Rio Tinto Plc · LSE:RIO
Rio Tinto — Corporate Update (September 2013)
61 slides from Rio Tinto's corporate update, Sep 2, 2013
Slide 1: ASX cover letter: site visit presentations
Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707 For personal use only ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 2 September 2013 Dear Sir, Attached are presen
Slide 2: Site visit to iron ore operations in Western Australia
2 – 5 September 2013 For personal use only Site visit to iron ore operations in Western Australia
Slide 3: Cautionary statement
1 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
Slide 4: Proven sector leadership
3 Proven sector leadership • Delivering value for shareholders • Proven sector leadership in: For personal use only − Integrated operational performance − Cash costs/ margin improvement − On time/ budget growth projects − Sales and marketing strategies − Utilisation of new technology − Key stakehold
Slide 5: Safety performance; Chinese iron ore demand fundamentals
5 Safety performance Iron Ore all injury frequency rates 2003 – 1H 2013 Per 200,000 hours worked For personal use only 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 03 04 05 06 07 08 09 10 11 12 1H'13 All injury frequency rate Lost time injury frequency rate Source: Rio Tinto ©2013, Rio Tinto,
Slide 6: Constraints on new iron ore supply; Pilbara performance records
7 On-going constraint to the development of new iron ore supply Announced and completed iron ore • Supply capacity continues to be production capacity (global) constrained Million tonnes − Reduced sources of project For personal use only 1000 financing 800 600 − Protracted approvals processes 400 20
Slide 7: Cash cost management and EBITDA performance
9 Strong focus on cash costs management delivers results, with more expected Pilbara cash operating unit cost* • Continued focus on (2006 = 100) controlling cash operating unit costs 200 For personal use only 180 • Inflationary pressures 160 persist but have eased 140 • 2012 cash cost: US$23.5/t 120
Slide 8: 290Mt/a infrastructure complete, 360Mt/a progressing
11 290Mt/a infrastructure complete and 360Mt/a infrastructure progressing well • 290 Mt/a first ore on ship 24 August • 290 Mt/a delivered ahead of schedule and on budget For personal use only • 220 – 290Mt/a delivered at a capital intensity less than US$140/t (100%) • Infrastructure expansion to 36
Slide 9: Community engagement; extending competitive advantages
13 Full engagement with our community stakeholders • Full community engagement is imperative to our licence to operate • Strong Aboriginal focus For personal use only − 9 of 10 Indigenous Land Use Agreements completed, covering all of our Pilbara footprint − Jobs and training for > 1500 Aboriginal e
Slide 10: Projects & Development: Extending our competitive advantages
2nd September 2013 Day 1 Day 2 Day 3 Day 4 Projects & Development For personal use only Extending our competitive advantages David Joyce - Managing director, Projects & Development 2 We have demonstrated superior performance in delivering projects Western Australian construction projects performance
Slide 11: Pathway to 290Mt/a at low capital intensity
3 Completed 220 to 290Mt/a pathway at a capital intensity <$140/t (100%) or $115/t (Rio Share) Added Project Date of capacity description first ore For personal use only 220Mt/a Dampier port Q1 2011 to 225Mt/a debottlenecking 225Mt/a Dampier port Q1 2012 to 230Mt/a incremental 230Mt/a Programme Q3 2
Slide 12: Early completion and ramp up to 290Mt/a
5 Early completion and ramp up to 290Mt/a adds considerable value 290Mt/a port capacity ramp up profile • All infrastructure in place-port, rail, Million tonnes power and water For personal use only 300 • Accelerated infrastructure schedule 290 enabled first ore on-ship 24th August 280 • Ramp up to
Slide 13: Getting the 290Mt/a expansion right: Rail and Mines
7 Getting the 290 Mt/a expansion right: Rail For personal use only Electronically Controlled Pneumatic (ECP) ore car Cape Lambert Yard – trip service facility Emu Siding upgrade Cape Lambert Yard – auto wash facility ©2013, Rio Tinto, All Rights Reserved 8 Getting the 290 Mt/a expansion right: Mines
Slide 14: 360Mt/a infrastructure progressing well
9 360Mt/a infrastructure progressing well Amount Left to • All dredging and wharf piling approved Commit completed Project Status US$B US$B For personal use only • The first of the topside modules have Port Approved 3.9 1.5 been installed with the balance due Rail Approved 0.9 0.2 by November Power
Slide 15: Orebody knowledge supports Pilbara growth pathways
11 Increased ore body knowledge supports the full range of Pilbara growth pathways 20000 Pilbara resources, reserves and production1 • Drilling effort is staying ahead of Million 18000 tonnes production increases For personal use only 16000 20,000 300 • The drilling focus is on near-mine 18,000 1400
Slide 16: Extending our competitive advantages
