Chartbook
February 2017
Contact details
Investor Relations, EMEA/ North America
John Smelt
Office: +44 (0) 20 7781 1654
Mobile: +44 (0) 787 964 2675
[email protected]
David Ovington
Office: +44 (0) 20 7781 2051
Mobile: +44 (0) 7920 010 978
[email protected]
Nick Parkinson
Office: +44 (0) 20 7781 1552
Mobile: +44 (0) 7810 657556
[email protected]
Investor Relations, Australia/ Asia
Natalie Worley
Office: +61 (0) 3 9283 3063
Mobile: +61 (0) 409 210 462
[email protected]
Rachel Storrs
Office: +61 (0) 3 9283 3628
Mobile: +61 (0) 417 401 018
[email protected]
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Cautionary statement
Mineral resources, reserves and
production targets
Overview
Safety comes first
Our value proposition
Rio Tinto – a world leader in
mining
Where we operate
More than 85% of assets in
OECD
Strength in diversity
Consistent delivery of value
Strategy will deliver value
through the cycle
FY 2016 highlights
Delivering on our promises
Strong results delivered in 2016
World-class assets delivering
value
Prices recovered in 2016 but
were lower in aggregate than
2015
Underlying earnings 2015 vs
2016
$1.6 billion of cost reductions
achieved in 2016
Net earnings
Trade working capital
Our capital allocation
framework
Disciplined allocation of strong
cash flow
Group capital expenditure
profile to 2019
Investing in growth projects of
>15% IRR
Net debt and gearing ratio
Near-term maturities greatly
reduced
Continuing to shape our
portfolio
Application of the new returns
policy
Delivering superior returns to
shareholders
$5 billion of free cash flow in
productivity improvements over
five years
Prioritising people and partners
2017 guidance
2017 production guidance
Market outlook
Commodity recovery led by
renewed activity in China
February 2017
36 2017 steel and iron ore outlook
37 China’s bauxite import demand
growing rapidly
38 Aluminium gradually moving
back to balance
39 Transport sector is the key
driver of future aluminium
growth
40 Rio Tinto well placed to benefit
from copper’s attractive longterm fundamentals
41 Iron Ore
42 Iron Ore FY2016 highlights
43 Iron Ore underlying earnings
2015 vs 2016
44 Delivering optimal value from
one of the world’s best
businesses
45 Major trends influencing the
iron ore market
46 Five highly-valued iron ore
products
47 Our product suite includes the
Pilbara Blend
48 Fully integrated asset network
49 Low-cost advantage sustained
over many years
50 Iron Ore productivity
51 Installed infrastructure offers
high-value optionality
52 Sustaining best value
production
53 High-quality, low-cost options
available to offset depletion
54 Iron Ore capex profile to 2019
55 Highly-valued partners and
sustainable local and regional
investment remain a priority
56 Aluminium
57 Aluminium FY2016 highlights
58 Aluminium underlying earnings
2015 vs 2016
59 Strategy for outperformance
through the cycle
60 $1.6 billion of cost
improvements since 2012
61 Leading bauxite resource and
market positions
62 Amrun on track for first bauxite
in H1 19
63 250+ bauxite improvement
initiatives underway
64 Transforming our alumina
business
65 Improving our smelting cost
66
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68
69
70
71
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73
74
75
76
77
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79
80
81
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85
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87
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92
93
94
95
position
500+ aluminium improvement
initiatives underway
Copper & Diamonds
Copper & Diamonds FY2016
highlights
Copper & Diamonds underlying
earnings 2015 vs 2016
Copper’s sector-leading
attributes
Strategy to deliver further value
Maximising value from existing
operations
Kennecott – a simplified and
reset business
Oyu Tolgoi – the leading Tier 1
copper project
OT underground is a Tier 1
asset
OT underground capital
expenditure profile
OT production profile to end of
lateral development phase in
2032
Non-managed interest in two of
the world’s best copper mines
Future optionality for the
Copper business
Delivering medium-term growth
and progressing long-term
options
Developing our people and
partnerships
Energy & Minerals
Energy & Minerals FY2016
highlights
Energy & Minerals underlying
earnings 2015 vs 2016
Maximising value from the
Energy & Minerals portfolio
A lean, scalable operating
model running cash-focused
businesses
Borates
Coal
Iron Ore Company of Canada
Iron & Titanium
Maximising ore value through
product portfolio
Maximising value from the
Energy & Minerals portfolio
Growth & Innovation
Find, evaluate and develop
assets
Declining industry investment
February 2017
96
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100
101
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103
104
105
106
107
108
109
110
111
112
and success
Extensive and successful
exploration programme
Jadar: a significant lithiumborate resource
Driving productivity across the
value chain
Corporate information
Dividend policy and capital
commitment
Credit rating
Modelling earnings
Accounting treatment of
principal operations
Accounting treatment of
principal operations
Principal corporate activity
2010 to 2012
Principal corporate acidity
2013 to 2017
Ongoing major capital projects
Ongoing major capital projects
Geographical analysis of Rio
Tinto shareholders
Rio Tinto Executive Committee
Rio Tinto Board
Rio Tinto Board
Cautionary statements
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following
statement.
Forward-looking statements
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. These statements are forward-looking
statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words “intend”, “aim”, “project”, “anticipate”, “estimate”,
“plan”, “believes”, “expects”, “may”, “should”, “will”, “target”, “set to” or similar expressions, commonly identify such forward-looking statements.
Examples of forward-looking statements include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this presentation.
For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other
factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect
of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty.
In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as
to the date of this presentation. Except as required by applicable regulations or by law, the Rio Tinto Group does not undertake any obligation to publicly update or revise any forward-looking statements,
whether as a result of new information or future events. The Group cannot guarantee that its forward-looking statements will not differ materially from actual results. In this presentation all figures are US
dollars unless stated otherwise.
Disclaimer
Neither this presentation, nor the question and answer session, nor any part thereof, may be recorded, transcribed, distributed, published or reproduced in any form, except as permitted by Rio Tinto. By
accessing/ attending this presentation, you agree with the foregoing and, upon request, you will promptly return any records or transcripts at the presentation without retaining any copies.
This presentation contains a number of non-IFRS financial measures. Rio Tinto management considers these to be key financial performance indicators of the business and they are defined and/or
reconciled in Rio Tinto’s annual results press release and/or Annual report.
1
| © Rio Tinto 2017
Mineral resources, reserves and production targets
Mineral Resources and Ore Reserves
Details of Rio Tinto group Bauxite Mineral Resource and Ore Reserve estimates which appear on slide 61 of this presentation are estimates, or an aggregation of the estimates, previously reported at
pages 217 and 225 of Rio Tinto’s 2015 Annual Report dated 2 March 2016. The Competent Persons responsible for that previous reporting were L McAndrew (AusIMM Reserves), J Bower (AusIMM
Resources), J-F Durand-Smet (EuroGeol Resources/Reserves), G Girouard (AusIMM Resources), CJ da Silva (AusIMM Reserves) and MAH Monteiro (AusIMM Resources).
The Mineral Resource estimate for Resolution which appears on slide 79 was reported in Rio Tinto’s 2016 Annual Report dated 1 March 2017 and released to the market on 2 March 2017. This resource
estimate is reported on a 100% basis. The Competent Person responsible for that previous reporting was C Hehnke (AusIMM).
The Mineral Resource estimates which appear on slide 97 are based on the Mineral Resource statements in the 2016 Rio Tinto Annual Report to shareholders released to the market on 2 March 2016. The
Competent Person responsible for reporting of the Mineral Resources was J Garcia (Eurogeol) and M Sweeney, both full time employees of Rio Tinto.
Rio Tinto is not aware of any new information or data that materially affects the above Mineral Resource and Ore Reserve estimates as reported in the 2016 annual report. All material assumptions on
which the estimates in the 2015 annual report were based continue to apply and have not materially changed. The form and context in which those findings are presented have not been materially modified.
Mineral Resources are reported exclusive of Ore Reserves. Ore Reserves are reported as product tonnes. Mineral Resources are reported on an in situ basis.
Production Targets
The production target for Amrun shown on slides 24 and 62 were disclosed in a release to the market dated 27 November 2015 (“Rio Tinto approves US$1.9 billion Amrun (South of Embley) bauxite
project”). The production target for Oyu Tolgoi shown on slides 24, 75 and 80 is the average production 2025-2030, including open pit production. This production target was disclosed in a release to the
market on 6 May 2016 (“Rio Tinto approves development of Oyu Tolgoi underground mine”). All material assumptions underpinning these production targets continue to apply and have not materially
changed.
2
| © Rio Tinto 2017
Overview
Safety comes first
A history of continual improvement in safety
Fatality at Paraburdoo in June 2016
AIFR per 200,000 hours worked
1.4
Continued focus on Fatality Prevention, Illness and
Injury Reduction and Catastrophic Event Prevention
1.2
Critical Risk Management (CRM) Programme
– More than 1.3 million verifications in 2016
1.0
0.8
0.6
0.4
0.2
0.0
’06
’07
’08
’09
’10
’11
’12
’13
'14
'15
'16
4
| © Rio Tinto 2017
Our value proposition
Long-term strategy
Cash focus
Capital discipline and
shareholder returns
Team and performance
culture
World-class assets
Value over volume
Strong balance sheet
Safety first
Delivering >2% CAGR1 CuEq growth
$2 billion cost savings over 2016/17
40-60% returns through the cycle
Assets at the heart of our business
Licence to Operate
$5 billion free cash flow from mine
to market productivity by 2021
Portfolio shaping
Commercial and operational
excellence
1 Copper
equivalent CAGR, 2015-2025.
5 | © Rio Tinto 2017
Rio Tinto – a world leader in mining
Aluminium
Copper & Diamonds
• Industry-leading bauxite position
• Alumina refineries provide competitive security
of supply for our smelters
• Sector-leading primary aluminium metal EBITDA
margins, driven by low-carbon, low-cost power
• Significant producer of copper from our assets in
the USA, Mongolia, Chile and Indonesia
• Diverse diamonds business
• Maximises our technical underground mining
expertise
Energy & Minerals
Iron Ore
• Australian producer of thermal, semi-soft and
hard coking coal
• Leading supplier of titanium dioxide feedstocks,
zircon and borates
• Supplier of salt and uranium
• Iron Ore Company of Canada produces
concentrates and pellets
• World-class Pilbara operations in Western
Australia
• Supplies our premium Pilbara Blend lump and
fines products
• Industry-leading margins supported by
automation, innovation and technology
6
| © Rio Tinto 2017
Where we operate
North
America
Europe
Asia
Key
Mines and mining projects
Africa
Smelters, refineries, power
facilities and processing
plants remote from mine
Aluminium
Copper & Diamonds
Energy & Minerals
Iron Ore
South
America
Australasia
7
| © Rio Tinto 2017
8
| © Rio Tinto 2017
More than 85% of assets in OECD
2016 total assets (excluding non-controlling interests) by region
Canada
22%
Europe
3%
Mongolia
3%
US
8%
Other Asia1
2% Indonesia
2%
1
Other Asia mainly relates
to assets in Singapore and Oman.
