Slide 1: 2015 half year results
6 August 2015 Highlights Financial performance Outlook Appendix 2015 half year results Generating value through the cycle
Slide 2: Cautionary statement
2 Cautionary statement 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-looki
Slide 3: Sam Walsh, Chief executive
6 August 2015 Highlights Financial performance Outlook Appendix Sam Walsh Chief executive
Slide 4: Our commitment to shareholders
4 Our commitment to shareholders To deliver industry-leading, sustainable shareholder returns through the cycle from our: Tier 1 assets Disciplined allocation of capital Operating and commercial excellence Culture of safety and integrity ©2015, Rio Tinto, All Rights Reserved
Slide 5: The 'New Normal'
5 The ‘New Normal’ Global growth continues • Period of economic adjustment Real GDP (US$ trillion) Real GDP growth (%) 100 10% • Developed markets recovering • China transitioning to major 80 8% developed economy Other developing economies 60 6% − Lower growth on a higher base China 40 4% • Rising d
Slide 6: H1 2015 highlights
6 H1 2015 highlights Underlying earnings of $2.9 billion Net cash from operating activities of $4.4 billion Returned $3.2 billion of cash to shareholders Reduced costs by $0.6 billion Reduced capex spend to $2.5 billion Strong balance sheet with net debt of $13.7 billion ©2015, Rio Tinto, All Rights
Slide 7: $3.2 billion returned to shareholders in H1 2015
7 $3.2 billion returned to shareholders in H1 2015 Total cash returns to shareholders US$ billion • Expected to return over $6 billion to shareholders in 2015 1.0 6.1 • $2 billion share buy-back on track for completion by 2015 year end 1.9 − Funded from 2014 cash flows • Total dividends paid in 2015
Slide 8: Chris Lynch, Chief financial officer
6 August 2015 Highlights Financial performance Outlook Appendix Chris Lynch Chief financial officer
Slide 9: Cost reductions, exchange rates and lower energy costs offset almost 40% of price decline
9 Cost reductions, exchange rates and lower energy costs have offset almost 40% of the price decline Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 5,116 5,000 Total cost reductions of $460m post-tax or $641m pre-tax 4,000 3,000 396 64 2,923 74 79 847 2,417 (33) 2,000 (3,620) 1,
Slide 10: Net earnings
10 Net earnings US$m H1 2015 underlying earnings 2,923 Impairments (421) Losses/gains on disposals 11 Exchange losses on (1,306) debt and derivatives Increased closure provision (242) for legacy operations Restructuring costs and (135) global headcount reductions Other (24) H1 2015 net earnings 806
Slide 11: Succeeding in a challenging market
11 Succeeding in a challenging market Iron Ore Aluminium • Pilbara operating FOB EBITDA margins • Integrated operations EBITDA margins of 61% of 35% • Cash flows from operations of $2,065m • Cash flows from operations of $1,556m • Underlying earnings of $2,099m • Underlying earnings of $793m Copper
Slide 12: Balance sheet remains strong and flexible
12 Balance sheet remains strong and flexible Net debt and gearing ratio1 • Maintain strong balance sheet amid US$ billion challenging market 22.1 • Targeting 20-30% gearing ratio through the cycle 18.1 • $11.2 billion of cash on hand as at 30 28% June 2015 13.5 13.7 12.5 25% H1 SBB • Half way throug
Slide 13: Strong operating cash flows
13 Strong operating cash flows Net cash generated from operating activities • $1 billion reduction in cash flows, as US$ million price impact partially offset by: − Operating cash cost reductions 5,456 − Working capital cash release − Volume increases 4,435 − Lower taxes − Favourable exchange rates
Slide 14: Cost culture continues – 85% of original 2015 target achieved in H1
14 Cost culture continues – 85% of original 2015 target achieved in H1 and target increased Pre-tax operating cash cost improvements Reduction vs. 2014 (US$ million) 359 1,000 750 90 551 Original 2015 target H1 2015 H1 2015 E&E H2 2015 target Total (operating and E&E) operating (operating and E&E) (
Slide 15: Focus on capital efficiency
