Rio Tinto and China: partners for growth. Sam Walsh Chief executive Iron Ore & Australia

Transcription

1 Rio Tinto and China: partners for growth Sam Walsh Chief executive Iron Ore & Australia Metal Bulletin conference 28 February 2012

2 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 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 forward-looking 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. Except as required by applicable regulations or by law, Rio Tinto does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. 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. 28 February

3 Timeline of relationship 1960s aluminium trade 1973 iron ore pioneer 1983 China office 1987 Channar JV 2002 BaoHi JV 2002 Shougang in HIsmelt 2002 Exploration JV Gansu 2005 Suzhou Metal Powders Plant 2008 Chinalco largest shareholder 2010 Chalco JV Simandou 2010 Channar JV Extension/strategic cooperation 2010 Chow Tai Fook diamond partnership 2011 Chinalco Exploration JV 28 February

4 Population growth and urbanisation to drive steel demand for coming decades World urban population growth (Billion people) Building height categories (Steel intensity, floors kg/m 2 ) Floors < 100 F The world is set to urbanise close to another 3 billion people by the middle of the century < 50 F < 32 F < 18 F < 12 F < 8 F Steel intensity of different power technologies (tonnes of steel/mw) Solar Hydro Gas-fired Nuclear Coalfired Wind Source: UN, McKinsey, Rio Tinto 28 February

5 The China steel story has a long way left to run, with India and others to follow Steel intensity and GDP * (Kg/capita crude steel production) Number of years of steel production above 500 kg/capita 1,400 1,200 China exceeded 500 kg/capita level Korea of crude steel production for first time in 2011 US 30 years 1, China (actual) Japan China (forecast) Germany USA Japan 44 years (continuing) Germany 45 years (continuing) Korea 27 years (continuing) 200 India ,000 20,000 30,000 40,000 GDP per capita (PPP basis, $2005) China 0 years Note: Stylistic representation Source: Correlates of War, Maddison, Global Insight, Rio Tinto 28 February

6 Challenges of bringing on new supply Announced and completed iron ore production capacity (global) (million tonnes) Over the next 8 years, global supply additions need to be at the rate of at least 100 Mt each year: 600 Mt to satisfy expected demand growth 200 Mt to replace expected high cost supply exits We expect to add ~ 25% of required supply We have a proven project expansion delivery model - scope, time and budget Announcements from others do not necessarily translate to supply capacity Reduced sources of project financing Approvals processes Shortage of specialist mining skills Working in remote locations Rising resource nationalism We will maintain a low and advantageous first quartile cost position and product portfolio Source: UNCTAD, Rio Tinto analysis 28 February

7 Continued iron ore price volatility; value-in-use an important consideration Platts IODEX (62% Fe, $/dmt, CFR North China) Iron ore prices remain high by historical standards Prices impacted by: Chinese credit tightening, stock draw downs and pressure of steel mill margins A weaker outlook for the US and Eurozone affecting market sentiment Portfolio approach for customer sales Iron ore is not homogeneous; customer needs are important value-in-use consistency and reliability Source: Platts 28 February

8 Pilbara operations: an integrated network of mines, rail, ports and associated infrastructure 14 mines 1,500km of rail 3 port terminals 9 berths 3 power stations Other associated infrastructure 28 February

9 Global iron ore growth options without equal Pilbara expansion projects in scope, on time and on budget 5 Mt this quarter will increase Pilbara capacity to 230 Mt/a 283 Mt/a expansion fully approved 353 Mt/a accelerated to 1H mine plan and strong nearterm resources and reserves Drilling >600,000m a year for the next 4 years IOC concentrate expansion currently being commissioned Solid progress at Simandou Cape Lambert expansion 28 February

10 IOC has a strong pipeline of high grade growth options to meet market demand IOC concentrate capacity (Mt/a) 28 February High grade concentrate stockpiles Sept Iles, Quebec 50 CEP phase 1 to 22 Mt/a on track for delivery in Q and phase 2 to 23.3 Mt/a in 2013 CEP phase 3 will take concentrate production to 26 Mt/a Consistently high quality products with the lowest phosphorus in the industry High grade resource base in excess of 2 billion tonnes 1, with an extensive 2012 drill programme Line of sight on options for expansion to 50 Mt/a through sequential mine developments 1 Note: Meas = 39.3 %Fe, Ind = 38.2 %Fe, Inf = 37.8 %Fe Source: Rio Tinto Annual Report

11 Strong co-operation with our partners is enabling solid progress to be made at Simandou Largest integrated mining project in Africa, supported by in-country management team Secured tenure and full support of Government of Guinea and Chalco Committed US$3 billion 1 to date, with over US$2 billion allocated to mine-related expenditure Stage gate process for approvals and development Geotechnical drilling at the port is underway Early works contracts being issued and significant rail work tenders released 1 Includes US$700 million settlement payment 28 February

12 Mine of the Future TM advanced leadership in next generation technologies for mining operations Operations Centre Autonomous haulage Autonomous drilling Smart explosives truck Autonomous trains High Precision GPS Machine supervision and control 28 February

13 The leading Iron Ore business Fully integrated production platform and diversified sales and marketing strategy Focus on managing Pilbara costs and improving productivity in an environment of strong inflation and a high Australian dollar Pilbara 283 Mt/a expansions remain in scope, on A$ budget and on time, with options for phased expansion Industry-leading advantages in port options, quality and location of mineral resources, and innovation and technology 28 February

14 We are actively pursuing sourcing in China 110 active suppliers from all over China 35 current and over 120 potential projects Around 50 sourcing professionals $1.2bn in 2011 Potentially $1.5bn in February 2012 Note: 1. Staff includes ECL and RTP procurement staff headcount 2. Spend includes both RTP and marine spend with Chinese suppliers 14

15

16 CP Consent Statement The information in this report that relates to IOC Mineral Resources is based on information compiled by Tim Leriche who is a member of Member, Canadian Institute of Mining and Metallurgy (CIMM). Tim Leriche is a full-time employee of IOC and has experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which they have undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Tim Leriche consents to the inclusion in the report of the matters based on their information in the form and context in which it appears. 28 February