Rio Tinto Chartbook · March 2019 1 Cautionary statements 2 Mineral resources, reserves and...
Transcript of Rio Tinto Chartbook · March 2019 1 Cautionary statements 2 Mineral resources, reserves and...
ChartbookMarch 2019
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: +61 (0) 436 637 571 [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]
March 2019
1 Cautionary statements 2 Mineral resources, reserves and
production targets 3 Overview 4 Focus on people and sustainability5 Rio Tinto – a world leader in
mining 6 Where we operate 7 More than 85% of assets in OECD8 Strength in diversity 9 Strategy will deliver value through
the cycle 10 Disciplined capital allocation 11 2018 highlights 12 A strong 2018
Delivering $13.5 billion of cash returns
13 Increased portfolio value and performance
14 Consistent, disciplined capital allocation Investment and shareholder returns delivered from operating cash flow
15 Commodity specific price drivers in 2018
16 Strong and consistent EBITDA 17 Productivity accelerating in 2019 18 Our strong balance sheet gives us
resilience and flexibility 19 Disciplined ramp-up of
investments 20 Superior cash returns declared of
$13.5 billion in 2018 21 Investing through the cycle 22 Tailings storage facilities 23 Three levels of assurance for
managing tailings and water storage
24 Strong base for future growth and profitability
25 2019 production guidance 26 Other guidance 27 Net earnings reconciliation 28 Market outlook 29 2019 outlook 30 China supply-side reform and
tightening environmental policy have driven structural change
31 China’s supply-side reform and environmental policies have created a more efficient industry…
32 … causing a structural shift towards productivity
33 China’s supply-side reforms are here to stay and will continue to be driven by tightening environmental policy
34 Impact of China policy changes on aluminium capacity
35 Strong global aluminium demand with Chinese production at a turning point
36 Increasing production in bauxite and alumina
37 Rio Tinto well placed to benefit from copper’s attractive long-term fundamentals
38 Iron Ore 39 Iron ore
Continued delivery from a world-class asset
40 Iron ore Maintaining our competitive advantage
41 Iron ore Lower prices partly offset by higher volumes
42 Our value over volume strategy maximises free cash flow
43 World-class assets, fully integrated and agile network
44 Highly valued product suite, sustained by significant resources
45 Best in class quality delivered through system blending
46 Pilbara blend is the world’s most recognised brand of iron ore
47 Yandicoogina, Robe Valley products are placed with customers who value them most
48 Multiple low-cost, value-accretive capital options
49 Productivity options to continue to deliver cash benefits
50 Priority remains to optimise infrastructure capacity and build flexibility
51 Further opportunity exists to optimise mines
52 Optimising rail capacity and improving flexibility
53 AutoHaul® completed in 2018 54 Aluminium 55 Aluminium
stable operations squeezed by raw material costs
56 Aluminium
March 2019
higher prices and volumes & mix partly offset by raw material cost headwinds
57 Strategy for outperformance through the cycle
58 We will maintain our low-cost position
59 Unrivalled assets in the Saguenay, Quebec
60 Productivity options to continue to deliver cash benefits
61 Bauxite : asset performance drives productivity
62 Smelters creeping at 1% per annum, double industry average
63 Enhancing margins through VAP 64 Amrun ramping up in 2019 65 Section 232 impact 66 Relevance of Alunorte
curtailment, Rusal sanctions and alumina legacy contracts
67 Modelling Aluminium EBITDA 68 Modelling Aluminium costs 69 Copper & Diamonds 70 Copper & Diamonds – strong
operational performance 71 Copper & Diamonds – strong
operational performance 72 Sector-leading attributes 73 Strategy to deliver further value 74 Productivity options to continue to
deliver cash benefits 75 Kennecott – a stronger contributor
to cash 76 Oyu Tolgoi – the leading Tier 1
copper project 77 Non-managed interest in
Escondida 78 Future optionality for the Copper
business 79 Delivering medium-term growth
and progressing long-term options80 Developing our people and our
partnerships 81 Energy & Minerals 82 Energy & Minerals* a challenging
year 83 Energy & Minerals
Higher prices offset by coal disposal and one-off disruptions
84 Maximising value from the Energy and Minerals portfolio
85 A lean, scalable operating model running cash-focused businesses
86 Borates
87 Iron Ore Company of Canada 88 Iron & Titanium 89 Maximising ore value through
product portfolio 90 Growth & Innovation 91 Growth & Innovation enabling
value generation across asset lifecycle
92 Our focus builds on leadership in data, technology and automation
93 Driving Rio Tinto mine to market productivity
94 Delivering $1.5bn additional free cash flow each year from 2021
95 Number of discoveries by quality 96 Discovery of copper-gold
mineralisation in Western Australia
97 Extensive and successful exploration programme
98 Corporate Information 99 Dividend policy and capital
commitment 100 Credit rating* 101 Near-term maturities further
reduced in 2018 102 Modelling EBITDA 103 Accounting treatment of principal
operations 104 Accounting treatment of principal
operations 105 Principal corporate activity 2010 -
2012 106 Principal corporate activity 2013
to 2017 107 Principal corporate activity 2018
to 2019 108 Ongoing major capital projects 109 Ongoing major capital projects 110 Geographical analysis of Rio
Tinto shareholders 111 Rio Tinto Executive Committee 112 Rio Tinto board – diverse,
operational experience 113 Rio Tinto board – diverse,
operational experience
©2019, Rio Tinto, All Rights Reserved1
Cautionary statementsThis 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.