15 Focus on capital efficiency Capital discipline… • Capital allocation discipline requires Capital expenditure profile (US$ billion)1 project IRR >15% 17.6 • Two major projects completed in H1 2015: 13.0 − Kitimat − Pilbara infrastructure 8.2 ~7 <6 ~5.5 2012A 2013A 2014A 2015F 2016F 2017F Sustainin
Slide 16: Our capital allocation framework maximises shareholder value
16 Our capital allocation framework maximises shareholder value 1. Essential 2. Progressive 3. Iterative cycle of sustaining capex dividends Further cash Compelling returns to growth shareholders Debt management ©2015, Rio Tinto, All Rights Reserved
Slide 17: Sam Walsh, Chief executive
6 August 2015 Highlights Financial performance Outlook Appendix Sam Walsh Chief executive
Slide 18: Safety and our values are fundamental
18 Safety and our values are fundamental All injury frequency rates Per 200,000 hours worked Accountability • Relentless pursuit of shareholder value 2.0 • Disciplined decision-making 1.8 1.6 Respect 1.4 • For the environment and communities 1.2 • For health, safety and wellbeing 1.0 Integrity 0.8 •
Slide 19: Tier 1 iron ore assets and operational excellence deliver through the cycle
19 Tier 1 iron ore assets… 140 2015 second quarter delivered iron ore cost curve (WoodMac) $/dmt CFR China 62% Equivalent 120 RTIO Pilbara Third Quartile Producer 100 80 60 40 20 0 - 250 500 750 1,000 1,250 1,500 Mtpa …and operational excellence deliver through the cycle 80% Average annual margin 62
Slide 20: Pilbara: our low-cost advantage has been sustained over many years
20 Pilbara: our low-cost advantage has been sustained over many years Pilbara cash unit cost • H1 2015 cash unit cost of $16.2/t US$ per tonne (21% lower than $20.4/t in H1 2014) • Maintain consistently attractive FOB EBITDA margins (61% in H1 2015) 20.4 18.7 • Average realised FOB price of $54.40 p
Slide 21: Operational and commercial excellence is embedded across our businesses
21 Operational and commercial excellence is embedded across our businesses Iron ore material 166,000 tonnes of rehandling reduced concentrate tolled by 16Mt in 2014 in H1 2015 at RTK to optimise smelter utilisation and increase revenues Autonomous trucks (Utilisation) Aluminium sales (% H1 2015) 1.4
Slide 22: Delivering our major projects
22 Delivering our major projects Iron Ore Aluminium Copper Fe Al Cu OT Underground Pilbara infrastructure Kitimat expansion Development Plan1 Ramp up to 420kt nameplate Next steps to approve of feasibility Ramp up to generate maximum value from integrated system expected in early 2016 study an
Slide 23: Building the world's best mining company
23 Building the world’s best mining company World-class portfolio Free Quality cash flow growth generation Sustainable shareholder returns Operating Capital and allocation commercial discipline excellence Balance sheet strength ©2015, Rio Tinto, All Rights Reserved
Slide 24: 2015 half year results
6 August 2015 Highlights Financial performance Outlook Appendix 2015 half year results Generating value through the cycle
Slide 25: Cost reductions, exchange rates and lower energy costs offset over half of the price impact
25 Cost reductions, exchange rates and lower energy costs have offset over half of the price impact Underlying earnings H2 2014 vs H1 2015 US$ million (post tax) 5,000 4,189 4,000 126 319 2,923 3,000 79 2,846 702 (213) (155) 2,000 (2,124) 1,000 0 H2 2014 Price Exchange Energy & H1 2014 Volumes Cash
Slide 26: Weaker prices significantly reduced underlying earnings in H1 2015
26 Weaker prices significantly reduced underlying earnings in H1 2015 Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 5,116 5,000 4,000 139 2 3,000 (14) (19) (23) (46) (75) (58) (85) 2,000 (241) (3,620) 1,000 (3,200) 0 H1 2014 Price underlying earnings ©2015, Rio Tinto, All Right
Slide 27: Partly offset by favourable exchange rates, lower energy costs and higher volumes
27 … partly offset by favourable exchange rates, lower energy costs and higher volumes Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 150 5,116 5,000 73 26 4,000 12 2 (4) (14) 3,000 (33) 74 2,417 79 847 2,000 (133) (3,620) 1,000 0 H1 2014 Price Exchange Energy & Flexed Volumes u
