Generating significant business value

Transcription

1 Generating significant business value Andrew Harding Chief executive Iron Ore, China, Japan, Korea AJM Global Iron Ore & Steel Forecast Conference, Perth 2014

2 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.

3 Bringing capacity on-line to meet growth in traditional and developing regions 3 Chinese steel demand Million tonnes per annum Growth fundamentals CAGR % % China India % 7.5% Population Urban population GDP per capita ASEAN Middle East Source: China National Bureau of Statistics, CISA, Rio Tinto (e) Population Urban population GDP per capita Source: United Nations, Global Insight, Rio Tinto

4 Rapid uptake of 2014 off-take opportunities with unfulfilled demand for Rio Tinto iron ores Pilbara off-take agreements by pricing mechanism Q Actual Q Lagged Spot Monthly Pilbara Blends continue to be base load products for Asian steel industry Unprecedented demand for 2014 off-take opportunities due to our reputation of providing stable quality and reliable supply Of our 2014 volume: ~85% will be sold under term contracts ~15% uncontracted for sale into the spot market, in support of robust and transparent indices Pilbara Blend sustainable for decades to come

5 Iron Ore Company of Canada - fully integrated mine to port system 5 Mine, rail and port network whollyowned by IOC ( Rio Tinto 58.7%) Consistently high quality products with the lowest phosphorous in the industry 2013 saleable production of 15.4Mt, 9% higher than 2012 CEP project adds mining fleet, ore delivery, grinding and spiral capacity and power infrastructure Concentrate expansion project to 23.3 Mt/a expected in H Iron Ore Company of Canada operations

6 The Pilbara high quality assets, fully owned and operated, with great optionality 6 Assets 15 mines 1,600kms of rail 4 independent port terminals, with 11 berths, 3 power stations System fully integrated via Operations Centre All product blending undertaken at port Strong Resources & Reserves position provides optionality Rio Tinto Pilbara operations

7 Pilbara performance key to delivering strong 2013 financial results 7 Pilbara mine production Million tonnes per quarter Q1 Q2 Q3 Q4 Iron Ore results Global 2013 vs 2012 Production (Million tonnes100%) Underlying EBITDA ($ millions) Change % 17,442 15, % Severe weather impacts in 1Q, 2Q and 4Q Increasing capacity and system alignments enabled improving performances beyond 237Mt/a rating 2013 mine production of 251Mt (YoY +5%) 66.5Mt mine production and 68.8Mt shipping in Q Strong contribution to EBITDA and underlying earnings Underlying earnings ($ millions) 9,858 9,247 +7% Source: Rio Tinto

8 Continuous improvement outcomes realise significant value 8 Railings (no. of trains) Pooled fleet railings and payload 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 Railings Payload Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4' Payload (kt) Mine Right- sizing the fleet initiative optimising cycle times and payload management 6 out of 55 West Angelas haul trucks redeployed to other mines Reductions to occur at other mines Rail Continued train cycle improvements with electronic controlled pneumatic brakes and additional consists Payload increases through new train specs and mass and volumetric loading controls 2013 new consist payload record of 27kt Reclaimer Port Parker Point outload capacity increased 12Mt/a Changes to reclamation control program and stockpile profiling Dual reclaiming to maximise ship loading

9 Relentless focus on cost- outs to also continue productivity improvements Hours returned to the business via training transformation 21,000 18,000 15,000 12,000 9,000 6,000 3,000 0 Jan Feb Mar Apr May Monthly Jun Jul Aug Sep Oct Cumulative Nov Dec 150, ,000 90,000 60,000 30,000 0 Improved crane scheduling and alignment of maintenance shuts $1.4M saved at Brockman 4 alone Rationalised training and streamlined delivery Cost savings ~$20M/ yr Over 200,000 person hours* returned to the business Hire car expenditure savings ~ $4M Centralised administration function savings over $5 million per annum Stockpile *December 2013 annualised

10 Improvements are maintaining the business as the Pilbara s lowest cost producer 10 Full year cash unit cost ($/t) WA IO EBITDA per tonne (US$/t and %) % 70% 60% US$/t % 40% 30% EBITDA % % 10% AUD cost USD cost 0 0% H110 H210 H111 H211 H112 H212 H113 H213 RTIO ($US/t) BHP ($US/t) FMG ($US/t) RTIO % BHP % FMG % Source: Rio Tinto 2013 full year cash unit cost was US$20.80/t, 11% lower than 2012 Source: Rio Tinto ; BHPB; and FMG lodged financial statements Note: RTIO results exclude Dampier Salt and RT Marine Tonnage based on attributed shipments (adjusted for Robe River at 65% as per financial results). Results as reported. All publically available information Retaining best margin of Pilbara producers

11 290Mt/a infrastructure complete and now quickly ramping to fill capacity Mt/a first ore on ship 24 August 4 months ahead of schedule $US400M under budget Mt/a being delivered at a capital intensity <US$140/t (100%) 290Mt/a complete, 360Mt/a wharf in progress Extra 53Mt/a Pilbara system nameplate capacity by end 1H 2014 Nammuldi below water table mine completion on target for Q Deliberate mine bulk stocks strategy, with ~5Mt draw- down in 2014 Nammuldi mine development

12 Infrastructure development to 360 Mt/a progressing on target 12 Infrastructure expansion to 360Mt/a fully approved and underway Expected completion during H Cape Lambert Screenhouse 6 Cape Lambert All major work packages have been awarded Earthworks complete, civil works near complete, SMP commenced Rail All rolling stock contracts awarded Duplication earthworks and track construction complete Full commissioning by late 2Q 14 First train at 37.5kp duplication Car dumpers 6 & 7

13 Low- cost, brownfields Pilbara growth pathway extracts significant value 13 Mine capacity potential (average annualised) Million tonnes per annum Example brownfield expansions Indicative Mt/a West Angelas (approved 13/02/2014) ~6 Yandicoogina ~8 Brockman ~8 Paraburdoo ~7 Nammuldi ~9 A rapid, low- cost pathway to increase mine production capacity by more than 60Mt/a by 2017 Utilises brownfield mine options opportunities at existing operations Silvergrass decision has been deferred and Koodaideri mine decision not required in the medium term US$3 billion saving in growth capital over the next 3 years Capital intensity to reduce from mid $150s/t to $ /t (100% basis) Other ~6 10 Source: Rio Tinto

14 Further value opportunities being realised in sustaining tonnage projects 14 Western Turner Syncline phase 2 approved in February 2014 Additional 7Mt/a to replace Tom Price ore to commence in mid 2015 A new WTS phase 1 mine plan allows extension of trucking model At least 3 year deferral of primary crusher construction and linking to Phase 1 conveyor ~$500M in deferred capital expenditure NPV unchanged Western Turner Syncline - 1

15 Mine of the Future programme continues to turn competitive advantage into real business value 15 Autonomous Haulage System update >130Mt autonomously moved between Improved safety and control Reduced truck numbers Expect 10-15% increase in effective utillisation in mature operation Autonomous haul trucks AutoHaul first heavy haul network in the world to be fully automated scheduled to be operational in 2015 Safety, cycle time and capacity improvements Eliminating driver changeovers AutoHaul High performing teams Cohesive culture is fundamental United focus, creative solutions and excellent performance

16 Proven sector leadership continues to return significant value 16 Relentless focus on safety Continual liaison with full range of key stakeholders Drawing greater value through: operational performance across integrated system cash costs/ margin management on time/ budget growth projects sales and marketing strategies utilisation of new technology Haul truck Remaining flexible to changing internal and external environments