©2019, Rio Tinto, All Rights Reserved2
Mineral resources, reserves and production targetsMineral Resources and Ore Reserves
The Mineral Resource estimate for Resolution which appears on slide 78 was reported in Rio Tinto’s 2018 Annual Report released to the market on 27 February 2019. This resource estimate is reported on a 100% basis. The Competent Person responsible for that previous reporting was C Hehnke (AusIMM).
The Reserve grade for Oyu Tolgoi Underground – Hugo Dummett North and Hugo Dummett North Extension, which appears on slide 76 was reported in the 2018 Rio Tinto Annual Report on 27 February 2019. The Competent Person responsible for that previous reporting was J Dudley (AusIMM).
The Mineral Resource and Ore Reserve estimates which appear on slide 44 are reported on a 100% basis. Mineral Resources are reported as additional to Ore Reserves. These Mineral Resource and Ore Reserve estimates, together with the ownership percentages for each joint venture were set out in the Mineral Resource and Ore Reserve statements in the 2013 to 2018 Rio Tinto annual reports to shareholders released to the market on 14 March 2014, 6 March 2015, 3 March 2016, 2 March 2017, 2 March 2018, and 27 February 2019 respectively. The Competent Persons responsible for reporting of those Mineral Resources and Ore Reserves were B Sommerville (Resources 2013-2018), P Savory (Resources 2013-2018) and A Bertram (2017-2018), L Fouche (Reserves 2013-2014), A Do (Reserves 2015), C Tabb (Reserve 2013 - 2017) and R Verma (Reserves 2017-2018)
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 2018 Annual Report. All material assumptions on which the estimates in the 2018 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.
Overview
©2019, Rio Tinto, All Rights Reserved4
Focus on people and sustainability
0.97
0.820.69 0.67 0.67 0.65
0.59
0.44 0.44 0.42 0.44
2.78
1.56
1.171.24
1.010.90 0.90 0.94
0.850.79
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
All
inju
ry f
requ
ency
rat
e pe
r 20
0,00
0 ho
urs
Rio Tinto AIFR
ICMM (23 companies) AIFR
Health and Safety
3 fatalities in 2018; 2 workplace related, 1 security incident
CRM* a strong focus with 1.4 million verifications in 2018
White Ribbon accreditation in Australia
Environment
Successful divestment of Grasberg and sale of coal
First TCFD* report released – includes 2ºC scenario analysis
GHG* emissions intensity reduced by 2.5% YoY, and 29% below 2008 baseline
* Critical Risk Management, Taskforce on Climate Related Financial Disclosures, Green House Gas
Safety Performance
©2019, Rio Tinto, All Rights Reserved5
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 and Chile
• Diverse diamonds business• Maximises our technical underground mining
expertise
Energy & Minerals Iron Ore
• 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
©2019, Rio Tinto, All Rights Reserved6
Where we operate
Europe
SouthAmerica
Australasia
Africa
Asia
NorthAmerica
AluminiumCopper & DiamondsEnergy & MineralsIron Ore
KeyMines and mining projects
Smelters, refineries, power facilities and processing plants remote from mine
©2019, Rio Tinto, All Rights Reserved7
More than 85% of non-current assets in OECD
US 8%
Australia/NZ 50%
Canada23%
Mongolia
2%
Other
AfricaSouthAmerica
2018 non current assets (other than excluded items* and non controlling interest) by region
2018 total assets = $56 billion
* Non current assets excluded from the analysis were: Deferred tax assets, Other financial assets (including loans to equity accounted units), Quasi equity loans to equity accounted units, tax recoverable and trade and other receivables.