Total assets as at 31 December 2016
adjusted for non-controlling interests,
cash, current and deferred tax
receivables and derivatives. Excludes
assets held for sale, cash and bank
balances, current and deferred tax
receivables, derivative assets.
6%
South
America
Africa
5%
Australia/NZ
48%
2016 total assets = $68 billion
Strength in diversity
Revenue – by destination
Revenue – by commodity
Percentage
Percentage
Diamonds 2%
7%
8%
China
Coal 8%
17%
Iron ore 45%
43%
North
America
Aluminium 26%
Other Asia
15%
Japan
11%
Copper &
Gold 10%
Gross sales revenue in 2016 was US$35.3 billion
9
| © Rio Tinto 2017
Consistent delivery of value
Long-term strategy
Cash focus
Capital discipline and shareholder returns
Team and performance culture
10 | © Rio Tinto 2017
Strategy will deliver value through the cycle
Superior cash generation
World-class assets
Portfolio
Operating excellence
Performance
Capabilities
People & Partners
Disciplined capital allocation
Balance sheet strength
Superior shareholder returns
Compelling growth
11
FY 2016 highlights
| © Rio Tinto 2017
Delivering on our promises

Strong operating cash flow of $8.5 billion

Portfolio optimisation with divestments announced of $1.3 billion

Investing in our three major growth projects

Balance sheet strength with net debt reduced to $9.6 billion

Shareholder returns of $3.6 billion
13
| © Rio Tinto 2017
Strong results delivered in 2016
Robust financial performance
Capital allocation
Positioning for the long-term
Operating cashflow of $8.5 billion
Full year 2016 dividend of $3.1 billion
Oyu Tolgoi underground approved in May
Underlying earnings of $5.1 billion
Share buy-back of $0.5 billion in 2017
Silvergrass iron ore approved in August
Free cash flow of $5.8 billion
Net debt reduced to $9.6 billion at 31 December
Amrun development progressing to plan
Cash cost reductions of $1.6 billion
Capital expenditure of $3.0 billion
Portfolio shaping progressed with divestments
announced totalling $1.3 billion in 2016
14
| © Rio Tinto 2017
World-class assets delivering value
Margins
Cash flow
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
63%
28%
35%
30%
Pilbara operations FOB
EBITDA margin
Integrated operations
EBITDA margin
Operating EBITDA
margin
Operating FOB EBITDA
margin
Cash flows from operations
of $5,644m
Cash flows from operations
of $2,074m
Cash flows from operations
of $987m
Cash flows from operations
of $1,431m
Free cash flow of $4,776m
Free cash flow of $1,267m
Free cash flow of $78m
Free cash flow of $1,294m
15
| © Rio Tinto 2017
Prices recovered in 2016 but were lower in aggregate
than 2015
16
| © Rio Tinto 2017
Increased underlying earnings driven by cash cost
reductions
Underlying earnings 2015 vs 2016
$ million (post tax)
6,000
1,124
97
4,540
5,100
(136)
49
4,000
25
(460)
3,996
19
(158)
Total cost reductions
of $1.2bn post-tax or
$1.6bn pre-tax
2,000
0
2015
underlying
earnings
Price
Exchange
rates
Energy
Inflation
Flexed 2015
earnings
Volumes
Cash cost
reductions
Exploration Tax and other
2016
& evaluation
underlying
earnings
17
| © Rio Tinto 2017
$1.6 billion of cost reductions achieved in 2016
2016 pre-tax operating cash cost improvements
($m)
185
$7.8 billion cost savings achieved since 2012
1,601
342
Cost performance helped deliver a 2016 EBITDA
margin of 38% (34% in FY 2015)
Cost culture across all product groups
278
$2 billion cost savings target across 2016 and
2017
481
Improving productivity to deliver $5 billion free
cash flow by the end of 2021
315
Iron Ore
Aluminium
Copper &
Diamonds
Energy &
Minerals
Central, E&E
and other
2016 total
18
| © Rio Tinto 2017
Net earnings
$m
2016 underlying earnings
5,100
Impairments/Onerous contracts
(512)
Net gains on disposals
382
Exchange gains/losses on
debt and derivatives
536
Restructuring costs and
global headcount reductions
(177)
Tax provision
(380)
Closure provisions
(282)
Other
(50)
2016 net earnings
4,617
19
| © Rio Tinto 2017
Continued focus on trade working capital
Trade working capital days reduced from 35 to 22 in 2016
Trade working capital balances
#days (12 month rolling average excluding financing)
$ million
3000
39
270
2500
2,424
610
34
2000
1,875
17
1500
(227)
29
(121)
1000
24
500
0
19
Opening
balance
31 Dec.
2015
14
Dec‐15
Mar‐16
Jun‐16
Sep‐16
FX
Change in Change in Price on
Other
inventories payables receivables changes in
receivables
Closing
balance
31 Dec.
2016
Dec‐16
20
| © Rio Tinto 2017
Our capital allocation framework
Essential
sustaining capex
1
2
Further cash
returns to
shareholders
Ordinary
dividends
3
Iterative
cycle of
Compelling
growth
Debt
management
21
| © Rio Tinto 2017
Disciplined allocation of strong cash flow
Cash flow 2016
Disciplined allocation of capital
($ million)
($ billion)
761
10,000
8,465
9,580
354
1.7
8,000
3.9*
Total cash from asset
disposals of $1.1bn
6,000
1.3
4,000
2,000
2.7
0
Net cash generated
from operating
activities
Sales of PP&E
Disposals
Cash available for
allocation
Sustaining capital
Growth capital
Shareholder returns
Balance sheet strength
* Balance sheet net debt reduction of $4.2bn comprises $3.9bn of net cash movement and $0.3bn of non-cash or exchange movements
22
| © Rio Tinto 2017
Sustaining capex and compelling growth
2016 capital reduction due to project optimisation, cost
improvements and timing
Capital expenditure profile
$ billion
~5.5
~5.5
~5.0
H2 2016 spend of $1.7 billion as projects progress
Three major projects approved and on track
Brownfields Pilbara mines replacement capital intensity
of $5 - $20 / tonne
3.0
2016A
Sustaining
2017F
2018F
Pilbara replacement
2019F
Development
23 | © Rio Tinto 2017
Investing in growth projects of >15% IRR
Silvergrass – delivering high-grade low, phosphorus iron ore,
with system benefits, for the Pilbara Blend
On track for H2 2017, ~20Mtpa capacity
Amrun – high-quality greenfield bauxite project.
Advancing to schedule, 22.8 Mt/a1 capacity, H1 2019
Oyu Tolgoi underground – large, high-grade,
brownfield copper development
Underground mine development underway, ~560kt/a copper
production (2025-2030)1
1 Refer
to the statements supporting these production targets set out on slide 2 of this presentation.
24
| © Rio Tinto 2017
Strengthening our balance sheet
Net debt and gearing ratio1
Net debt reduction of $4.2 billion in 2016
($bn)
Gearing below 20%
– Provides stable foundation during uncertain
economic outlook
22.1
– Supports shareholder returns through the
cycle
18.1
13.8
12.5
28%
25%
– Enables counter-cyclical investment in
compelling growth
9.6
24%
19%
17%
Jun-13
1 Gearing
Dec-13
Dec-14
Dec-15
Dec-16
ratio ( ) = net debt / (net debt + book equity)
25 | © Rio Tinto 2017
Near-term maturities greatly reduced
31 Dec 2015 debt maturity profile *
$(m)
Gross debt reduced by $5 billion in 2016
3,000
$9.0 billion of bonds purchased or repaid with cash
in 2016
2,000
1,000
2040
2042+
2033
2032
2031
2030
2029
2028
2027
2026
2016 bond reductions
2034-2039
Gross debt
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
0
$4.1 billion of Oyu Tolgoi Project Finance
fully consolidated in 2016
Average outstanding debt maturity now ~10 years
$(m)
31 Dec 2016 debt maturity profile *
Net interest paid of $0.5 billion associated with
bond purchase programmes
3,000
2,000
1,000
No bond maturities until 2019
2040
2042+
2034-2039
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
0
*Numbers based on year-end accounting value
26 | © Rio Tinto 2017
Continuing to shape our portfolio
$7.7 billion1 disposals announced since 2013
Value delivered through divestments
($bn)
January announcement of Coal & Allied
divestment for up to $2.45 billion
Up to
2.45
Proceeds expected in 2017:
– Lochaber second tranche of $0.2 billion in H1
1.3
3,208
– Coal & Allied of at least $1.95 billion in H2
7.7
1.8
2.2
2013
1 Based
2014
2016
2017 to date
Total since
2013
on amounts announced in Rio Tinto media releases, may vary from cash flow statement due to completion adjustments and exchange rates
27
| © Rio Tinto 2017
Application of the new returns policy
Capital return considerations
Comments
Status
Results for 2016
Underlying earnings up 12% to $5.1bn
Net debt reduced to $9.6bn.

Long term growth prospects
Focused on Silvergrass, Amrun and Oyu Tolgoi.

Balance sheet strength
Net debt <$10bn

Strong earnings/ cash generation –
supplement with additional returns
Payout >60% threshold possible due to strong performance
One-off asset disposal proceeds of $1.1bn

40-60 per cent of underlying earnings through the cycle
Payout over the 60% upper threshold possible based on (i) strong H2
2016 prices (ii) disposals (iii) strong balance sheet

Balanced between growth and shareholder returns
Defined growth pipeline provides capacity to allocate more
to shareholder cash return and debt reduction

Not less that 110c per share in 2016
Minimum payout can be exceeded

Outlook
Potential for continued price volatility
?