13 Extending our competitive advantages • Growth to 290Mt/a is being completed at a For personal use only capital intensity of less than US$140/t (100% Rio Tinto) or US$115/t (Rio Tinto share) • Delivering projects ahead of schedule adds early tonnes and significant business value • To maximise shar
Slide 17: Technical Marketing
2nd September 2013 Day 1 Day 2 Day 3 Day 4 Technical Marketing For personal use only Extending our competitive advantages Warwick Smith - Managing director – Sales & Marketing Darren Matthews – General manager – Technical Marketing 2 The ability to continuously maximise value • A deep understanding
Slide 18: Iron ores differentiated by quality and cost
3 Iron ores are differentiated by quality and cost to customer Quality Logistics Physical Properties Freight Rates For personal use only Chemical Properties Market Metallurgical Ship Size Properties Mill Location and Product Variability Inbound Logistics • Iron ore products are not homogenous and ar
Slide 19: Iron ore quality and customer cost
5 Iron ores are differentiated by quality and cost to customer • Iron content of the iron ore should be as high as possible • All contaminants influence the total cost of steel production and should be as low as possible. − Major gangue contaminants such as alumina and silica are removed as slag in
Slide 20: How customers value iron ores
7 Customers value iron ores differently after considering the following factors • Geographical − Delivered costs and availability of fuels and fluxes Technical − Seasonal preferences For personal use only − Availability, cost and quality of alternative ores supply Geographical − By products value or
Slide 21: Pilbara products aligned to resource base and customers
9 Our Pilbara products are aligned to our resource base and customer needs Product Strengths Pilbara Blend • The most traded iron ore product globally For personal use only Fines • Base load sinter blend in Asian markets Pilbara Blend Fines Pilbara Blend • Avoids the costs of sintering which will 61
Slide 22: Working with customers and universities
11 We continually work with our customers, research providers and universities to optimise our product offering • Focused on maintaining long term relationships • Improved blast furnace operating For personal use only practices • Improved product understanding • Slag chemistry fundamentals • New pro
Slide 23: Cautionary statement
1 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
Slide 24: Pilbara mine network
3 Pilbara mine network For personal use only ©2013, Rio Tinto, All Rights Reserved 4 Fully integrated operations ©2013, Rio Tinto, All Rights Reserved
Slide 25: Pilbara mines, ports and product quality
5 Mine schematic - Multiple improvement options For personal use only ©2013, Rio Tinto, All Rights Reserved 6 Pilbara iron ore: mines, ports and typical quality of product Ore group Banded Iron Formation derived Iron Deposits Channel Iron Deposits Paraburdoo Mt Tom West Hope Mines (inc. Channar Broc
Slide 26: Mine portfolio performing above design
7 Mine portfolio consistently performing above design Total Material Moved and Saleable Ore • Consistent record performances Production (Mt) • Material moved in Q2 increased as a result of higher production and pre- For personal use only 250 70 60 stripping at Marandoo, HD4 and 200 Nammuldi as part
Slide 27: Costs robustly managed; mine production on track
9 …. and costs continue to be robustly managed • Contractor cost savings ~ $7.5m YTD − Reduction in contractor use − Use of non original equipment For personal use only manufacturer suppliers • Maintenance cost savings and avoidance of ~$23m YTD − Component life extension − Challenging our maintenan
Slide 28: Visits to Hope Downs and Yandicoogina
11 Visits to two premier mine operations Hope Downs Yandicoogina Newest site Large scale very low cost operation For personal use only Centralised services function First fully automated truck mine Wet plant design enhancement Continued low capital intensity expansions Joint Venture operation Rio Ti
Slide 29: Hope Downs
3rd September 2013 Day 1 Day 2 Day 3 Day 4 Hope Downs 4 For personal use only Extending our competitive advantages John Dumbill - General manager, Greater Hope Downs 2 Safety guidelines Please observe the following rules during your visit: • Follow the advice of your host; visitors are to be escorte
Slide 30: Greater Hope Downs development stages
3 Greater Hope Downs development stages Hope Downs 1 • Initial development; 22 Mt/a Dry – Hope Downs North For personal use only − ‘Dry plant’ − Stockyard (660 kt) live capacity − Completed in Q1 2008 • Expansion; 22 Mt/a to 30 Mt/a Dry – Hope Downs South − Modified crushing & screening circuit − Co
Slide 31: Autonomous truck fleet deployment
5 Deployment of the autonomous truck fleet • In early stages of deployment with “go-live” scheduled for early 2014 • AHS will deliver planned total For personal use only material movement with three less trucks, a 14% productivity improvement. • Expected significant improvement in − Tyre life − Fuel
