Slide 1: 2006 Half Year Results US teleconference
2006 Half Year Results US teleconference 3 August 2006 1 2006 Half Year Results US teleconference 3 August 2006
Slide 2: US Teleconference call
US Teleconference call Paul Skinner Chairman Leigh Clifford CEO Replay (toll free US and Canada) 888 2031112 Replay (outside US and Canada) 1 719 4570820 Confirm Code 5314607 Time 11.00am Eastern, 10.00am Central 9.00am Mountain, 8.00am Pacific 2 2006 Half Year Results US teleconference 3 August 200
Slide 3: Cautionary statement
Cautionary statement For the purposes of the Forward-Looking Statements Safe Harbor provisions of the US securities laws This presentation contains statements which constitute forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, st
Slide 4: Paul Skinner
Paul Skinner 4 2006 Half Year Results US teleconference 3 August 2006
Slide 5: Record first half earnings
Record first half earnings 5,000 $m H1 H1 2005 2006 4,000 Underlying 2,087 3,751 +80% 3,000 earnings 2,000 Excluded 78 45 1,000 items 0 Net 2,165 3,796 +75% 2003 2004 2005 2006 earnings H2 underlying earnings ($m ) H1 underlying earnings ($m ) Data for 2003 are adjusted earnings under UK GAAP, from
Slide 6: Highlights of first half 2006
Highlights of first half 2006 • Underlying earnings of $3.75 billion, up 80% • Cash flow from operations of $5.2 billion, up 52% • Capital investment of $1.8 billion, up 58% • Capital management programme of $4 billion ahead of schedule • $1.5 billion special dividend paid to shareholders • $1.0 bil
Slide 7: Outlook
Outlook • Interest rates and political events leading to increased volatility but… • …global growth continues to be robust • Supply side constraints continue • Demand prospects remain favourable 7 2006 Half Year Results US teleconference 3 August 2006
Slide 8: Leigh Clifford
Leigh Clifford 8 2006 Half Year Results US teleconference 3 August 2006
Slide 9: Earnings strengthen across the board
Earnings strengthen across the board H1 2005 H1 2006 4,000 Diamonds +14% 3,000 Ind. Minerals +10% Aluminium +82% $m 2,000 Energy +23% Iron Ore +40% 1,000 Copper +140% 0 H1 2005 H1 2006 Product group underlying earnings 9 2006 Half Year Results US teleconference 3 August 2006
Slide 10: EBIT margins improve again
EBIT margins improve again 50 40 30 % 20 10 0 2003 2004 2005 H1 2006 Group EBIT as a percentage of gross turnover Data for 2003 are under UK GAAP, from 2004 data are under IFRS 10 2006 Half Year Results US teleconference 3 August 2006
Slide 11: Copper
Copper • Very strong copper market 80 • Co-products remain strong 60 • Operations performing well – KUC and Northparkes stand out 40 – Escondida • Norte makes a contribution 20 • Sulphide Leach started up in June 0 – Palabora block cave going well 2004 2005 H1 06 Product Group – Lower grades at Gras
Slide 12: Iron Ore
Iron Ore 60 • Demand remains strong • 2006 price settlement reflects fundamentals 40 • Production recovered from cyclones early in the year 20 • Expansion projects are on track • Hope Downs construction is under way 0 2004 2005 H1 06 • Simandou mining concession signed in April Product Group • HIsme
Slide 13: Energy
Energy 30 • Thermal coal prices remain strong in Pacific Basin and North America 20 • Powder River Basin rail capacity improves • Spring Creek and Antelope mines are being 10 expanded • Clermont moves towards approval 0 • Uranium market continues to strengthen 2004 2005 H1 06 • Progress continues on
Slide 14: Aluminium
Aluminium 40 • Stronger aluminium market • Investment continues in Weipa capacity 30 • Comalco Alumina Refinery at over 90% 20 capacity • CAR II is under evaluation 10 • Smelters are performing well 0 • Seeking greenfield smelting opportunities 2004 2005 H1 06 and alumina alliances Product Group EBI
Slide 15: Diamonds
Diamonds 50 • Underground development at Argyle 40 and Diavik advances 30 • Diavik A418 dyke project is ahead of 20 schedule 10 • Airlift overcomes ice road challenges 0 • Argyle recovered from heavy rains 2004 2005 H1 06 earlier in the year Product Group EBIT margin in % 15 2006 Half Year Results U
Slide 16: Industrial Minerals
Industrial Minerals 20 • UGS ramps up 15 • Madagascar project construction under way 10 • TiO2 market in reasonable balance, co-products remain strong 5 • Rio Tinto Minerals structure is delivering 0 2004 2005 H1 06 • Potasio Rio Colorado progressing Product Group EBIT margin in % 16 2006 Half Year
Slide 17: Operational summary
Operational summary • Challenging operating environment early in the year • Operations performing consistently well • Substantial investment programme to add capacity • Growth projects remain on track 17 2006 Half Year Results US teleconference 3 August 2006
Slide 18: Strong markets lift earnings
Strong markets lift earnings 4,000 7 -79 3,000 1,804 $m 2,000 3,819 1,000 2,087 0 2005 H1 Prices Fx Inflation 18 2006 Half Year Results US teleconference 3 August 2006
Slide 19: Copper dominates price effect
Copper dominates price effect Traded metals Other products 1,006 r 1,000 pe op C $m re O n s 600 Iro al um te er xi gy i in in 396 au M er m /B lu En ds l ria A on a d st in ol m du 217 207 m G ia lu In 200 D A 110 er 18 18 y 25 th ol O M -200 -97 -96 Earnings impact from price $1,804 million 19 200
Slide 20: Volumes up but impacted by weather