6% 5%
6%
©2019, Rio Tinto, All Rights Reserved8
Strength in diversity
45%
10%
11%
19%
10%
5%
Japan
China
Other Asia
North America
Revenue – by destination
Percentage
Iron ore 49%
Copper & Gold 8%
Aluminium 30%
Coal 2%
Diamonds 2%
Revenue – by commodity
Percentage
Consolidated sales revenue in 2018 was US$40.5 billion
©2019, Rio Tinto, All Rights Reserved9
Strategy will deliver value through the cycle
Disciplined capital allocation
World-class assetsPortfolio
Operating and Commercial excellence Performance
CapabilitiesPeople & Partners
Balance sheet strength Superior shareholder returns Compelling growth
Superior cash generation
©2019, Rio Tinto, All Rights Reserved10
Disciplined capital allocation
Essential sustaining capex1
Ordinary dividends2
Iterative cycle of3
Further cash returns to
shareholders
Compelling growth
Debtmanagement
2018 highlights
A strong 2018
12 ©2019, Rio Tinto, All Rights Reserved
Balancesheet
Valuecreation
$11.8bnOperating cash flows
$8.6bnDisposal proceeds***
– Divested coking coal, Grasberg and Dunkerque
$0.3bnNet cash at Dec-2018
– Adjusted net debt of $8.0 billion**
– No bond maturities until 2020
Financialperformance
$18.1bnEBITDA* on margin of 42%
* Underlying EBITDA | ** Adjusted net debt of $8.0 billion includes return of Grasberg/Dunkerque proceeds, previously announced buy-backs, Australian tax lag, and leasing accounting standard change | *** Pre-tax proceeds
**** Return on Capital Employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets before net debt)
$13.5bnTotal shareholder cash returns
19%Return on capital employed****
$2.9bnDevelopment capital investment
Approval of Koodaideri and Robe River replacement iron ore mines
Delivering $13.5 billion of cash returns
©2019, Rio Tinto, All Rights Reserved13
Increased portfolio value and performance
Completed ~$12bn disposals since 2015
Grasberg
Kitimat wharf & land
Qld coking coal
Aluminium Dunkerque
Coal & Allied
Other
And strengthened the portfolio:
Increase in CuEq CAGR of 1.4%*– Driven by a 3.4% increase in CuEq CAGR
across our remaining portfolio
Increased ROCE by 10pp from 2015-2018
Reduced net debt by $14 billion since Dec-2015
* 2015 – 2018
$5bn Buy-backs
from disposals
©2019, Rio Tinto, All Rights Reserved14
Consistent, disciplined capital allocationInvestment and shareholder returns delivered from operating cash flow
$7bnGrowth capex
$12bnDividends paid
$3bnBuy-backs
$6bnSustainingcapex
$46bn(2016-18)
$14bnReduction in net debt
$12bn Cash fromdisposals
$34bnCash flow from operations
$46bn(2016-18)
* Comprises $4 billion of special dividends and $1.7 billion of on-market Plc buy-backs by 28 February 2020.Numbers have been rounded to the nearest $bn
$3bn2018 final dividend to be paid in Apr-19
$6bn*2019 special dividend and buy-backs
+
+
©2019, Rio Tinto, All Rights Reserved15
Commodity specific price drivers in 2018
Aluminium (+7%)
Copper (+6%)
Iron Ore (-4%)
Jan 18 Mar 18 May 18 Jul 18 Sep 18 Nov 18
Jan 18 Mar 18 May 18 Jul 18 Sep 18 Nov 18
Jan 18 Mar 18 May 18 Jul 18 Sep 18 Nov 18
2,700
1,700
340
240
80
50
Iron ore
Solid growth in global steel production, including Chinese crude steel production of ~930Mt
China’s structural policy-driven demand for higher grade products
Disrupted seaborne supply (~40Mt)
Aluminium
Robust global demand growth of ~4%
Volatility in supply surrounding potential Rusal sanctions
Trade tariffs and uncertainty
Copper
Macro headwinds affected demand in H2
Limited supply disruption of ~3%
2018 avg*: $61.2/t vs $64.1/t in 2017
2018 avg**: $2,110/t vs $1,969/t in 2017
2018 avg: 297c/lb vs 281c/lb in 2017
* Dry metric tonne, FOB basis | ** Average LME price
©2019, Rio Tinto, All Rights Reserved16
Strong and consistent EBITDA
* Other cash costs include movements in Central costs and Exploration & Evaluation costs. All variances exclude coal
Underlying EBITDA $ billion
17.4 17.2 17.2
0.20.3 0.9
(0.4)(0.3)
(0.4)(0.3)
(0.2)
1.20.9
2017underlyingEBITDA
Price Exchangerates
Energy CPI Flexed 2017 underlying
EBITDA
Volumes &mix
Rawmaterial costheadwinds
Other cashcosts*
One-offsand other
2018underlyingEBITDA
18.118.6
Coal EBITDA
EBITDA excl. Coal
©2019, Rio Tinto, All Rights Reserved17
Productivity accelerating in 2019
Post-tax mine-to-market (M2M) productivity programme$ billion (free cash flow)