Slide 32: Sustainable cost reductions
7 Sustainable cost reductions Centralised services for flights and accommodation saving of ~$3M* • Most cost effective flight for the sector • Direct employee cost saving (travel, For personal use only accommodation, site allowances etc.) • Less site accommodation required Village contract saving of
Slide 33: Yandicoogina region
3rd September 2013 Day 1 Day 2 Day 3 Day 4 Yandicoogina region For personal use only Extending our competitive advantages Alex Bates - General manager, Yandicoogina region 2 Safety guidelines Please observe the following rules during your visit: • Follow the advice of your host; visitors are to be e
Slide 34: Yandicoogina overview and expansion
3 Yandicoogina – Overview Junction Central Junction South East Dry Plant – 24 Mt/a Dry Plant – 16 Mt/a • Primary Jaw Crusher • Primary sizer • Scalping screens • Secondary sizer For personal use only • Secondary cone crusher • Overland conveyor • Tertiary cone crushers • Product screening Loop • Ove
Slide 35: Productivity improvements – Yandicoogina
5 Productivity improvements – Yandicoogina YANDI Dry Plant Dry plant increased tonnes: (tonnes per operating hour/ saleable ore product) • Identified in 2008, process control 3,900 26 improvements and new equipment at a For personal use only 3,800 25 3,700 24 cost of approximately $150k TPOH 3,600 M
Slide 36: Cost initiatives
7 Cost initiatives Contractor cost reduction – ~$2m YTD • Reduce the costs associated with major contractors (labour hire, catering contractors and airline carriers) For personal use only • Ongoing improvements in shutdown management to reduce contractor requirements Mining cost reduction initiative
Slide 37: Cautionary statement
1 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
Slide 38: Safety guidelines
3 Safety guidelines Please observe the following rules during your visit: • Follow the advice of your host; visitors are to be escorted at all times For personal use only • Wear safety glasses at all times while outside and hard hats when advised • Wear seat belts when provided • No smoking inside b
Slide 39: Port schematic and port capacity
5 Port schematic - Multiple improvement options For personal use only Source: Online Data Source: SAP, Offline Data Source: PDS ©2013, Rio Tinto, All Rights Reserved 6 Single owner, single user and each port readily expandable Current port capacity is 237 Mt/a: • Parker Point: 102 Mt/a • East Interc
Slide 40: Product flow and port debottlenecking
7 Product flow and logistics at the ports Ore group Banded Iron Formation derived Iron Deposits Channel Iron Deposits Paraburdoo Mt Tom West Hope Mines (inc. Channar Brockman 2 Brockman 4 Hope Downs 4 Marandoo Nammuldi Angelas Yandicoogina Mesa Mesa Price / WTS Downs 1 For personal use only Eastern
Slide 41: Cost savings; readiness for expanded port assets
9 Cost savings initiatives are ensuring increased cash flow for the business • Contractor cost savings of ~$8m year to date have been realised by ensuring the right skills are used for For personal use only each job • Changes to bulking methods, allowing the sharing of resources across the Ports ~$4
Slide 42: Extending our competitive advantages
11 Extending our competitive advantages • Single owner, single user and each port readily expandable and unconstrained For personal use only • Many hundreds of productivity and cost improvement opportunities across 3 port operations • Seamless integration of growth and operational infrastructure, en
Slide 43: Pilbara rail operations
4th September 2013 Day 1 Day 2 Day 3 Day 4 Pilbara rail operations For personal use only Extending our competitive advantages Clayton Walker - Managing director, Pilbara Supply Chain 2 Safety guidelines Please observe the following rules during your visit: • Follow the advice of your host; visitors
Slide 44: Fully integrated rail operations
3 Fully integrated operations For personal use only ©2013, Rio Tinto, All Rights Reserved 4 Single owner, single user and proximity to present and future resources and operations • 39 Pooled fleet and 6 Robe Valley trains operate on 1,500km of rail (42 and 6 by end of October) • 173 locomotives and
Slide 45: Rail expansions enabling 290Mt/a
5 Significant rail expansions readily enable 290Mt/a system performance Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 For personal use only CD5C full rate Marandoo 290Mt Phase II Hope Downs 4 First railings 42 consists in service Juna Downs upgrade 35 42 consists in Emu – Cape Lambert Emu upgrade service
Slide 46: Sustainable cost improvement in rail
7 … and sustainable cost improvement Rail has made significant reductions in cost position through the following Ambitious Fuel Efficiency Programme is focus areas: reaping results: For personal use only • Fuel efficiency initiatives ~$2m YTD More than 15 Initiatives including: • Off-lining locos •
