Guy Elliott. Cautionary statement. Chief financial officer Analyst Handout

Transcription

1 18 February results Appendix Guy Elliott Chief financial officer Analyst Handout Cautionary statement 2 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 This presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding Rio Tinto s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. Such forward-looking statements are based on numerous assumptions regarding Rio Tinto s present and future business strategies and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause Rio Tinto s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors identified in Rio Tinto's most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this presentation. Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed its historical published earnings per share.

2 2012 highlights 3 Strong underlying earnings and cash flows from operations Record iron ore volumes; recovery in copper grades during second half Lower prices and price volatility across most commodities Stronger currencies, input cost pressures especially in Australia Net loss following aluminium and Mozambique coal impairments Progressive dividend increased by 15% $ billion Movement Underlying earnings % Net earnings / (loss) 5.8 (3.0) -151% Cash flows from operations % Capital expenditure % Dividend per share 145 cents 167 cents +15% Underlying earnings 4 Underlying earnings 2011 vs ,000 15,000 15,549 10, (5,315) (943) (270) (304) (202) 9,303 5, underlying earnings Price Exchange Rates Volume increase Volume decrease Energy and inflation Other cash costs Explor'n, eval'n & other 2012 underlying earnings

3 Iron ore: delivering expansions on time and budget 5 Movement in underlying earnings 2011 vs , (3,658) (1) (121) (22) (222) 5 (332) 9,242 FY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY, 12 Record annual production and sales from the Pilbara, offset by lower prices System capacity re-rated to 237 Mt/a with minimal capital expenditure Pilbara expansion projects on track for accelerated expansion to 290 Mt/a by Q and 360Mt/a by H1 2015; capital intensity maintained at mid US$150s/t Iron Ore Company of Canada phase one expansion project complete and will increase concentrate production capacity to 22 Mt/pa. Phase two expansion to 23.3 Mt/a progressing with first production Q production expected to be 265 Mt (100 per cent basis) from global operations Copper: lower prices and grades, recovering during second half 6 Movement in underlying earnings 2011 vs ,932 (322) 14 (498) (28) (178) 1,092 FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 Impact of lower prices and lower volumes from lower throughput at Kennecott Utah Copper and no metal share from Grasberg Escondida mined copper production up 38% compared to 2011 Construction of Oyu Tolgoi project 99% complete, commissioning commenced in mid-november and scheduled for first commercial production by end of June 2013 Increased stake in Turquoise Hill (formerly Ivanhoe) to 51% 2013 Rio Tinto share of production expected to be 665 kt as grade recovery continues at KUC, Escondida

4 Aluminium: pricing and cost pressure 7 Movement in underlying earnings 2011 vs (70) (588) (36) (147) FY 2011 Price Fx Vols CPI Energy Other cash Expl n Eval n Other FY % lower LME price year on year partly offset by impact of a weaker Canadian dollar Volumes lower impacted by Alma lock-out, partly offset by ramp up of Yarwun 2 Unfavourable raw material costs, mainly coke, pitch and caustic soda Alma lock-out and Shawiningan transformer failure led to adverse cash cost impact Kitimat modernisation project slowed in response to challenging market conditions Transformation program has delivered $460 million EBITDA improvement since Rio Tinto Alcan s share of production expected to be 34 Mt bauxite, 8.2 Mt alumina, 2.5 Mt alumina Energy: price, currency and cost headwinds 8 Movement in underlying earnings 2011 vs ,074 (575) 10 (15) (45) (28) 148 (155) (131) 283 FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 Earnings impacted by lower prices, increased cash costs and Australian cost inflation Offset by the sale of interests in exploration properties (Kalahari and Extract Resources), which delivered a $258 million pre-tax and $227 million post-tax gain Production of hard coking coal was 9 percent lower offset by higher thermal coal production being 16 per cent higher than in 2011 On 25 June 2012, Rio Tinto exported its first shipment of premium hard coking coal from its Benga Mine in Mozambique Major cost reduction initiative in progress to achieve substantial cash cost savings 2013 Rio Tinto share of production of Australian hard coking, semi soft coking and thermal coal expected to be 8.5 Mt, 4 Mt and 20.5 Mt respectively

5 Diamonds & Minerals: TiO 2 pricing momentum begins to flow through earnings 9 Movement in underlying earnings 2011 vs (32) (17) 10 (11) (162 ) FY FY 2011 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other Other cash FY FY 2012 Underlying earnings of $119m were $281m favourable to the loss incurred in 2011 (restated to include Simandou project costs) Excluding Simandou project costs, underlying earnings of $381m are 52% higher than 2011 The group benefited from higher prices across the industrial minerals business, particularly titanium dioxide products as legacy contracts continued to be replaced with alternative pricing mechanisms The earnings impact of exploration and evaluation costs is lower following the capitalisation of Simandou project costs from 1 April 2012 Earnings benefit from the group s increased share of Richards Bay Minerals from September Rio Tinto share of production expected to be 0.5 Mt boric oxide equivalent, 1.7 Mt titanium dioxide feedstocks, 13.9 Mcts diamonds Other 10 $million (net earnings impact) FY 2011 FX/ price Volumes CPI Energy Cash Costs Epl'n Eval'n Non Cash Interest, tax & other FY 2012 Intersegment 40 (48) (8) Other operations (120) (406) (20) (105) (154) (528) Central exploration (net) (102) 5 (97) Interest (229) 124 (105) Other (593) 2 51 (158) (698) Intersegment in 2012 relates to elimination of profit on inter-company stock transfers between RTA, Pacific Aluminium and Other Aluminium largely relates to insurance proceeds Other operations comprises mainly Pacific and Other Aluminium (1), legacy management areas requiring ongoing environmental or closure management, and Constellium Exploration costs decreased due to higher divestment income mainly related to sale of royalty rights Other includes variances due to lower EAU interest income from consolidation of Ivanhoe, lower gains on currency movements on non-usd funds, higher share option costs partly offset by lower corporate costs and favourable insurance recoveries (1) Other Aluminium comprises Lynemouth, Sebree, Specialty Alumina, Alcan Cable and other non-operating upstream aluminium entities

