post tax) 400 266 5 295 300 269 52 (45) 3 189 200 (99) (62) 100 (200) 0 2014 Price Exchange Energy Inflation Flexed 2014 Volumes Cash cost Explorati
Slide 42: Other movements in underlying earnings
42 Other movements in underlying earnings Underlying earnings impact Epl'n eval'n Interest, FX/ Energy & Cash Epl'n 2014 Non tax & US$ million 2014 price Inflation Volumes Costs eval'n disp Cash other 2015 Other operations (240) (51) 3 9 2 - - 16 173 (88) Central Exploration (net) (156) 17 - - - (10
Slide 43: ERA earnings reconciliations
43 ERA earnings reconciliations 2015 Energy Resources of Australia US$m Total comprehensive loss per ERA press release (A$275m) (207) Lower depreciation following impairment recognised by Rio Tinto 29 1 Tax and unwinding of discount 147 Less: Minority interests (31.6%) 11 Other (4) Underlying earnin
Slide 44: Modelling earnings
44 Modelling earnings 2015 ($m) impact on FY 2015 average price/ underlying earnings of 10% Earnings sensitivity rate price/rate change Copper 249c/lb 213 Aluminium $1,661/t 416 Gold $1,160/oz 39 Iron ore (62% Fe FOB) $50/dmt 843 Coking coal (benchmark) $102/t 60 Thermal coal (average spot) $62/t 11