Slide 47: Rail of the Future
9 Continued testing of the Rail of the Future • Without conventional expansion of track and rolling stock assets, are we capable of: For personal use only − Achieving 1,500,000 safe and efficient tonnes railed every day This involves: Rail of the Future ore cars • Idea generation (first phase comple
Slide 48: Cautionary statement
1 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
Slide 49: Operations Centre safety and integration
3 Safety while visiting the Operations Centre • Two levels of alarm − Beep Beep – prepare to evacuate − Whoop Whoop – follow your guide to For personal use only muster point • In the event of an emergency, please stay with your host and follow their instructions • The control room is an operating si
Slide 50: System-wide real-time information
5 System wide, real time information allows clear visibility of capabilities, issues and rapid responses • Nerve centre of Pilbara operations • Operational improvements evident through increased production efficiencies and For personal use only records • Will continue to unlock value across our netw
Slide 51: Rapid response to system issues
7 Close proximity of teams allows rapid response to system issues Unplanned wharf Cape Lambert belt replacement at Cape Lambert and • No railed tonnes were lost wet weather during the unplanned wharf belt replacement at Cape For personal use only Lambert and wet weather affecting the coastal region
Slide 52: Reducing and avoiding costs
9 …and assists in reducing and avoiding costs • Improving the condition and Real time condition data sent life of our asset components to the Operations Centre • Analyse real time equipment data to highlight potential For personal use only issues before they escalate to failures • Manage such issues
Slide 53: Extending our competitive advantages
11 Extending our competitive advantages • The nerve centre of the Pilbara integrated network, seamlessly bringing it all together For personal use only • Full end to end visibility means the entire system is optimised • Comprehensive insight into system bottlenecks, improvement efforts and reduction
Slide 54: Sales & Marketing
5th September Day 1 Day 2 Day 3 Day 4 Sales & Marketing For personal use only Extending our competitive advantages Warwick Smith - Managing director, Sales & Marketing 2 The ability to continuously maximise value • A deep understanding of markets and the steel Industry knowledge industry • Aligning
Slide 55: Iron ore and steel prices; strong 2013 demand
3 Recent developments in iron ore and steel prices Iron Ore Spot prices China steel prices and forwards $/dmt, CFR China RMB/t 4400 For personal use only 160 4200 150 4000 140 3800 130 3600 120 3400 110 3200 100 3000 Dec-12 Mar-13 Jun-13 Sep-13 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Rebar spot prices (S
Slide 56: Iron ore stock levels; short-term growth
5 While iron ore stock levels are lower YoY • Iron ore ports stocks remain well below this time last year • Iron ore stock levels at mills are also at low levels compared to consumption requirements Chinese iron ore stockpiles at port Chinese mill iron ore stocks (Mt) and share For personal use only
Slide 57: Long-term Chinese demand; domestic production cost curve
7 Long-term fundamentals for Chinese iron ore demand remain strong Chinese steel production and iron ore Machinery and transportation increases as requirements proportion of Chinese steel demand Million tonnes % For personal use only 1200 1600 100% 90% 1400 1000 80% Iron ore requirement (Mt) 1200 St
Slide 58: Aligning resource offering and customer base
9 Aligning our resource offering and our customer base July 2012 – June 2013 July 2012 – June 2013 actual shipments by market (Pilbara and IOC) percentage of products by market (Pilbara and IOC) For personal use only 100% Japan 22% 90% 80% 70% 60% 50% Korea, 40% Taiwan China 12% 62% 30% 20% Atlantic
Slide 59: Electronic tender spot sales channel
11 RTIO’s electronic tender spot sales channel – scalable and secure • Simultaneously invites more than 90 pre-qualified buyers to bid on a spot shipment • Seamlessly contracts with highest bidder • “Sealed” bids and defined processes ensures impartiality For personal use only E-tender smart phone a
Slide 60: Evolving capabilities to maximise revenue
13 The capabilities required to maximise revenue continue to evolve For personal use only • In 2007 we established Rio Tinto Iron Ore Asia in Singapore as the operational headquarters for sales and marketing in the Asia pacific region • Since 2007 the iron ore industry presence in Singapore has grow
Slide 61: Rio Tinto contact details
Rio Tinto plc Rio Tinto Limited 2 Eastbourne Terrace 120 Collins Street London W2 6LG Melbourne, Victoria 3000 United Kingdom Australia T +44 (0)20 7781 2000 T +61 (0)3 9283 3333 riotinto.com For personal use only