28
| © Rio Tinto 2017
Delivering superior returns for shareholders
Cash returns to shareholders
($bn)*
Final 2016 dividend declared of 125 US cents per
share, delivering full year dividend of 170 US cents
per share
0.5
Share buy-back totalling $0.5 billion to be
undertaken in 2017 in Rio Tinto plc shares
2.3
Total 2016 cash returns of $3.6 billion, represent
70% of underlying earnings
3.6
0.8
Interim dividend
Final dividend
Share buy-back
2016 total
* Declared basis
29
| © Rio Tinto 2017
We aim to deliver $5 billion of free cash flow in
productivity improvements over five years
Value Chain
Exploration
Major projects
Mining
Asset
management
Processing
Infrastructure
Marketing
Broadening our cost saving programme to include productivity
Opportunity to
Opportunity to
Opportunity to
improve by 30%
improve up to 70%
improve by 30%
Haul Truck
Effective Utilisation1
Maintenance Quality –
Mean Time Between Failure2
Processing Utilisation
– wet & dry3
All sources Rio Tinto. 1 All trucks best to worst performing, excluding autonomous trucks. 2 Across a range of key assets with utilised time representing one element of MTBF. 3 Across wet & dry mineral processing, excluding smelting
30
| © Rio Tinto 2017
Prioritising people and partners
Mobile
talent pool
Safety first
Technical &
commercial excellence
Fully-engaged
employees
Highly-valued partners
Sustainable local
investment
31 | © Rio Tinto 2017
2017 guidance
Operating cash cost improvements of $2bn over 2016 and 2017
Capex of ~$5.0bn in 2017, ~$5.5bn in 2018 and ~$5.5bn in 2019
Gearing ratio of 20-30% through the cycle
Effective tax rate on underlying earnings of 27-30% in 2017
32
| © Rio Tinto 2017
2017 production guidance
Iron Ore: Pilbara shipments 330-340 Mt (100% basis)
Aluminium: 48-50 Mt bauxite, 8.0-8.2 Mt alumina, 3.5-3.7 Mt aluminium
Copper & Diamonds: 525-665 kt mined copper1, 185-225 kt refined copper, 19-24 Mcts diamonds
Coal: 17-18 Mt thermal2, 3.3-3.9 Mt semi-soft coking, 7.8-8.4 Mt hard coking
IOC: 11.4-12.4 Mt iron ore pellets and concentrate
TiO2, borates, uranium: 1.1-1.2 Mt TiO2 slag, 0.5 Mt boric acid equivalent, 6.5-7.5 Mlbs uranium
1 2017 mined copper guidance includes an expected share from the Grasberg joint venture, which is operated by PT-Freeport Indonesia (PT-FI), a subsidiary of Freeport-McMoRan Inc.
On 12 January 2017, the Government of Indonesia issued new mining regulations to address exports of unrefined metals, including copper concentrates, and other matters related to the
mining sector. These regulations impact PT-FI’s operating rights, including its right to continue to export concentrate without restriction, and may have a significant impact on Rio Tinto’s
share of production in 2017.
2 Guidance for thermal coal to be updated following completion of the sale of Coal & Allied to Yancoal which is expected to take place in H2 2017.
Market outlook
33 | © Rio Tinto 2017
Commodity recovery led by renewed activity in China
Housing inventories
Tier 1
70
Tier 2
60
Tier 3, 4, 5
Months of supply
50
40
30
17.7
20
10
7.8
0
6.4
FAI: YTD
FAI: Infrastructure, YTD
FAI: Real Estate
FAI: Manufacturing, YTD
25
Fixed asset investment growth has moderated but
manufacturing FAI is picking up after a long slump
PMI indicates that manufacturers remain optimistic
about early 2016
20
%
Housing inventories have normalised, in particular
tier 3 and below
Market recovery supported by surge in credit growth
in early 2016
Fixed Asset Investment
30
Construction and downstream industrial activity has
picked up, improving profitability
15
10
5
0
Dec-13
Dec-14
Dec-15
Dec-16
Source: CEIC, CREIS & RT China Research
35
| © Rio Tinto 2017
2017 steel and iron ore outlook
Steel production curtailment leads to a more sustainable
steel industry
China crude steel production
(Mt, annualised)
Mt
1000
900
– Reduction in steel mill capacity not directly linked to
steel output
800
700
– Supports demand for high quality iron ore
600
1Q15
Mt
160
140
120
100
80
60
40
20
-20
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
~100 Mt of additional seaborne supply from top six
expected over the coming two years
Chinese domestic iron ore supply has been ‘sticky’
entering and exiting the market
– Peak of ~400mt/a
148
– Low point of ~230mt/a
96
– Currently ~260mt/a
52
~40
2016(e)
2017(f)
~60
Low cost iron ore supply growth has moderated
– 2017 growth primarily from S11D and Roy Hill
2014
2015
2018(f)
– Oversupply in low grade material
All data from CEIC, CREIS & RT China Research
36
| © Rio Tinto 2017
China’s bauxite import demand growing rapidly
Rising demand for bauxite in China driven by
aluminium demand growth (6%) and alumina
production growth (19%) over the last ten years
Rapid growth in bauxite imports in China
Million tonnes of bauxite equivalent1
China will continue to add refining capacity, with
majority of growth in Northern coastal provinces
+34%
56
51
Imports will continue to play an increasingly
important role as domestic bauxite quality declines
45
33
18
2
21
36
38
31
25
16
7
2005
1Assumes
2010
2015
a bauxite to alumina ratio of 2.4. Imported bauxite shown after subtracting stock accumulation. Source: Rio Tinto, GTIS, CRU Group; all growth percentages are CAGR.
37 | © Rio Tinto 2017
Aluminium gradually moving back to balance
Aluminium dealing with excess inventory and capacity
overhang from the global financial crisis
Primary aluminium production, consumption
and stocks
Million tonnes
Weeks of consumption
18
70
16
60
14
50
12
40
10
30
8
6
20
4
10
2
0
0
2000
2002
2004
2006
Ex-China production
Consumption
2008
2010
2012
2014
Market rebalancing delayed by sustained Chinese
capacity growth
Supply growth outside China mostly contained
to India and Middle East
Prices cutting into cost curve
Rapid recovery unlikely and expect stocks to
revert back to long-run levels over next five years
2016
China production
Stocks (right axis)
Source: CRU Group
38 | © Rio Tinto 2017
Transport sector is the key driver of future aluminium
growth
Aluminium per passenger vehicle
•
Increasing aluminium penetration into the transport
sector, particularly cars
•
Aluminium offers a cost-effective route for meeting
emissions targets through light-weighting of cars
•
Transport sector demand is further supported by the
expected strong growth in transport services
•
Aluminium per passenger vehicle in North America
expected to increase 60% by 2030
Average kg per vehicle
300
North America
China
200
100
0
1990
2000
2010
2020
2030
China automobile demand
Passenger cars per thousand people
Italy
Germany
600
Japan
400
Australia
USA
UK
China Forecast
South Korea
200
China 2015
0
0
10,000
20,000
30,000
40,000
50,000
GDP per capita at peak passenger vehicles
Source (Top chart): Rio Tinto, Ducker International
Source (Bottom chart): World Bank OICA, Rio Tinto
39 | © Rio Tinto 2017
Rio Tinto well placed to benefit from
copper’s attractive long-term fundamentals
Copper supply/demand
New projects have moved market into oversupply
driving short-term price volatility
(million tonnes)
Surplus
Deficit
Rio Tinto copper growth to be delivered into a supply
deficient market
25
Further demand growth expected in China and other
emerging markets
20
Consumer goods and new uses to provide upside
– renewable energy
15
– electric vehicles
10
2015
2017
2019
Base
2021
2023
Highly Probable
2025
2027
2029
Demand
Source: Wood Mackenzie Q3 2016. Rio Tinto.
40 | © Rio Tinto 2017
Iron Ore
Iron Ore FY 2016 highlights
2016
2015
Change
Pilbara shipments (100%) - Mt
327.6
318.5
+3%
Pilbara production (100%) Mt
329.5
309.9
+6%
Underlying EBITDA
US$m
8,526
7,675
+11%
63%
60%
+3
Underlying earnings
US$m
4,611
3,940
+17%
Net cash generated from ops
US$m
5,644
5,844
-3%
Capex
US$m
(868)
(1,608)
-46%
Free cash flow
US$m
4,776
4,236
+13%
$315m of pre-tax cash cost improvements in 2016:
cumulative savings of $1.4 billion since 2012
Underlying FOB EBITDA
margin
Average realised 2016 FOB price of $49.3 per wet
metric tonne ($53.6/dmt)
Pilbara unit cash costs of $13.7/t in 2016, ($14.9/t in
2015)
2017 Pilbara shipments guidance of between 330
and 340 Mt (100% basis)
42 | © Rio Tinto 2017
Iron Ore: increased volumes, prices and cost reductions
Underlying earnings 2015 vs 2016
$ million (post tax)
6,000
4,000
3,940
59
139
4,047
147
Flexed
2015
earnings
Volumes
230
187
4,611
Tax & other
2016 underlying
earnings
(54)
(37)
2,000
0
2015 underlying
earnings
Price
Exchange rates
Energy
Inflation
Cash cost
reductions
• Pilbara shipments of 327.6 million tonnes was 3% higher than in 2015, attributable to the newly expanded infrastructure and minimal disruption from weather events
• Pilbara FOB EBITDA margins of 63% achieved in 2016 (60% in 2015)
• Pilbara iron ore revenues includes $886 million of freight in 2016 compared to $918 million in 2015, following declines in freight rates period-on-period
• Approximately 64 per cent of sales in 2016 were priced with reference to the current month average, 20 per cent with reference to the prior quarter’s average index
lagged by one month, five per cent with reference to the current quarter average and 11 per cent were sold on the spot market
• Approximately 62 per cent of 2016 sales were made on a cost and freight (CFR) basis, with the remainder sold free on board (FOB)
43
| © Rio Tinto 2017
Delivering optimal value from
one of the world’s best businesses
Strong foundation
Mine to market productivity
Value over volume
– Exclusive use of assets, fully integrated system,
consistent returns through the cycle
– Maximise cash flow from existing asset base
– Resource development sequencing to optimise
mines and product
– Highly-valued product suite, sustained by
significant resources
– Innovation and technology to assist the drive to
superior performance
– Disciplined capital allocation
– Quality people and partners
– Delivering productivity, cost and revenue
outcomes
– Low-cost, productivity-enabled options
44 | © Rio Tinto 2017
Major trends influencing the iron ore market
Steel production resilient……
…..with continued high cost iron ore supply exits
Steel production has been resilient in 2016
Exits of higher cost producers
Replacement cycle a more significant driver of steel consumption
Lower concentrate availability
Scrap increasingly important
Impact of depletion
Increased supply from low-cost producers and new entrants
Changing nature of financial markets…….