Slide 28: Working capital cash release offset by non-cash movements
28 Working capital cash release offset by non-cash movements and lower payables as capex reduces Working capital balance reconciliation US$ million Net increase of $243m 273 Working capital cash movements US$ million 30 (30) 1,609 1,366 (579) (636) (678) (791) (795) H1 2010 H1 2011 H1 2012 H1 2013 H
Slide 29: Iron Ore: increased volumes and cost reductions delivered against lower prices
29 Iron Ore: increased volumes and cost reductions delivered against lower prices Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 5,000 4,683 4,000 3,000 150 176 2,099 349 80 1,912 2,000 (1) (138) 1,000 (3,200) 0 H1 2014 Price Exchange Energy & Flexed Volumes Cash cost Exploration & Ta
Slide 30: The world's best aluminium business
30 The world’s best aluminium business Clear focused strategy: Bauxite and first quartile smelters are key pillars Bauxite Alumina Aluminium Industry-leading bauxite position Provides competitive security Sector-leading primary metal H1 of supply for our first cost 2015 EBITDA margin of 26% quartile
Slide 31: Aluminium: exchange rates, prices and cost improvements more than doubled earnings
31 Aluminium: exchange rates, prices and cost improvements more than doubled earnings Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 1,000 1 104 793 279 758 12 750 (82) (33) 139 500 373 250 - H1 2014 Price Exchange Energy & Flexed Volumes Cash cost Exploration & Tax & other H1 2015 un
Slide 32: Significant growth in copper ahead
32 Significant growth in copper ahead Kennecott Oyu Tolgoi volumes start to underground will recover in 2016 deliver significant following value (>80% of total de-weighting/ de- value) watering east wall New 152 ktpd Rio Tinto expects concentrator metal share from completed in Grasberg in H1 2015 at
Slide 33: Copper & Coal: cost savings and exchange rates partially offset lower prices
33 Copper & Coal: cost savings and exchange rates partially offset lower prices Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 750 658 500 41 107 393 41 348 86 (57) 250 (46) (437) 0 H1 2014 Price Exchange Energy & Flexed Volumes Cash cost Exploration & Tax & other H1 2015 underlying r
Slide 34: Diamonds & Minerals: delivering strong margins
34 Diamonds & Minerals: delivering strong margins Well positioned for consumer-driven growth Diamonds Borates Titanium Dioxide Salt & Uranium 42% FOB EBITDA 27% FOB EBITDA 26% FOB EBITDA 44% EBITDA margins margins margins margins in salt Argyle underground Stable borate demand ramp up continues as i
Slide 35: Diamonds & Minerals: earnings in line with H1 2014
35 Diamonds & Minerals: earnings in line with H1 2014 despite challenging market conditions Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 150 104 101 100 76 (12) 14 75 27 50 (38) (29) 0 (67) H1 2014 Price Exchange Energy & Flexed H1 Volumes Cash cost Exploration & Tax & other H1 2015
Slide 36: Other movements in underlying earnings
36 Other movements in underlying earnings Underlying earnings impact Epl'n eval'n Interest, FX/ Energy & Cash Epl'n 2014 Non tax & US$ million H1 2014 price Inflation Volumes Costs eval'n disp Cash other H1 2015 Other operations (181) (54) (2) 1 15 - - 47 154 (20) Central Exploration (net) (69) 6 -
Slide 37: Earnings reconciliations
37 Earnings reconciliations H1 2015 Energy Resources of Australia US$m Total comprehensive loss per ERA press release (A$255m) (200) Increased depreciation of closure asset (6) 1 Tax and unwinding of discount 155 Less: Minority interests (31.6%) 17 Other (3) Underlying earnings as reported by Rio Ti
Slide 38: Modelling earnings
38 Modelling earnings H1 2015 ($m) impact on FY 2015 average price/ underlying earnings of 10% Earnings sensitivity rate price/rate change Copper 268c/lb 183 Aluminium $1,783/t 441 Gold $1,206/oz 23 Iron ore (62% Fe FOB) $56/dmt 1,005 Coking coal (benchmark) $113/t 74 Thermal coal (average spot) $63