2018 M2M additional free cash flow fully offset by raw material cost headwinds, primarily related to Aluminium
2018 invested in capabilities and technology for future productivity
2018 run rate of $0.4 billion with additional $0.6 billion M2M free cash flow expected in 2019
Maintain M2M free cash flow target of $1.5 billion run-rate from 20210.4 0.4
1.0
0.3 0.3
0.6
2017 run rate 2018 additional 2018 costheadwinds
2018 run rate 2019 additional* 2019 target runrate
* Based on consensus prices and exchange rates
9.6
3.8
2016 2017 2018 2018 adjusted
7.0*
8.0
IFRS 16
9.6
(0.3)
©2019, Rio Tinto, All Rights Reserved18
Our strong balance sheet gives us resilience and flexibility
* Adjusted Dec-2017 net debt of $7 billion included announced buy-backs relating to the Coal & Allied proceeds and the Australian tax lag** Numbers are rounded to the closest $0.1bn | *** As at February-2019 | **** Gearing ratio = net debt / (net debt + equity)
Net cash of $0.3 billion
Committed cash outflows for 2019 will result in adjusted net debt of $8.0 billion**:
– $4.0 billion return of Grasberg and Dunkerque proceeds via special dividend
– $1.7 billion in buy-backs previously announced in 2018
– $0.4 billion for lag in Australian tax payments
– $0.9 billion coal disposal tax payment
– New leasing accounting standard to come into effect from January 2019, increases net debt by $1.2 billion (non-cash)
Net debt$ billion
Adjusted net debt / EBITDA 0.7x 0.4x (0.0x) 0.4x
Gearing ratio**** 17% 12% (1%) 14%
Credit ratingS&P A- A- A A
Moody’s Baa1 A3 A2*** A2***
19
Disciplined ramp-up of investments
Capital expenditure profile$ billion
3.0
4.5
5.4
~6.0
~6.5 ~6.5
2016A 2017A 2018A 2019F 2020F 2021F
Sustaining Pilbara replacement Other replacement Development
Maintained sustaining capital guidance of $2.0 to $2.5 billion per year, including:– Iron Ore sustaining capex of
~$1 billion per year
Pilbara replacement capital includes Koodaideri and Robe River mine developments from 2019
All capital decisions go through rigorous evaluation and challenge
Development capital delivers 2% CAGR (2019 – 2023)
©2019, Rio Tinto, All Rights Reserved
Depreciation
©2019, Rio Tinto, All Rights Reserved20
Superior cash returns declared of $13.5 billion in 2018
6.3
13.5
2.2
1.0
3.1
2.1
1.1
4.0
2018 interim dividend On-market plc SBB byFeb-2019
2018 final dividend Total returns fromOperations
Off-market Ltd SBB On-market Plc SBB 2019 special dividend Total returns declared
Grasberg and Dunkerque proceeds
Coking coal
2018 cash returns declared to shareholders$ billion
Note: Franking credit balance at Dec-2018 was $4.7 billion | Numbers have been rounded to the nearest $0.1bn
©2019, Rio Tinto, All Rights Reserved21
Investing through the cycle2% CAGR** from an extensive pipeline of growth options
Arvida, AP60
Kennecott: SPB Slice 2*Selective U/G Project*
Western Range, WTS 2*
Zulti South*
Resolution
Koodaideri Stage 2
Jadar
6 Brownfield exploration programmes
Pilbara Iron Ore
Oyu Tolgoi Copper
Cape York Bauxite
Bingham Canyon Copper
Other minerals
OT Underground
Koodaideri*
Mesas B, C, H, West AngelasC&D*
Kennecott SouthwallPushback*
Pre-Feasibility& Feasibility
World Class Resource Base andEstablished Exploration Programme
Execution
* Denotes mainly replacement tonnes | ** CuEq CAGR from 2019 – 2023
Copper
Diamonds
Iron Ore
Bauxite
Other
$231mspent on
explorationin 2018
64 Greenfield exploration programmes
Pilbara Iron Ore
Copper (inc. Winu)
Diamonds
Bauxite
Other minerals
©2019, Rio Tinto, All Rights Reserved
Tailings storage facilities
22
With active or inactive tailings storage facilities, including 3 non-managed operational sites and 4 legacy sites
100facilities
Active or inactive, with an additional 36 facilities closed or under rehabilitation
32operations
Upstream Centreline Other*Downstream
14facilities
24facilities
41facilities
21facilities
10 active
4 inactive
3 closed
16 active
8 inactive
5 closed
36 active
5 inactive
11 closed
19 active
2 inactive
17 closed
www.riotinto.com/tailings
Construction type:
*Other includes Single embankment, No embankment – excavated storage facility, No embankment – dry stack, Lake discharge.Active includes tailings storage facilities under construction.