…and of regulatory frameworks
Increased liquidity in iron ore paper markets influences sentiment
Environmental restrictions
Presence of non-physical players in market creates more price
volatility
Steel capacity reductions / consolidation
Energy caps
By-product value / disposal costs
45
| © Rio Tinto 2017
We remain well-placed with five highly-valued products
Shipments by product and market 2016 YTD*
5%
4%
47%
17%
25%
74%
18%
Product
Strengths
Pilbara Blend
Fines
– The most traded iron ore product globally
– Base load sinter blend in Asian markets
Pilbara Blend
Lump
– Avoids the costs of sintering
HIY
Fines
– Ideal chemical composition for the Asian sinter
blends and favourable coarse sizing.
Robe Valley
Fines
– Favourable coarse sizing, low phosphorus
7%
3%
RVL
RVF
HIY
PBL
PBF
China
Japan
Korea
Taiwan & other
Robe Valley
Lump
– Low phosphorus
– Avoids the costs of sintering
* Year-to-date as at end September 2016
46
| © Rio Tinto 2017
Our product suite includes the industry benchmark
Pilbara Blend
Blending reduces product variability
Product quality variance from mean
Fe
Customers value the consistency and liquidity of the Pilbara Blend
Alumina
Silica
Ship
Phosphorus
–
Easier to manage blast furnace mix
–
Technical expertise provided to maximise value in use
–
Easily traded product
–
Reduces inventory
PB fines is the only product with a Platts ‘brand differential’
in recognition it is worth more than the index
Mine/Rail
Platts 62% Fe index and lump premium 2016 YTD*
Lump is a significant value driver
US$/dry metric tonne
Max: $84.0
Max: $70.5
Avg: $54.3
+$10.3
Avg: $64.6
Min: $39.3
Min: $44.1
Fines
Lump
–
Rio Tinto is the largest lump producer (~25% of our tonnes)
–
Platts lump premium averaged ~$10/dmt to the 62% fines index*
*Prices year-to-date as at end September 2016
47 | © Rio Tinto 2017
We have a fully integrated asset network
12,000
Workforce
15
Mines
1,700km
Rail
4
Port terminals
3
Power stations
370
Haul trucks
51
Production drills
190
Locomotives
48
| © Rio Tinto 2017
Iron Ore: our low-cost advantage has been sustained
over many years
Pilbara cash unit cost
2016 cash unit cost of $13.7/t (8% lower than
$14.9/t in 2015)
$ per tonne
Focus remains on maintaining consistently
attractive FOB EBITDA margins (63% in 2016)
20.4
18.7
Average realised FOB price of $49.3 per wet
metric tonne ($53.6/dry metric tonne)
16.2
H1 2014
H2 2014
H1 2015
13.8
14.3
H2 2015
H1 2016
2017 guidance for shipments from the Pilbara
remains unchanged at 330-340Mt
13.1
H2 2016
49
| © Rio Tinto 2017
50
| © Rio Tinto 2017
Replicating best practice drives greater value
Haul Truck Effective Utilisation
Plant Effective Utilisation
Time %, indexed, Sept YTD, site comparison
Time %, indexed, Sep YTD, site comparison
23%
17%
1.23
1.17
1.14
1.00
1.00
IO Manned Ave.
IO Autonomous Ave.
IO Ave.
IO Best Autonomous
Collaboration and standardisation, with data analytics
assisting rapid change
Currently >30% volume beneficiated
370 trucks operating, around 20% autonomous
Replicating best practice across the system:
15% improvement in load & haul costs; reduction in capex & opex
–
Conveyor system availability
Automation retrofit potential being explored
–
Process control improvement
–
IO Best Perf.
Ore quality and product handleability
Installed infrastructure offers high-value optionality
Optimising system capacity
Mt/a
Production
optionality
Mine capacity can be delivered through productivity
and low capital brownfields pathway
Silvergrass
and productivity
Mines
Rail capacity can be delivered through productivity, low
capital investment and progressive implementation of
Autohaul® from 2017: fully implemented by end of 2018
Autohaul®
and productivity
Rail
Port capacity at 360Mt/a, with potential to further
optimise
Production
optionality
Port
2017 guidance of 330-340Mt for shipments
360Mt
51
| © Rio Tinto 2017
Sustaining best value production
Low-cost brownfield mine expansions have dominated
Pilbara mine capital intensity US$/t installed
Bubble size indicates capacity
120
Hope Downs 4
Nammuldi
Below Water
Table
90
– Initial brownfield expansions at $9/t
– Focus on low phosphorus ores for Pilbara Blend
Marandoo
Phase II
60
West Angelas
Deposit B
Yandi
Sustaining
Focus on maintaining low capital intensity
Silvergrass
– Nammuldi Incremental Tonnes (NIT) at $19/t
30
Brownfields
Mine
Expansions
-
Brownfield mine expansions have dominated
production
2012
2012
– Silvergrass ~20Mt/a at $29/t
Nammuldi
Incremental
2016
Nammuldi Incremental and Silvergrass in development (~20 Mt/a capacity)
-30
52
| © Rio Tinto 2017
High-quality, low-cost options available to offset
depletion
Pilbara mine development options
Multiple options leveraging existing infrastructure
US$/t Installed capital intensity
Bubble size indicates capacity
120
Brownfield replacement mines to sustain current
production range (Capital Intensity $5-$20/t)
90
Koodaideri
option
60
30
– Potential capital spend from 2019
2016 Yandi Oxbow
Greenfield replacement mine
1 IRR
Koodaideri option underpins Pilbara Blend,
low-cost operations. Present view:
– Phase 1 ~40Mt/a plant capacity at $55/t Capital
Intensity ($2.2bn)
West Angelas
Deposit F
2012
-30
– West Angelas Deposit F and Yandi Oxbow Capital
Intensity <$10/t; IRR >100%1
Approved replacement mines
– Potential for first ore available around 2021
New brownfield replacement mine
calculated using consensus iron ore prices at May 2016
53 | © Rio Tinto 2017
Iron Ore capital expenditure profile
Capital expenditure
Silvergrass - majority of growth spend in 2017
US$bn (RT share)
~$100m approved replacement mine capital over next
three years, e.g.
1.5
– ~$64m Yandicoogina Oxbow
1.0
~$1bn unapproved replacement mine capital over
next three years
~$2.2bn sustaining capital over next three years, e.g.
0.5
– Mine mobile fleet replacements
– Process plant conveyors
0.0
2016F
2017F
2018F
2019F
Growth (mainly Silvergrass in 2017)
Unapproved replacement mine capital
Approved replacement mine capital
Sustaining capital
– Rail track replacement
54 | © Rio Tinto 2017
Highly-valued partners and sustainable local
and regional investment remain a priority
Regional and local commitment
– Local employment & procurement a priority
– Workforce of 12,000
– >1,000 fly-in/fly-out employees from six regional
WA towns
In the last decade
– >$13 billion State royalties
– ~$700 million in payroll tax
– ~$30 billion in company tax
– $300 million in Pilbara community investment
55 | © Rio Tinto 2017
Aluminium
Aluminium FY 2016 highlights
2016
2015
Change
Bauxite production (Rio
share) - kt
47,703
43,677
+9%
Alumina production (Rio
share) - kt
8,192
7,788
+5%
Aluminium prod’n (Rio
share) - kt
3,646
3,322
+10%
vs LME of $1,605/t
Underlying EBITDA
US$m
2,472
2,742
-10%
Premia for value-added products (for 54% of metal
28%
31%
-3
produced) averaged $223 per tonne of VAP sold in
947
1,118
-15%
Net cash generated from ops
US$m
2,074
2,413
-14%
Capex
US$m
(795)
(1,601)
-50%
Free cash flow
US$m
1,267
817
+55%
$481m of cash cost improvements in 2016:
cumulative savings of $1.6bn since 2012
Average realised aluminium price of $1,849/t in 2016
Underlying EBITDA margin
(integrated operations)
Underlying earnings
US$m
2016
2017 share of production guidance:
– 48-50 Mt of bauxite, 8.0-8.2 Mt of alumina,
3.5-3.7 Mt of aluminium
57 | © Rio Tinto 2017
Aluminium: volumes and cost improvements almost
completely offset lower prices
Underlying earnings 2015 vs 2016
$ million (post tax)
1,500
1,118
351
1,000
4
947
(18)
519
500
(507)
(3)
(45)
(44)
Price
Exchange
rates
Energy
Inflation
91
0
2015
underlying
earnings
Flexed
2015
earnings
Volumes
& Mix
Cash cost
reductions
Exploration &
evaluation
Tax & other
2016
underlying
earnings
• Average LME prices decreased 3% year on year. The average realised price per tonne averaged $1,849 in 2016 (2015: $2,058) due to lower market and product premia.
In the US, the Mid-West market premium averaged $162 per tonne in 2016, compared with an average $271 per tonne in 2015, a 40% decrease. Value-added product
premia averaged $223 per tonne in 2016
• Total 2016 cost savings were $481 million pre-tax. These were achieved through productivity improvements and volume increases, taking total pre-tax Aluminium cost
savings delivered since 2012 to $1.6 billion
• Integrated operations EBITDA margins were 28% in 2016, compared to 31% in 2015, delivering operating cash flows of $2.1 billion and $1.3 billion of free cash flow
• Bauxite revenues includes $202 million of freight in 2016 ($205 million in 2015)
58
| © Rio Tinto 2017
Strategy for outperformance through the cycle
Bauxite
Industry-leading bauxite position
Low first quartile cost
Size, quality, proximity to markets
Low-carbon, low-cost power
Market-paced high-margin growth
Strong cash flow generation
Competitive advantage
Strategic focus
Aluminium
Competitive alumina supply to our smelters
Key enablers
Commercial excellence from mine to market
Strategic goal
Leading performance through the cycle
59
| © Rio Tinto 2017
$1.6 billion of cost improvements since 2012
2016 cost savings of almost $500m
Industry-leading upstream margins
Cash cost improvements
Upstream EBITDA margin versus peers1
US$ million
Percentage
1,750
50%
1,500
40%
481
1,250
30%
1,000
326
750
20%
232
500
250
10%
574
0%
2013
2014
Raw Materials
2015
Production
2016
Total
Functional Support
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016
Rio Tinto Aluminium
Competitors
1Rio
Tinto internal analysis which includes adjustments to externally reported EBITDA margins, trading, procurement and marine revenues to report performance on a comparable basis.