6 Targeting $5 billion cumulative reduction in operating cash costs by end of Cash cost reduction target US$ billion, base = 2012 cash operating cost base savings 2013 savings 34% 2% 9% Copper Aluminium Diamonds & Minerals Iron ore Energy Central 17% 30% 8% Sustainable annual cash cost decrease of $3 billion by end of 2014 Assumes constant operating conditions Includes overhead reductions, cost elements of RTA transformation Context 2012 cash operating cost base: $35 billion Average increase $2 billion p.a. since 2009 Progress against target to be reported at half and full year results Capital expenditure is being prioritised on the highest quality projects 12 Approved capital expenditure US$ billion F 2014F 2015F Sustaining Pilbara growth Pilbara 360 unapproved Pilbara Sustaining Mines Other growth Previous guidance Capex programme managed within boundaries of single A credit rating, dividend policy and other returns to shareholders Yarwun 2 completion and rapid ramp-up Oyu Tolgoi commissioning underway Pilbara 290 first ore accelerated to Q Average sustaining capex reduction of >$1 billion in 2013 Pilbara expansion cost reduced by $1 billion Further flexibility in Pilbara growth programme decisions

7 18 February results Appendix Appendix Reconciliation of underlying to net earnings 14 Underlying earnings 2012 to net earnings ,000 9,303 8,000 6,000 4,000 2,000 0 (2,000) (4,000) ,130 (443) (2,990) (6,000) Underlying earnings (14,360) Impairment Consolidation / disposal of business assets Exchange differences & gains on derivatives MRRT Other Net earnings

8 Reconciliation of underlying earnings H vs H Underlying earnings H vs H ,000 5,000 5, ,000 3,000 (1,645) (99) 656 (181) 7 (390) 4,149 2,000 1,000 0 H Price Exchange Rates Volume increase Volume decrease Energy and inflation Other cash costs Explor'n, eval'n & other H Modelling earnings 16 Earnings sensitivity 2011 average price/ rate 2012 average price/ rate 10% change in 2012 average Impact on 2012 full year underlying earnings ($m) Copper 400c/lb 361c/lb +/-36c/lb 270 Aluminium* $2,395/t $2,018/t +/-$202/t 384 Gold $1,571/oz $1,669/oz +/-$167/oz 42 Iron ore +/-10% 1,573 Coking coal +/-10% 28 Thermal coal +/-10% 31 A$* 103USc 104 USc +/-US10.4c 753 C$ 101USc 100 USc +/-US10.0c 272 * Excludes impact on the non-core aluminium assets included within Other Operations **For both thermal and coking coal

9 Provisional pricing 17 Open shipments (million lbs) 31 Dec 2012 Provisional pricing effect (US$m) 31 Dec Escondida (58) Northparkes (2) Grasberg JV/Other 1 2 (1) (61) 2011: driven by an 18% decline in the copper 3 month forward price and a 33% decrease in tonnes provisionally priced at the end of 2011, resulting in an unfavourable earnings impact in 2011 of $61m 2012: driven by a 2% increase in the copper 3 month forward prices and a 38% increase in tonnes provisionally priced at the end of 2012, resulting in a favourable earnings impact in 2012 of $22m The variance between 2011 and 2012 approximates $83m Earnings reconciliations Energy Resources of Australia US$m Earnings per ERA press release (A$151m) (156) Increased depreciation of closure asset (27) Tax and unwinding of discount 7 Less: Minority interests 56 Other (11) Underlying earnings as reported by Rio Tinto (131) Palabora US$m Loss per Palabora press release (ZAR 97m) (12) Rio Tinto share of interest and FX gain/loss on net debt (net) (11) Other 19 Tax effect on above items (6) Tax on unremitted earnings 24 Less: minority interest (42.3%) (11) Underlying earnings as reported by Rio Tinto 3

10 Variance analysis methodology 19 Price = Change in commodity price x prior year sales volumes Exchange = (Change in exchange rates x Prior year cost of sales) + Relative movements in exchange gains and losses on working capital Inflation = Inflation rate x Prior year cash cost of sales Volume = Change in sales volumes x Current year margins Cost = cash cost variance + non cash cost variance + impact of energy price changes + one-off costs Energy = change in input price x prior year usage Cash cost = Change in cash unit costs x Prior year sales volumes Non cash cost = Change in non cash unit costs x Prior year sales volumes