Rio Tinto Kennecott, Utah, US
Hope Downs 4, Pilbara, Western Australia
Boron, California, US
Three levels of assurance for managing tailings and water storage
23
Audit
Surface Mining Centre of Excellence
Technical risk reviews
Site processes
Effective design, inspection and monitoring
Group Standard and Procedure (D5 – Tailings & Water Storage)
rdlevel3
ndlevel2
stlevel1
Group review
Assurance to the Rio Tinto Standard
Business conformance audits and HSEC reviews
Review by subject matter experts external to the asset
Operations management
Effective facility design (Engineer of Record / Design Engineer)
Comprehensive operational controls
Independent external review undertaken at least every two years
Audit of control effectiveness
Group Internal Audit working with external auditors
Assures systems for risk management, internal control and governance are effective
©2019, Rio Tinto, All Rights Reserved
©2019, Rio Tinto, All Rights Reserved
World-class portfolio
19% ROCEThrough a simplified portfolio of long life, low cost assets
Attractive growth opportunities
2% CuEqAnnual growth rate to2023 from broad pipelineof growth opportunities
Consistent financial discipline
$29bn*Returned to shareholders in 3 years, cash generative assets and strong balance sheet
21st century mining company
ZeroCoal or oil productionplus a leading position in technology and automation
Operatingefficiency
$1.5bnFree cash flow per year from 2021 delivered through our productivity programme
Strong base for future growth and profitability
24 * Including 2016-2018 cash returns, 2018 final dividend, 2019 buy-backs and special dividend
Safety is our priority #1
©2019, Rio Tinto, All Rights Reserved25
2019 production guidance
- Iron Ore: Pilbara shipments guidance between 338-350Mt (100% basis)
- Aluminium: 56-59Mt bauxite, 8.1-8.4Mt alumina, 3.2-3.4Mt aluminium
- Copper & Diamonds: 550-600kt mined copper, 220-250kt refined copper, 15-17Mcts diamonds
- Energy & Minerals: 11.3-12.3Mt iron ore pellets and concentrate, 1.2-1.4Mt TiO2 slag, 0.5Mt boric acid equivalent
©2019, Rio Tinto, All Rights Reserved26
Other guidance
- Mine-to-market productivity programme to deliver an additional free cash flow run-rate of $1.5 billion from 2021, as originally anticipated. In 2019 we expect the run-rate to be around $1.0 billion.
- Capital expenditure to stay at around $6.0 billion in 2019 and around $6.5 billion in 2020. In 2021, we expect to invest $6.5 billion in our business. Each year includes approximately $2-2.5 billion of sustaining capex.
- Effective tax rate on underlying earnings of approximately 30% in 2019.
- Pilbara unit cash costs of $13-14 per wet metric tonne (excluding freight) in 2019.
- C1 unit costs at Rio Tinto Kennecott, Oyu Tolgoi and Escondida to average 110-120 US cents per pound in 2019.
Net earnings reconciliation
27 ©2019, Rio Tinto, All Rights Reserved
($bn) Reported Underlying Exclusions
EBITDA 23.3 18.1 5.1*
Depreciation & Amortisation (4.6) (4.6) 0.0
Impairment charges (0.1) 0.0 (0.1)
Finance items (0.1) (0.7) 0.6
Tax (4.5) (3.7) (0.8)
Non-controlling interests (0.3) (0.3) (0.0)
Net Earnings 13.6 8.8 4.8
Exclusions from underlying EBITDA:
– gains on disposal of businesses and land (Kitimat), and gain on formation of Elysis JV
– gains on embedded commodity derivatives
– offset by increases to closure provisions at Argyle and ERA
Impairment charges relate mainly to ISAL and excluded from underlying earnings
Finance items are reported net of exchange gains on net debt and intragroup which are excluded from underlying earnings. Underlying finance costs are lower than 2017 on lower net debt
Tax rate on underlying earnings of 29%. The tax rate on net earnings is 23% due to non-taxable gains on disposal
Tax rate 23% 29%
ROCE 30% 19%
* Numbers have been rounded to the nearest $0.1bn
Market outlook
©2019, Rio Tinto, All Rights Reserved29
2019 outlook
Global economic growth– Momentum slowing
– Volatility and risk of trade war is ongoing
China’s GDP growth – Decelerating as expected
– Introducing stimulus measures to encourage infrastructure investment and support the private sector
Global trade
Global GDP
China tipped to continue stimulus as growth slows
China’s new trade offer is better than a tariff war
US-China trade war: who has the upper hand?