Analysis excludes the Gove alumina refinery. Competitors included in the analysis are Rusal, Hydro, Alcoa.
60 | © Rio Tinto 2017
Leading bauxite resource and market positions
Unrivalled Tier 1 assets
– Largest bauxite position with global footprint
Rio Tinto bauxite position versus peers
Bauxite resources/reserves (billion
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
tonnes)1,2
Resources
– Generating attractive margins
Reserves
Logistics advantage
– Proximity to China and Middle East
– Dedicated port infrastructure
Differentiated value proposition
Rio Tinto
Rusal
AWAC
EGA
South32
Harita
Chalco
Rio Tinto third party bauxite sales
– Security of supply, flexibility in offering and consistent
quality
Million tonnes
30
– Valuable technical support
25
20
15
10
1
2
– High alumina content
13
16
17
2010
2011
2012
22
23
2013
2014
27
Moving from option-rich to option-ready
30
– Amrun and CBG Phase 1 progressing
2015
2016F
– Development pathways in Cape York, CBG and MRN
Rio Tinto data from the 2015 Annual Report. Refer to the statements supporting the above Rio Tinto resource and reserve estimates and relevant Competent Person references set out on slide 2.
Competitor data taken from published company data. For South32, Resources are reported inclusive of Ore Reserves. EGA and Rusal only report Resources. AWAC and Chalco only report Reserves.
61 | © Rio Tinto 2017
Amrun on track for first bauxite in H1 19
Overall project status: 25% complete
People and partnering
Approved in November 2015
1
Volume 22.8Mt/a – Capex $1.9bn – IRR above 20%
550+ Australian businesses engaged to date
2
– 398 from Queensland
– 58 from Cape York
Advancing to schedule (engineering and construction):
– Site access & infrastructure available end of 2016
– River terminals operational by early 2017
– First wharf equipment and first beneficiation plant
modules delivery in 2017
1 Refer
– 10 Indigenous
50+ Indigenous staff employed by the project
and contractors
to the statements supporting these production targets set out on slide 2 of this presentation. 2 IRR based on CRU price assumptions as at 8 December 2015.
62 | © Rio Tinto 2017
250+ bauxite improvement initiatives underway
Volume / commercial
Low cost production creep: 5% production increase in 2017
following 9% in 2016
– East Weipa plant to increase rates by 15% in 2017
– Gove conveyor system to increase rates by 11% in 2017
Cost / productivity
Truck utilisation increase of 5% in 2017
Labour productivity increase of 11% over 2016 and 2017
63
| © Rio Tinto 2017
Transforming our alumina business
Business transformation continues
Unit conversion cost ($/t)
1
2015
164
2016
Delivering +$150m EBITDA and FCF positive in 2016
Strong delivery in 2016:
-23%
– $200m operational cost reduction – building
momentum into 2017
Sustaining capital ($m)
2015
2016
151
-42%
88
Trade working capital (average days)
2015
2016
1
2
– 5% volume increase and stable operations
127
2
– $90m trade working capital reduction
31
26
– $60m sustaining capital reduction while
managing key risks
-16%
2016 H2 unit cost annualised
TWC days at end of 2015 and estimated position at end of 2016 based on second half run-rate
– 41% reduction in contractor costs since 2015
through footprint consolidation and rate reductions
from re-tendering
500+ alumina improvement initiatives underway
64
| © Rio Tinto 2017
Improving our smelting cost position
Business operating cost curve1
Rio Tinto’s low-cost, low-carbon power
is a sustainable competitive advantage
US$ per tonne
2,500
2013
Rio Tinto average position
2,000
Since 2013, cost rank improved to low Q1 cost
position:
– Cumulative $1bn from cost reduction programme
– Fixed costs reduced by over 35%
1,500
2017F
1,000
Creeping at 1%, double the industry average
Divestment of Lochaber and ancillary businesses
500
0%
1CRU
– Modernised and expanded Kitimat at 1st cost
decile
25%
50%
75%
100%
and internal analysis. The business operating cost includes hot metal and cold metal costs net of market and product premiums.
65
| © Rio Tinto 2017
66
| © Rio Tinto 2017
500+ aluminium improvement initiatives underway
Volume / commercial
Volume increase of 4% over next few years through low-capex creep
Increase in value-added product mix from 54% in 2016 to 59% in 2017
Cost / productivity
Labour productivity improvement of 12% over 2016 and 2017
Cash improvement of $40m through external spend reduction
(optimisation of warehousing, services and light mobile equipment)
Copper & Diamonds
Copper & Diamonds FY 2016 highlights
2016
2015
Change
Mined copper prod’n (Rio share) - kt
523.3
504.4
+4%
Refined copper prod’n (Rio share) - kt
250.1
213.0
+17%
Diamonds production (Rio share) – k
carats
17,953
17,316
+4%
1,387
1,833
-24%
Underlying EBITDA margin
35%
35%
-
Underlying (loss) / earnings
US$m
(18)
370
-105%
Net cash generated from ops
US$m
987
1,575
-37%
(924)
(806)
+15%
78
791
-90%
Free cash flow positive in 2016
Pre-tax cash cost improvements of $278m in 2016:
cumulative savings of $1.3bn since 2012
Underlying EBITDA
US$m
Capex
US$m
Free cash flow
US$m
2017 share of production guidance:
– 525-665kt for mined copper1
– 185-225kt for refined copper
– 19-24 M carats of diamonds
1 2017 mined copper guidance includes an expected share from the Grasberg joint venture, which is operated by PT-Freeport Indonesia (PT-FI), a subsidiary of FreeportMcMoRan Inc. On 12 January 2017, the Government of Indonesia issued new mining regulations to address exports of unrefined metals, including copper concentrates, and other
matters related to the mining sector. These regulations impact PT-FI’s operating rights, including its right to continue to export concentrate without restriction, and may have a
significant impact on Rio Tinto’s share of production in 2017.
68 | © Rio Tinto 2017
Copper & Diamonds: cost savings partly offset lower
volumes and prices
Underlying earnings 2015 vs 2016
$ million (post tax)
500
370
249
250
(79)
(16)
(4)
14
203
(22)
0
(297)
(187)
(18)
Tax & other
2016
underlying
earnings
-250
2015
underlying
earnings
Price
Exchange
rates
Energy
Inflation
Flexed
2015
underlying
earnings
Volumes
Cash cost
reductions
Exploration &
evaluation
• Copper & Diamonds underlying earnings of $(18) million, were heavily impacted by lower sales volumes of copper, molybdenum and gold, lower prices and include $114
million of one-off non-cash asset write-downs. This was partly offset by the delivery of further cash cost savings.
• Pre-tax cash cost savings delivered in 2016 were $278 million bringing total pre-tax cash cost improvements delivered by Copper & Diamonds since 2012 to $1.3 billion.
• Copper & Diamonds generated net cash from operating activities of $987 million and was free cash flow positive, despite investing more than $900 million in
development capital and exploration and evaluation. All managed operations made a positive free cash flow contribution.
• To optimise smelter utilisation, Kennecott tolled 315 thousand tonnes of third party concentrate in 2016
• At 31 December 2016, the Group had an estimated 235 million pounds of copper sales that were provisionally priced at 250 cents per pound. The final price of these
sales will be determined during the first half of 2017. This compares with 252 million pounds of open shipments at 31 December 2015, provisionally priced at 217 cents
per pound
69
| © Rio Tinto 2017
Sector-leading attributes
Robust long-term demand
Attractive industry
fundamentals
Constrained supply
Deficit expected towards end of decade
Long-life, low-cost, expandable assets
Large, high-quality
resources
Interest in three of the world’s Tier 1 copper mines
Productivity & processing optimisation at Kennecott
Leading mine to
market productivity
Cost and productivity culture at Oyu Tolgoi
Broad customer base for underground volumes at Oyu Tolgoi
Medium-term growth from Oyu Tolgoi and Grasberg
Multiple, strong
growth options
Longer-dated optionality at Resolution
Exploration pipeline
70 | © Rio Tinto 2017
Strategy to deliver further value
Maximise value from
existing operations
Deliver medium-term growth
and progress long-term options
Develop our people
& partnerships
Unlock additional value through
productivity initiatives
71
| © Rio Tinto 2017
Maximising value from existing operations
Strong culture of cost improvements
Kennecott truck productivity trends
$1.3 billion of cost reductions delivered since 2013
Cost performance helped deliver a 2016 EBITDA margin of 35%
Further opportunities:
–
Contractor management and external optimisation
–
Moving to condition based maintenance
Productivity unlocking additional value
Truck utilisation at OT is best in the group
Increase truck payload at Kennecott
Mean time between failures (MTBF) at Kennecott is highest in the
group
Further opportunities identified:
2012
2013
Effective Utilisation
2014
2015
2016
Average Payload
2017
2018
–
Increase concentrator throughput at OT
MTBF
–
Raise smelter utilisation further at Kennecott
72 | © Rio Tinto 2017
Kennecott – a simplified and reset business
Asset optimisation
– Fully utilise excess smelter and refinery capacity
with third party product
South Wall push back underpins over a decade of
high-quality cash flow
Returns to higher grades from 2021
Operational excellence to maximise value
– Overall improvement of ~5% in truck productivity
equates to ~12 mt additional material moved
in 2017
73
| © Rio Tinto 2017
Oyu Tolgoi - the leading Tier 1 copper project
Underground development – unlocks the value
of Oyu Tolgoi
The highest quality, major copper project in
development
~3x higher production using existing infrastructure
Experienced project management team
Highly capable and motivated workforce
Long-life resource with multiple future options
Operational excellence to maximise value
74
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OT underground is a Tier 1 asset
2025 Copper Equivalent Cost Curve
Copper equivalent unit cost including sustaining capex, deferred strip and royalties (c/lb)
400
Q2
Q1
Q3
Q4
300
Oyu Tolgoi with
underground1
200
100
0
kt
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Copper production, kt Cu contained
Source: Wood Mackenzie Q3 2016. Oyu Tolgoi 2016 Technical Report. Rio Tinto.