Volumes up but impacted by weather 7 -79 129 4,000 3,000 1,804 $m 2,000 3,819 1,000 2,087 0 2005 H1 Prices Fx Inflation Volumes 20 2006 Half Year Results US teleconference 3 August 2006
Slide 21: Copper and moly benefit from investment and grades
Copper and moly benefit from investment and grades 200 $m 100 Volume contribution to earnings +$129m 0 Copper Moly Gold Iron ore Coal Diamonds Other Total 171 67 -79 30 -43 -15 -2 129 21 2006 Half Year Results US teleconference 3 August 2006
Slide 22: Industry cost pressures increase
Industry cost pressures increase 4,000 7 -79 129 -71 -386 -56 3,000 1,804 $m 2,000 3,819 1,000 2,087 0 2005 H1 Prices Fx Inflation Volumes Non Cash Energy Cash Costs 22 2006 Half Year Results US teleconference 3 August 2006
Slide 23: Cost impact on underlying earnings
Cost impact on underlying earnings Investing / Energy Input Prices Cost of Prod’n Exploration Expansion 0 $m -50 -100 -150 -200 -250 Investment costs +$99m Common industry costs +$343m -300 23 2006 Half Year Results US teleconference 3 August 2006
Slide 24: 'Other' benefits from recognition of US deferred tax asset
‘Other’ benefits from recognition of US deferred tax asset 4,000 7 -79 129 -71 -386 -56 316 3,000 1,804 $m 2,000 3,819 3,751 1,000 2,087 0 2005 H1 Prices Fx Inflation Volumes Non Cash Energy Other 2006 H1 Cash Costs 24 2006 Half Year Results US teleconference 3 August 2006
Slide 25: No significant asset sales in 'Excluded Items'
No significant asset sales in ‘Excluded Items’ 4,000 7 -79 129 -71 45 -386 -56 316 3,000 1,804 $m 2,000 3,751 3,819 3,796 1,000 2,087 0 2005 H1 Prices Fx Inflation Volumes Non Cash Energy Other 2006 H1 Excl’d Net Cash Costs Items Earnings 25 2006 Half Year Results US teleconference 3 August 2006
Slide 26: Operational cash flow strengthens in H1
Operational cash flow strengthens in H1 Dividends from JCEs & associates H2 Cash flow from 8,000 consolidated operations H1 Cash flow from 6,000 consolidated operations $m 4,000 2,000 0 2003 2004 2005 H1 06 Cash flow from consolidated operations excludes cash flows relating to capital expenditure, a
Slide 27: Balance sheet remains strong
Balance sheet remains strong Net debt Net debt / total capital (%) 7,000 Interest cover (times) 100 90 6,000 80 5,000 70 $m 4,000 60 50 3,000 40 2,000 30 20 1,000 10 0 0 93 94 95 96 97 98 99 00 01 02 03 04 05 H1 06 Net debt, interest cover and gearing ratios are as at the period ending 31 December,
Slide 28: Capital management status
Capital management status • Special dividend of $1.5 billion was paid in April • Interim ordinary dividend set at 50% of 2005 full year rate • Final ordinary dividend level is under review for the full year • $2.5 billion share buyback over two years is ahead of schedule • Assessment of further init
Slide 29: Construction projects will increase volumes
Construction projects will increase volumes Diavik A418 dyke Capex over $1bn UGS expansion Capex from $500m to $1bn PRB coal Capex less than $500m Cortez Hills expansions gold KUC Boric acid pushback Big Gossan expansion Weipa portal Kennecott land projects Madagascar TiO2 Hail Creek Argyle expansio
Slide 30: Numerous conceptual and early stage projects
Numerous conceptual and early stage projects Alaska copper / Capex over $1bn Pebble Diavik IOC pellet Capex from $500m to $1bn plant + underground Capex less than $500m US coal Sari Gunay Unspecified Kennecott Eagle nickel gold land Orissa iron Abu Dhabi ore Resolution copper smelter Deep Cortez Ken
Slide 31: Iron Ore infrastructure capacity to 200 million tonnes is under way
Iron Ore infrastructure capacity to 200 million tonnes is under way • Port and rail expansions on schedule • Total infrastructure capacity of 200 million tonnes in 2008 • Further expansion of Cape Lambert is under review • Envisaging next phase to 220 million tonnes 31 2006 Half Year Results US tele
Slide 32: Construction has started on Madagascar project
Construction has started on Madagascar project • Project on schedule • World Bank involvement • Port contract soon to be awarded • First production is due at the end of 2008 • First phase 750,000 tonnes of ilmenite per annum by 2012 • Will fill supply gap anticipated post 2009 32 2006 Half Year Resu
Slide 33: Potasio Rio Colorado is progressing
Potasio Rio Colorado is progressing • Large resource • In feasibility study • Solution mining trials progressing well • Approximately 5% of global potash supply • Would be first major potash producer in southern hemisphere • Competitive position for Brazilian market 33 2006 Half Year Results US tele
Slide 34: La Granja – a very large copper orebody
La Granja – a very large copper orebody • 2 billion tonne mineralisation • Grade is 0.6% copper • Potential large, long life operation • Innovation through technology • Order of magnitude study under way 34 2006 Half Year Results US teleconference 3 August 2006
Slide 35: Summary
Summary • Weather related operational challenges • Good operational performance in strong markets is delivering record cash flows • Record capital expenditure on organic growth options • Expansion projects in different regions are on track • Demand outlook remains positive • Total focus on performan
Slide 36: 2006 Half Year Results US teleconference
2006 Half Year Results US teleconference 3 August 2006 36 2006 Half Year Results US teleconference 3 August 2006