White House: Trump weighing possibilities on China Trade Deadline
As the clock ticks, there's a path to a 'win-win' outcome in US - China trade talks
Source: Rio Tinto, Oxford Economics
‐2%
0%
2%
4%
6%
8%
Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18 Jan‐19 Jul‐19 Jan‐20 Jul‐20 Jan‐21 Jul‐21
USA
Japan
Eurozone
World
China
‐2%
0%
2%
4%
6%
8%
10%
12%
Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18
Global trade (3mma y/y growth)
Exportvolumes
Containertraffic
©2019, Rio Tinto, All Rights Reserved30
China supply-side reform and tightening environmental policy have driven structural change
Supply side reform
Policies focused on restoring profitability and reducing debt
Unprecedented steel and aluminium capacity reductions
Limiting future capacity growth
Environmental policies
Environmental protection marked as a top three domestic
policy priority
Additional ultra-low emissions standards to apply to industry by
2025
Driving structural change
Improved productivity and profitability of Chinese steel
industry
Strong demand for high quality, driving structural iron ore
premiums
Improved fundamentals for global aluminium industry
©2019, Rio Tinto, All Rights Reserved31
China’s supply-side reform and environmental policies have created a more efficient industry…
1,270
1,010 980
65
55
140
30
800850900950
1,0001,0501,1001,1501,2001,2501,300
2015capacity
2016reductions
2017reductions
IF capacity 2017capacity
2018reductions
2018capacity
Steel mill rationalisation programme has removed significant capacity...
...driving record steel mill utilisation rates...
Source: China Metallurgical Industry Planning and Research Institute (MPI), OECD, WSA, Rio Tinto, Mysteel, CISA, China National Bureau of Statistics
...and higher steel prices
…while steel production has remained robust...
Mill
ion
tonn
es p
er d
ay
Ste
el C
apac
ity m
illio
n to
nnes
$ pe
r to
nne
50%
55%
60%
65%
70%
75%
80%
85%
0
200
400
600
800
1,000
1,200
1,400
2015 2016 2017 2018
Ste
el C
apac
ity m
illio
n to
nnes
Capacity U
tilisation %
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2015 2016 2017 2018
CISA member mill daily crude steel output
200
300
400
500
600
700
800
Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Hot rolled coil Rebar
©2019, Rio Tinto, All Rights Reserved32
...causing a structural shift towards productivity
Improvement in Chinese steel industry profitability... ... and the focus on productivity caused structural widening in iron ore premiums
Platts 62% Metal Bulletin 58%
Mill
mar
gin
$ pe
r to
nne
% relativity to 62% index
-50
0
50
100
150
200
250
300
2015 2016 2017 2018 201950%
60%
70%
80%
90%
100%
Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 18 Jan 19
©2019, Rio Tinto, All Rights Reserved33
China’s supply-side reforms are here to stay and will continue to be driven by tightening environmental policy
Provincial BF capacity > 30Mt
Share of small BF capacity (<1200M3) >50%
15Mt < Provincial BF capacity < 30Mt
Provincial BF capacity < 15Mt
Southern and Coastal regions destination for replacement steel capacity – well located for seaborne iron ore …
Environmentally sensitive areas (ESA), where steel capacity required to decline
Capacity new and replacement area
Source: China Metallurgical Industry Planning and Research Institute (MPI), Rio Tinto
50%
28%
11%
21%
35%
44%
16%18%
22%
13% 19% 23%
400-1200m3
1200-2000m3
2020E2017
>3000m3
2025E
2000-3000m3
... and replacement capacity will be larger and cleaner blast furnaces
BF
siz
e di
strib
utio
n
©2019, Rio Tinto, All Rights Reserved34
Impact of China policy changes on aluminium capacity
3.8 Mtpa of illegal capacity removed in 2017 and 2018
‒ ~9% of total Chinese aluminium capacity
‒ Potential for some restarts
0.8 Mtpa of capacity cuts from environmental winter policy in 2017 and 2018 and 0.5 Mtpa in 2018 and 2019
ROW smelters expected to ramp up activities and restart idled capacity as a result of the two policies
‒ Rio Tinto well placed with low carbon brownfield expansion potential
Shandong
Inner Mongolia
Xinjiang
Supply-side reform aluminium capacity cuts by province
2.5 Mtpa
0.8 Mtpa
0.4 Mtpa
Others
0.1 Mtpa
Source: Baiinfo, Aladdiny, Rio Tinto Market Analysis
©2019, Rio Tinto, All Rights Reserved35
Strong global aluminium demand with Chinese production at a turning point
0
2
4
6
8
10
12
14
16
18
0
10
20
30
40
50
60
70
80
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Ex-China production China production Stocks (right axis)
Primary aluminium production and stocks
Weeks of consumption
Million tonnes
Source: Rio Tinto, CRU Group
Aluminium demand growth ~3-4% p.a. next 5 years
Strict enforcement of Chinese capacity control and winter cut regulations in smelting and alumina:
‒ Illegal capacity cuts: aluminium ~3.8Mt, bauxite ~10Mt
‒ Winter cuts capacity: aluminium ~0.5Mt, alumina ~4.4Mt in 2018 and 2019
China expected to be broadly balanced in aluminium in medium to long-term
Seaborne bauxite demand driven mainly by China import requirements:
‒ Aluminium/alumina demand
‒ Domestic bauxite quality deteriorating
©2019, Rio Tinto, All Rights Reserved36
Increasing production in bauxite and alumina
Bauxite production Million tonnes
Bauxite: Maximising value from existing operations
‒ Production track record: Weipa 5% p.a. / Gove 11% p.a .