Note: Oyu Tolgoi costs and production 2025-2030 average. Oyu Tolgoi copper equivalent calculation uses Wood Mackenzie metal prices
($3.30/lb for copper and $1,300/ounce for gold, $18.75/ounce for silver)
1 Refer to the statements supporting these production targets set out on slide 2 of this presentation.
75
| © Rio Tinto 2017
76
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Approved OT underground capital expenditure
Approved underground capital spend profile, US$bn
1.2
1.2
1.3
1.0
0.8
Development
capital
$5.3bn
0.5
0.5
0.4
0.3
0.4
0.3
0.4
Sustaining capital to full production
$2.8bn
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
$5.3bn underground development capital by cost type
6%
10%
7%
48%
18%
43%
57%
8%
Underground Components
Construction indirect
GoM Fees and Charges
Concentrator
EPCM
3%
Supporting infrastructure
Owners Cost
OT production profile to end of lateral development
phase in 2032
Ore processed - ktpd
Copper and gold production
(annual average)1
Significant uplift in copper production
600
50,000
500
40,000
400
30,000
300
20,000
200
10,000
100
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Open Pit Ore ktonnes
0
2016-22
Underground Ore ktonnes
Copper (ktpa)
2023-30
Gold (kozpa)
1This
production target includes a combination of open pit and underground sources. The production target is based on reserves. The
reserves are 100% probable category for underground production and 100% proven and probable category for open pit production.
These figures have been scheduled from current mine designs and have been prepared by Competent Persons in accordance with the
requirements of the Australasian code for reporting of exploration results, mineral resources and ore reserves, 2012 edition.
77
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Non-managed interest in two of the world’s best copper
mines
Escondida
Grasberg
Strong cash flows underpin dividends
Contract of Work is a priority for the business
No additional significant capex required for near
future
Rio Tinto participation steps up to 40% from 2021
Transition to underground to occur in near-term
Los Colorados extension delivers incremental
near-term capacity of 200ktpa1
Supporting our partners to improve safety and protect
licence to operate
Desalination plant commissioning in H1 2017
1 Per
BHP 2016 annual report
78
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Future optionality for the Copper business
Resolution
Exploration
Continue to advance permitting process
Continued focus on copper exploration, primarily the Americas
Strengthen licence to operate
16 copper exploration projects ongoing
Complete pre-feasibility study by 2020
La Granja regional exploration
Inferred mineral resource of 1,787Mt @ 1.54% Cu1
61% Rio Tinto exploration spend is focussed on copper
1 Refer
to the statements supporting this resource estimate set out on Slide 2 of this presentation
79
| © Rio Tinto 2017
Delivering medium-term growth
and progressing long-term options
Supply surplus
2017
1
3
Supply deficit
2020
2018
Kennecott
South push back underpins margin & volume increase
Oyu Tolgoi
HNL1 development to first production
Escondida
LCE & EWS2
Grasberg
Transition underground
Resolution
Project permitting & continued studies
Exploration
Sustained & committed programme with an emphasis on the Americas
2021
2025-2030
Ramp-up to ave. 560 ktpa copper production1
~1.2 Mtpa average production capacity3
Long-term optionality
Potential project
execution
Includes open pit. Refer to the statements supporting this production target set out on slide 2 of this presentation. . 2 Los Colorados Concentrator Extension and Escondida Water Supply.
BHP Copper Briefing and Chilean Site Tour - http://www.bhpbilliton.com/investors/reports/copper-briefing-and-chilean-site-tour, released by BHP on 1 December 2015.
80 | © Rio Tinto 2017
Developing our people and our partnerships
Working with our partners to improve safety
Strengthening indigenous relationships
Consulting with communities
Building long-term sustainable relationships
at Oyu Tolgoi
– 93% local employment
– Best in class for water efficiency – 85%
of water recycled
– 40% of key underground contracts
awarded to local suppliers
81 | © Rio Tinto 2017
Energy & Minerals
Energy & Minerals FY 2016 highlights
All production on a Rio Tinto share basis
2016
2015
Change
Hard coking coal prod’n - kt
8,141
7,859
+4%
Semi-soft coking coal production - kt
4,102
3,647
+12%
Thermal coal prod’n - kt
17,254
18,638
-7%
Iron ore pellets / conc – kt
10,661
10,388
+3%
Titanium dioxide prod’n - kt
1,048
1,089
-4%
503
476
+6%
Salt production – kt
5,180
5,539
-6%
Uranium production – k lbs
6,342
4,907
+29%
U/l EBITDA - US$m
1,803
1,235
+46%
30%
21%
+9
610
175
+249%
Net cash generated from ops – US$m
1,431
1,482
-3%
Capex - US$m
(141)1
(552)
-74%
Free cash flow – US$m
1,294
925
+40%
Borates production - kt
U/l EBITDA margin (FOB)
U/l earnings - US$m
$342m of cash cost improvements in 2016: cumulative
savings of $1.4bn since 2012
Completed sales of 40% interest in Bengalla for $599m
and Mt Pleasant thermal coal project for $221m plus
royalties ($192m received in 2016)
Announced binding agreement for sale of Coal & Allied to
Yancoal for up to $2.45bn: expected to complete in
H217, subject to regulatory approvals.
2017 share of production guidance:
– 7.8-8.4 Mt of hard coking coal
– 3.3-3.9 Mt of semi-soft coking coal
– 17-18 Mt of thermal coal2
– 11.4-12.4 Mt of iron ore pellets/concentrate
– 1.1-1.2 Mt for TiO2 feedstocks
– 0.5 Mt for borates
– 6.5-7.5 Mlbs of uranium
1 2016
capex is net of $192m of proceeds from the sale of the Mt Pleasant thermal coal assets.
Guidance for thermal coal to be updated following completion of the sale of Coal & Allied to Yancoal which
is expected to take place in H2 2017.
2
83
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Energy & Minerals: cost improvements, favourable
exchange rates and higher volumes driving earnings
Underlying earnings 2015 vs 2016
$ million (post tax)
700
600
500
400
300
200
100
0
105
175
2
2015
underlying
earnings
Price
24
268
250
19
17
610
Cash cost
reductions
Exploration &
evaluation
Tax & other
2016
underlying
earnings
56
(38)
Exchange
rates
Energy
Inflation
Flexed 2015
earnings
Volumes
• Underlying earnings of $610 million were significantly higher than 2015, primarily driven by cash cost reductions, benefits from exchange rate movements and higher
sales volumes
• Pre-tax cost reductions delivered in 2016 were $342 million bringing total pre-tax cost savings delivered by Energy & Minerals since 2012 to $1.4 billion
• Strong operating cash flows of $1.4 billion resulted in a free cash flow contribution to the Group of $1.3 billion
• Rio Tinto completed the sale of its interest in the Bengalla coal mine in Australia on 1 March 2016, completed the sale of Mount Pleasant on 5 August 2016 and
completed the sale of its interest in ZAC on 2 September 2016
• Revenues included $320 million of freight in 2016 (2015: $481 million)
84
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Maximising value from the Energy & Minerals portfolio
Safety is our first priority
A lean, scalable operating model, running cash-focused businesses
Value over volume operating philosophy supported by a global
customer and market-oriented approach
Ongoing cost and productivity improvements continuing to
deliver cash flow
Energy & Minerals is the incubator for new commodities
85
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A lean, scalable operating model
running cash-focused businesses
Strategic
focus
Key customer segments
Competitive
advantages
FY 2016
margins
Borates
Coal
Integrated mine-to-market
business model
Maximising value from
existing assets
Cost and productivity
improvements
Value over volume
operating philosophy
Multiple end products
including construction,
agriculture & consumer
products
Power stations and steel
mills
Premium quality pellets
and concentrates to steel
producers
Pigment producers,
ceramics and titanium
industry
Large ore reserve
Wide range of TiO2
feedstock options
Commercial excellence
driven by market insight
IOC
TiO2
Creating new demand
through technical
expertise
Premium hard coking
coal
Installed capital base
Integrated operations
Premium quality pellets
Significant co-product
contributions
40%
34%
27%
27%
FOB EBITDA
FOB EBITDA
FOB EBITDA
FOB EBITDA
margins
margins
margins
margins
The Energy & Minerals Product Group also includes Dampier Salt Limited and Rio Tinto Uranium.
86
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Borates
Refined borates demand and supply
‘000 tonnes B2O3
2000
RT share of 2016
sales
1500
38%
1000
26%
500
0
2016
5-mol
Boric Acid
2018
2019
Supply
2020
Global marketer with integrated mine-to-market
capabilities.
Regional and end-use segmentation and
contracting positions supporting commercial
performance.
~3% CAGR
~4% CAGR
2017
Tier 1 orebody at Boron, California.
2021
Demand creation through developing new
applications through deep technical insight e.g.
borates in wood preservation.
Demand
Note: Supply refers to only proven capacity in 2016
Borates production
'000 tonnes B2O3
On-going cost and productivity improvements:
600
•
Increasing haul truck utilisation;
400
•
Improving high-payload capacities;
300
•
Increasing fixed plant productivity.
500
Progressing Jadar lithium-borate project
200
100
0
2011
2012
2013
2014
2015
2016
2017*
* Full year guidance (0.5mt)
87
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Coal
Achieved marketing premia vs. benchmarks1
Commercial portfolio structured to participate in
current spot prices.
2016
2015
Focus on “beat the market” premiums.
2014
Integrated resource to ship approach.
0%
5%
10%
Coking coal
15%
20%
Thermal coal
Targeted approach to productivity improvement:
1The
market benchmark is a basket of indices including globalCOAL, Platts and McCloskey
relevant to quality with energy and quality adjustors.
Coal production
Million tonnes, Rio Tinto share
40
35
30
25
20
20.4
17.8
22.5
21.5
18.6
Continued focus on cost discipline, contractor
management and working capital excellence.
17.3
17-18
•
Increasing longwall effective utilisation;
•
Improving haul truck utilisation;
•
“Best Shift Every Shift” operating mentality.
Announced sale of Coal & Allied to Yancoal for up to
US$2.45 billion.
15
10
2.9
3.3
3.9
3.2
3.6
4.1
3.3-3.9
5
8.8
7.9
7.7
7.1
7.9
8.1
7.8-8.4
2011
2012
2013
2014
2015
2016
2017*
0
HCC
SSCC
TC
* Full year guidance, before impact of the sale of Coal & Allied
88
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Iron Ore Company of Canada
Iron ore pellets/ concentrate production
Million tonnes, Rio Tinto share
Cost and productivity improvements facilitating
business transformation:
14
12
10
•
Increasing haul truck utilisation by
improving shift changes;
•
Increasing average payload for haul trucks.
8
6
4
2
0
2011
2012
2013
2014
2015
2016
2017*
* Full year guidance (11.4 to 12.4mt)
Integrated Operations Centre successfully piloted
during 2016.
Full mining and processing operations oversight
now in place:
Operations Centre Pilot
•
24/7 “Monitor & Advise” production and
product quality oversight;
•
Additional cost and productivity potential
with move to “Monitor & Command”.