‒ Optimising grade allocation to maximise customer ViU
Alumina: maximising use of installed capacity
‒ Production track record: ~3% p.a. since 2012
‒ E.g. : 5% yield increase at Yarwun driven by low-capital intensity process improvements
39.442.5 41.9 43.7
47.750.8
201620132012 20182014 20172015
50.4+5%
0
5
10
15
20
25
30
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Base Supply Primary Demand
©2019, Rio Tinto, All Rights Reserved37
Rio Tinto well placed to benefit from copper’s attractive long-term fundamentals
Copper supply/demand (million tonnes)
Deficits expected in 2019 and 2020 as annual copper mine supply growth over this period is less than half the volume of the previous four years
Rio Tinto copper growth to be delivered into a supply deficient market
Further demand growth expected in China and other emerging markets
Consumer goods and new uses to provide upside
– electric vehicles
– renewable energy
Source: Wood Mackenzie Long Term Q4 2018 and Short Term Outlook February 2019.
DeficitSurplus
Iron Ore
39
Iron Orecontinued delivery from a world-class asset
Operating metrics2018 2017
comparison2019
guidance
Average realised price* $62.8 / t - 3%
Shipments (100% basis) 338mt + 2% 338-350Mt
Operating cost / t** $13.3 / t - 0% $13-14 / t
Financial metrics ($bn)
Revenue 18.5 + 1%
EBITDA 11.3 - 2%
Margin (FOB) 68% + 0pp
Operating cash flow 8.3 - 2%
Sustaining capex 0.9 + 67% ~1.0
Replacement and growth capex 0.4 - 43%
ROCE 42% + 1pp
* Dry metric tonne, FOB basis | ** Unit costs are based on operating costs included in EBITDA and exclude royalties (state and third party), sustaining capital, tax and interest ©2019, Rio Tinto, All Rights Reserved
Shipments increased 2%
Maintained EBITDA margin
Strong demand for our 62% Pilbara Blend product
Full deployment of AutoHaulTM
in December 2018
Koodaideri Phase 1 approved for $2.6 billion
Iron Ore
40 ©2019, Rio Tinto, All Rights Reserved
2018 cash unit cost of $13.3/t ($0.1/t lower than 2017)
Focus on maintaining strong EBITDA margins (68% in 2018, in line with 2017)
Productivity initiatives and weakening Australian dollar in 2018 offset:
– Steeper hauls
– Higher diesel, labour and maintenance costs
Average realised FOB price of $57.8 per wet metric tonne ($62.8 per dry metric tonne)
2019 guidance for shipments from the Pilbara remains unchanged at 338-350Mt, subject to market conditions and any weather constraints
Pilbara cash unit cost $ per tonne
20.4
18.7
16.2
13.8 14.313.1
13.813.0 13.4 13.2
H12014
H22014
H12015
H22015
H12016
H22016
H12017
H22017
H12018
H22018
maintaining our competitive advantage
Iron Ore
41 ©2019, Rio Tinto, All Rights Reserved
11,520
11,008 11,325
142 321 27
(479) (105) (70)(31)
8,000
10,000
12,000
2017 underlyingEBITDA
Price Exchange rates Energy Inflation Flexed2017 underlying
EBITDA
Volumes Cash costreductions
Other 2018 underlyingEBITDA
– Our Pilbara mines produced 338 million tonnes in 2018 (282 million tonnes as Rio Tinto’s share) – 2% higher than 2017. This increase came from expanded mines and minimal weather interruptions compared to 2017
– Pilbara FOB EBITDA margins of 68% achieved in 2018 (68% in 2017)
– Pilbara cash unit costs were $13.3 per tonne in 2018, compared to $13.4 per tonne in 2017
– Pilbara iron ore revenues includes $1.7 billion of freight in 2018 compared to $1.5 billion in 2017
– Approximately 68% of sales in 2018 were priced with reference to the current month average, 17% with reference to the prior quarter’s average index lagged by one month, 5% with reference to the current quarter average and 10% were sold on the spot market
– Approximately 32% of our sales were made on an FOB basis with the remainder sold including freight
Underlying EBITDA 2017 vs 2018$ million
lower prices partly offset by higher volumes
©2019, Rio Tinto, All Rights Reserved42
Our value over volume strategy maximises free cash flow
Unit cost
Productivity
Innovation and Technology
Sustaining
Replacement
Growth
Maximises free cash flow through the cycle
Value over Volume Strategy Foundations