Development of new Wabush 3 open pit approved
in February 2017
89
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Iron & Titanium
TiO2 feedstock demand and supply
‘000 TiO2 units
8000
RT share of 2016
sales
6000
4000
31%
2.4% CAGR
2000
~3% CAGR
CAGR
0
~3%
2015
2016
~3%
CAGR 2017
Supply
62%
2018
2019
2020
High-grade chloride
High-grade sulphate
Aligning production to market demand:
• Two furnaces at Sorel and one at
Richards Bay Minerals taken offline.
Increasing zircon plant production and
recoveries at Richards Bay Minerals.
Increasing haul truck availabilities at Havre
Saint Pierre.
Demand
Source: TZMI
Commenced direct sales of QMM ilmenite.
TiO2 production1
Million tonnes, Rio Tinto share
Now selling Upgraded Slag into China.
2.00
Significant latent capacity as demand returns
and grows.
1.50
1.00
Continuing to progress the Zulti South
feasibility study.
0.50
0.00
2011
2012
2013
2014
2015
2016
2017*
* Full year guidance
1Excluding rutile and external ilmenite sales
90
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Maximising ore value through product portfolio
Iron & Titanium production breakdown
2016, percentage of product tonnes
Multiple co-product streams deliver maximum
value from ore-bodies.
Wide range of TiO2 feedstock options for:
• Multiple chloride and sulphate slags;
0%
10%
20%
30%
40%
TiO2 feedstocks
50%
Metallics
60%
Zircon
70%
80%
90%
100%
Other
• Upgraded slag (UGS);
• Rutile;
• Chloride ilmenite.
Iron & Titanium revenue breakdown
Zircon and metallics make significant
contributions, as well as leading positions in:
2016, percentage of revenue
• High purity ductile iron;
• Iron and steel powders;
• Specialist steel billets.
0%
10%
20%
30%
40%
TiO2 feedstocks
50%
Metallics
60%
Zircon
70%
80%
90%
100%
We are well-placed to supply demand growth.
Other
Data presented on 100% ownership basis, FOB
91
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Energy & Minerals is the Incubator for new commodities
Assess attractiveness of new commodities
and assets of interest.
Exploration
Use E&M’s lean, scalable operating model to
bolt on opportunities.
Foster an entrepreneurial mind-set whilst
maintaining focus on safety, free-cash flow
generation and high-value opportunities.
New Commodity
Opportunity
…
Generation
Exploration remit aligned with new commodity
opportunity generation.
Immediate focus on Jadar, providing a
potential future lithium business.
Projects
External Opportunities
92
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Growth & Innovation
Find, evaluate and develop assets
Find
Target
Testing
Evaluate
Project
of Merit
Order of
Magnitude
Pre-feasibility A
EC & IC
Wide exploration remit, successful programme delivers discoveries
Standardised evaluation approach to ensure we “do the right
projects”
Develop
Pre-feasibility B
Feasibility
EC & IC
Execution
EC & IC
Evaluation Committee and Investment Committee provide
strong governance to ensure we “do the project right”
Technical assurance at each stage gate
Effective and efficient central execution for capex > $250m
94
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Declining industry investment and success
Significant* mineral discoveries (excluding bulk commodities)
Western World: 1975 - 2015 (excluding FSU + Eastern Europe + China 1995 - 2015)
200
Number of discoveries
Expenditures (2015 US$b)
Expenditures
$20
150
Incomplete discovery
data in recent years
$15
100
Discoveries
$10
50
$5
Number of discoveries
Expenditures (2015 real US$bn)
$25
0
$0
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
*Significant defined as >100Koz Au, >10Kt Ni, >100Kt Cu equiv, 250Kt Zn+Pb, >5Moz Ag, >5kt U3O8
Source: MinEx Consulting March 2016; Expenditures – SNL Metals & Mining December 2015
Note: SNL expenditure data excludes Uranium prior to 2001.
95
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Extensive and successful exploration programme
Exploring across 17 different countries
Exploring for 8 different commodities
Expenditure by region, 2013 to 2016 forecast
Expenditure by commodity, 2016 forecast
100%
15% Nickel & others
22%
80%
40%
32%
3% Iron Ore
5% Diamonds
62%
61% Copper
5% R&D/Technical
5% Uranium
5% Bauxite
60%
40%
78%
60%
20%
68%
38%
0%
2013
2014
2015
OECD+Peru
2016 F'cast
Non-OECD
96 | © Rio Tinto 2017
Jadar is a significant lithium-borate resource discovered
by Rio Tinto
Jadarite: Li-Na-borosilicate mineral comprising 47.2% B2O3
and 7.3% Li2O
136Mt inferred resources containing 21Mt B2O3 and 2.6Mt
Li2O1
Potential to support a long-life operation in the first quartile of
the operating cost curve for boric acid and lithium
Initial studies suggest if developed, potential to be a top 3
producer
Presently advancing technical studies to complete
pre-feasibility by end 2017
1 Refer
to the statements supporting these resource and reserve estimates set out on Slide 2 of this presentation
97
| © Rio Tinto 2017
Driving productivity across the value chain
Effective Utilisation
Payload
(haul trucks, %)
(haul trucks, average target %)
H116 Avg
H116 Avg
+30%
+8%
Target
Target
Mean Time Between Failure
Processing Utilisation
(haul trucks, hrs)
(average wet & dry, %)
Average
H116 Avg
+50%
Target
+30%
Best
98
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Corporate information
Dividend policy and capital commitment
Balanced capital allocation
Maintain an appropriate balance between:
– Investment in compelling growth projects
with IRR >15%; and
Balance between interim and final to be weighted
towards the final dividend
Board to determine appropriate ordinary dividend
per share, taking into account:
– Results for the financial year
– Total shareholder cash returns of 40-60%
of underlying earnings through the cycle
– Outlook for our major commodities
Supplement ordinary dividends with additional
returns in periods of strong earnings and cash
generation
– Objective of maintaining a strong balance sheet
– View on the long-term growth prospects
100 | © Rio Tinto 2017
Credit rating1
Standard & Poor’s2
Moody’s3
Long-term
A-
A3
Short-term
A-1
P-2
Outlook
Stable
Stable
1
A rating is not a recommendation to buy, sell or hold securities, and may be subject to revision, suspension or withdrawal at any time by the
assigning rating agencies.
Standard & Poor’s Ratings Services - 30 August, 2016.
3 Moody’s Investors Service - 27 February, 2017
2
101
| © Rio Tinto 2017
Modelling earnings
2016
average price/
rate
($m) impact on FY 2016 underlying earnings of
10% price/rate change
Copper
221c/lb
238
Aluminium
$1,605/t
469
Gold
$1,250/oz
36
Iron ore (62% Fe FOB)
$53.6/dmt
879
Coking coal (benchmark)
$114/t
49
Thermal coal (average spot)
$66/t
81
A$
74USc
604
C$
76USc
229
Oil
$44/bbl
53
Earnings sensitivity
Note: The sensitivities give the estimated effect on underlying earnings assuming that each individual price or exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and
movements in exchange rates can affect movements in commodity prices and vice versa. The exchange rate sensitivities include the effect on operating costs but exclude the effect of revaluation of foreign currency working capital.
102
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Accounting treatment of principal operations
Alumina
Jonquiere
Queensland Alumina
Sao Luis (Alumar)
Yarwun
%
100.0
80.0
Location
Canada
Australia
Accounting treatment
Full consolidation
Proportional consol
10.0
Brazil
Proportional consol
100.0
Australia
Full consolidation
Aluminium
Alma
Bauxite
Gove
Porto Trombetas (MRN)
Sangaredi (note 1)
Weipa
%
100.0
12.0
Location
Australia
Brazil
Accounting treatment
Full consolidation
Equity accounted unit
23.0
Guinea
Equity accounted unit
100.0
Australia
Full consolidation
100.0
US
Full consolidation
Proportional consol
Borates
100.0
Canada
Full consolidation
Boron
40.0
Canada
Proportional consol
Coal
Arvida
100.0
Canada
Full consolidation
Hail Creek
82.0
Australia
Arvida AP60
100.0
Canada
Full consolidation
Hunter Valley Ops
67.6
Australia
Proportional consol
25.1
Canada
Proportional consol
Kestrel
80.0
Australia
Proportional consol
100.0
Australia
Full consolidation
Mount Thorley
80.0
Australia
Proportional consol
59.4
Australia
Equity accounted unit
Port Waratah Coal Services
36.5
Australia
Equity accounted unit
55.6
Australia
Proportional consol
Alouette JV
Bécancour
Bell Bay
Boyne
Dunkerque
100.0
France
Full consolidation
Warkworth
Grande Baie
100.0
Canada
Full consolidation
Copper
ISAL
100.0
Iceland
Full consolidation
Escondida
30.0
Chile
Equity accounted unit
Kitimat
100.0
Canada
Full consolidation
Grasberg JV
note 2
Indonesia
Proportional consol
Latarrière
100.0
Canada
Full consolidation
Kennecott
100.0
US
Full consolidation
Lochaber
100.0
UK
Full consolidation
Oyu Tolgoi
33.5
Mongolia
Full consolidation
Sohar
20.0
Oman
Equity accounted unit
Turquoise Hill Resources (TRQ)
50.8
Canada
Full consolidation
Tiwai Point (NZAS)
79.4
New
Zealand
Proportional consol
Tomago
51.6
Australia
Proportional consol
103
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Accounting treatment of principal operations
Diamonds
%
Location
Accounting treatment
Argyle Diamonds
100.0
Australia
Full consolidation
Diavik Diamonds
60.0
Canada
Proportional consol
Iron ore
Brockman (2 and 4)
Iron ore (cont’d)
West Angelas
Location
Accounting treatment
Australia
Proportional consol (note 4)
Western Turner Syncline
100.0
Australia
Full consolidation
Yandicoogina
100.0
Australia
Full consolidation
68.4
Australia
Full consolidation
100.0
Canada
Full consolidation
Salt
100.0
Australia
Full consolidation
Channar JV
60.0
Australia
Proportional consol
Dampier Salt
Eastern Range JV (note 3)
54.0
Australia
Proportional consol
TiO2 feedstocks
Hope Downs JV (1 and 4)
50.0
Australia
Proportional consol
RTFT mine and smelter
Iron Ore Company of
Canada (IOC)
%
53.0
58.7
Canada
Full consolidation
QMM mine
80.0
Madagascar
Full consolidation
Marandoo
100.0
Australia
Full consolidation
Richards Bay Minerals
74.0
South Africa
Full consolidation
Mt Tom Price
100.0
Australia
Full consolidation
Uranium
Nammuldi
100.0
Australia
Full consolidation
Energy Resources of Australia
(ERA)
68.4
Australia
Full consolidation
53.0
Australia
Proportional consol (note 4)
Rössing
68.6
Namibia
Full consolidation
100.0
Australia
Full consolidation
Pannawonica (Mesas J and
A)
Paraburdoo
Note 1: Rio Tinto has a 22.95% interest in Sangaredi but benefits from 45% of production, through Halco, which is equity accounted.
Note 2: Through a joint venture agreement with Freeport-McMoRan Inc., Rio Tinto is entitled to 40% of material mined from Grasberg above an agreed threshold as a consequence of expansions and developments
of the Grasberg facilities since 1998.
Note 3: Under the terms of the Eastern Range Joint Venture Agreement, Hamersley Iron manages the operation and is obliged to purchase all production from the JV.
Note 4: Rio Tinto recognises 65% of the assets, liabilities, revenues and expenses of Robe River, with a 12% non-controlling interest. The Group therefore has a 53% beneficial interest in the Robe River mines
(Mesas J and A and West Angelas).
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Principal corporate activity 2010 to 2012
2010
•
•
•
•
•
Sale of majority of Alcan Packaging to Amcor
Sale of Coal & Allied undeveloped properties (Maules Creek and Vickery) – Rio Tinto share
Sale of Alcan Packaging Food Americas to Bemis Inc
Increase in stake in Ivanhoe Mines to 40.1%
Sale of remaining 48% stake in Cloud Peak Energy
$1,948m
$306m
$1,200m
$1,591m
$573m
•
•
•
•
•
•
•
•
Increase in stake in Ivanhoe Mines to 42.1% and participation in rights offering
Increase in stake in Ivanhoe Mines to 46.5%
Acquisition of Riversdale Mining Ltd (net of cash acquired)
Sale of talc business to Imerys – enterprise value
Increase in stake in Ivanhoe Mines from 46.5% to 49%
Increase in holding in Coal and Allied from 75.7% to 80%
Acquisition of Hathor
Buy-back of Rio Tinto plc shares (up to 31 December 2011)
$751m
$502m
$3,690m
$340m
$607m
$266m
$536m
$5,500m
•
•
•
•
•
Purchase of remaining shares in Hathor
Increase in stake in Ivanhoe Mines from 49% to 51%
Buy-back of Rio Tinto plc shares (up to 26 March 2012)
Rio Tinto completes formation of Simandou JV with Chalco
$76m
$308m
$1,500m
$1,350m
Increase in stake in Richards Bay Minerals from 37% to 74%
$1,700m
2011
2012
Note: only selected transactions are shown.
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Principal corporate activity 2013 to 2017
2013
•
•
•
•
•
Sale of Eagle to Lundin Mining
Sale of Palabora Mining Corporation
Sale of Northparkes
Sale of Altynalmas Gold (held by Turquoise Hill subsidiary)
Sell-down of interest in Constellium
$315m
$373m
$820m
$235m
$670m
2014
• Sale of Clermont thermal coal mine
$1,015m
• Buy-back of Rio Tinto Limited shares (off-market)
• Buy-back of Rio Tinto Plc shares (ongoing throughout 2015)
$1,575m
2015
$425m
2016
• Sale of Bengalla thermal coal Joint Venture
• Sale of Mt Pleasant thermal coal project
• Sale of Lochaber aluminium smelter
$617m
• Sale of Coal & Allied1
Up to $2,450m
$221m
$410m
2017
Note: only selected transactions are shown.
1 Announced on 24 January 2017: subject to all approvals and other conditions precedent being satisfied, expected to complete in the second half of 2017.
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Ongoing major capital projects
All numbers on 100% basis (US$)
Approved
capital cost
Status
Copper – Construction of a desalination facility to
ensure continued water supply and sustain
operations at Escondida (RT share 30%), Chile.
$1.0bn
(RT share)
Approved in July 2013, the project is designed to provide a long-term
sustainable supply of water for the operations. It remains on schedule and on
budget and is 99 per cent complete, with commissioning scheduled in 2017.
Copper – Grasberg project funding to 2017
$0.2bn
(RT share)
Investment to continue the pre-production construction of the Grasberg Block
Cave, the Deep Mill Level Zone underground mines, and the associated
common infrastructure. Rio Tinto’s final share of capital expenditure will be
influenced in part by its share of production over the period of investment.
Copper – Remediation of the east wall at Rio Tinto
Kennecott, US
$0.3bn
Following the pit wall slide in 2013, mine operations have focused on
remediation from the slide and the east wall of Bingham Canyon, including
significant de-weighting and de-watering activities. There is a small amount of
dewatering activity scheduled to be completed in 2017.
Copper - Investment to extend mine life at Rio Tinto
Kennecott, US beyond 2019
$0.7bn
Funding for the continuation of open pit mining via the push back of the south
wall has been approved and will largely consist of simple mine stripping
activities.
Diamonds – development of A21 pipe at the Diavik
Diamond Mine in Canada (RT share 60%). Rio
Tinto’s share of capex is $210m.
$0.35bn
Approved in November 2014, the development of the A21 pipe is expected to
ensure the continuation of existing production levels. First carats are planned
for mid-2018.
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Ongoing major capital projects
All numbers on 100% basis (US$)
Approved
capital cost
Status
Aluminium – investment in the Amrun bauxite mine
on the Cape York Peninsula in north Queensland
with a planned output of 22.8 million tonnes a year
$1.9bn
Approved in December 2015, output includes an expected 10 million tonne
increase in annual exports with production commencing in the first half of
2019.
Aluminium – Investment in the Compagnie des
Bauxites de Guinée (CBG) bauxite mine to expand
from 14.5 to 18.5 million tonnes a year. Rio Tinto’s
share of capex is $0.3bn.
$0.7bn
Approved in 2016. Financing completed in November 2016. First incremental
shipment expected in June 2018.
Copper – development of the Oyu Tolgoi
underground mine in Mongolia, where average
copper grades of 1.66% are more than three times
higher than the open pit.
$5.3bn
Approved in May 2016, first production from the underground is expected in
2020. Contractor mobilisation commenced in the third quarter of 2016. Work
on the underground mine development, accommodation camp, conveyor to
surface decline, sinking of shaft #2 and shaft #5 and critical facilities are
continuing to progress. The focus is on completing the underground crusher
and de-watering system to enable increased lateral development rates.
Iron ore - Development of the Silvergrass iron ore
mine in the Pilbara, to maintain the Pilbara blend.
$0.3bn
The $338m approval in August 2016 expected to add 10 million tonnes of
annual capacity with commissioning anticipated for the second half of 2017.
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Geographical analysis of Rio Tinto shareholders
At 6 January 2017
0.3%
16.4%
UK
Europe
37.5%
North America
14.3%
Asia
Australia
Rest of World
23.9%
7.7%
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Rio Tinto Executive Committee
CEO
JS Jacques
CFO
Chris Lynch
Aluminium
(Montreal)
Copper
& Diamonds
(London)
Energy
& Minerals
(London)
Iron Ore
(Perth)
Growth
& Innovation
(Brisbane)
Health,
Safety &
Environment
(Perth)
Corporate
Relations
(London)
Human
Resources
(London)
Legal &
Regulatory
Affairs
(London)
Alfredo
Barrios
Arnaud
Soirat
Bold
Baatar
Chris
Salisbury
Steve
McIntosh
Joanne
Farrell
Simone
Niven
Vera
Kirikova
Philip
Richards
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Rio Tinto Board – diverse, operational experience
Role
Name
Sector experience
Chairman
Jan du Plessis
Finance – former chairman of BAT plc.
Executive Director
J-S Jacques
CEO since July 2016, appointed CEO Copper & Coal in February 2015 and CEO
Copper in January 2013. Joined Rio Tinto in 2011 as president International Operations
in the Copper group. Prior to joining Rio Tinto, J-S worked for more than 15 years across
Europe, Southeast Asia, India and the United States in a wide range of operational and
functional positions in the aluminium, bauxite and steel industries, including group
strategy director for Tata Steel Group from 2007 to 2011.
Executive Director
Chris Lynch
CFO since April 2013 (non-executive director Sep 2011-Mar 2013), CEO of Transurban
Group 2008-2012, former CFO of BHP Billiton and formerly group president Carbon
Steel Materials. Prior to this he spent 20 years with Alcoa Inc.
Non-executive Directors
Robert Brown
Aerospace – Chairman of AMIA Inc. Due to step down from the Board at the Rio Tinto
Limited AGM on 4 May 2017.
Megan Clark
Metals & mining, science, research & technology - chief executive of Australia’s national
research agency. Chairman of the Sustainability committee.
David Constable
Construction and Engineering – predominantly with Fluor Corporation. Former chief
executive officer of Sasol, He is also a non-executive director of Anadarko Petroleum
Corporation and ABB Ltd. Joined Board on 10 February 2017.
Ann Godbehere
Finance – former CFO of Swiss Re. Chairman of the Audit committee.
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Rio Tinto Board – diverse, operational experience
Role
Name
Sector experience
Non-executive Directors
Simon Henry
Oil and Gas – chief financial officer and board member of Royal Dutch Shell since 2009.
He will leave Shell in June 2017, and is also a non-executive director of Lloyds Banking
Group. Will join the Board with effect from 1 July 2017.
Sam Laidlaw
Energy industry background, former CEO of Centrica plc. Non-executive director of
HSBC Holdings plc and chairman of Neptune Oil & Gas. Joined Board on 10 February
2017.
Anne Lauvergeon
Energy / Government – former CEO of AREVA Group. Adviser on international economic
affairs at the French Presidency and as deputy chief of staff. Due to step down from the
Board at the Rio Tinto Limited AGM on 4 May 2017.
Michael L’Estrange
International relations – former Secretary to Australian Cabinet and former Secretary of
the Department of Foreign Affairs and Trade.
Paul Tellier
Aluminium / Government – former non-executive director of Alcan, former CEO of
Bombardier and Cabinet Secretary to Government of Canada.
Simon Thompson
Mining – former executive director at Anglo American and investment banking with NM
Rothschild and SG Warburg.
John Varley
Finance – former CEO of Barclays. Chairman of the Remuneration Committee. Current
non-executive directorships at AstraZeneca plc and BlackRock Inc. He remains a senior
advisor to Barclays.
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