Exclusive fully integrated system
Highly valued product suite and significant resources
Quality people and partners driving innovation
Capex
Price impact of incremental tonnes
Protecting quality
Delivering right tonnes to customers
who value them
Revenue
Operating cost
©2019, Rio Tinto, All Rights Reserved43
World-class assets, fully integrated and agile network
16 Mines
1,700 Rail (km)
4 Port terminals
4 Power stations
>370 Haul trucks
95 Autonomous haul trucks
55 Production drills
11 Autonomous drills
>200 Locomotives
> 100 Global customers
Point SamsonWickham
Roebourne
Tom Price
Paraburdoo
Newman
Karratha
Dampier
MESA A
MESA J
CAPE LAMBERT A & B
WEST ANGELAS
YANDICOOGINA
MARANDOOWESTERN TURNER SYNCLINE
TOM PRICE
BROCKMAN 4
BROCKMAN 2
NAMMULDI
SILVERGRASS
EAST INTERCOURSE ISLAND
PARKER POINT
CHANNAR
PARABURDOO
EASTERN RANGE
HOPE DOWNS 1
HOPE DOWNS 4
KOODAIDERI
CHANNAR MINING JV (60%)
BAO-HI RANGES JV (54%)
ROBE RIVER MINING JV (53%)
HOPE DOWNS JV (50%)
HAMERSLEY IRON (100%)
UNDEVELOPED PROJECT (100%)
Pannawonica
0
50
100
150
200
250
300
350
400
0
5,000
10,000
15,000
20,000
25,000
2013 2014 2015 2016 2017 2018
Mill
ion
tonn
es (
dry)
Measured Indicated Inferred Proved Probable
©2019, Rio Tinto, All Rights Reserved44
Highly valued product suite, sustained by significant resources
Large mineral resources support system optionality
Ore reserves maintained in line with depletion
Maintaining evaluation drilling and resource development programmes
Pilbara resources, reserves1 and production
1 Refer to the statements supporting these resource and reserve estimates set out on Slide 2
Million tonnes (w
et)
Mineral resources (LHS) Ore Reserves (LHS), Production (RHS)
©2019, Rio Tinto, All Rights Reserved45
Best in class quality delivered through system blending
West Angelas
Hope Downs 1
Nammuldi
Marandoo
Brockman 4
Mt Tom Price
Paraburdoo
Hope Downs 4
Brockman 2
Yandicoogina
Mesa J
Mesa AFuture system capacity
Products
HIY
PBL
PBF
PBL
PBF
PBL
PBF
Pisolite Marra Mamba Brockman
Port Terminals
Parker Point
EII
CapeLambert
B
RVL
RVF
HIY
CapeLambert
ASilvergrass
Alumina
PhosphorusSilica
Fe
©2019, Rio Tinto, All Rights Reserved46
Pilbara Blend is the world’s most recognised brand of iron ore
We remove variability for our customers through our blending process
Ship Mine/Rail
Alumina
PhosphorusSilica
Fe
Pilbara Blend Fines is main reference product for the 62% indices
70%77%
81%
2015 2016 2017
Pilbara Blend Fines
Pricing
Reference product for the 62% indices
Most traded physical iron ore product
Strengths
Valued for its liquidity, reliability
Market position
Base load sinter blend in China
Pricing
Aligned to 62% fines index plus lump premium
Strengths
Avoids the costs of sintering which will increase with emissions legislation
Market position
Most widely available lump product
In demand across most markets and emerging South East Asia
Pilbara Blend Lump
Product quality variance from mean
Source: Rio Tinto, Platts
Sha
re o
f PB
F v
olum
e in
rep
orte
d 62
% F
e tr
ansa
ctio
ns
©2019, Rio Tinto, All Rights Reserved47
Yandicoogina, Robe Valley products are placed with customers who value them most
2%
Contract
Other markets
Japan
China Spot
Long Term Contracts
Total tonnes of Yandicoogina Fines, Robe Valley Fines and Robe Valley lump
Yandicoogina FinesPricing
Priced very closelyto the 62% index
Strengths
58% Fe but calcines to high Fe Sinter
Low in phosphorusand alumina
Market position
Base load in blendsin East Asia and Southern China
Pricing
Priced against 62% index based on negotiated relativities
Strengths
Coarse sizing aids sinter granulationLow phosphorus
Market position
Coastal China mills and producers of niche steel in North China
Suitable for steel mills whose basic oxygen furnace (BOF) is the bottleneck
Robe Valley FinesPricing
Priced against 62% index based on negotiated relativities
Strengths
Low phosphorus
Market position
Producers of niche steel in Japan and Coastal China
Suitable for steel mills whose BOF is the bottleneck
Robe Valley Lump
Market
Source: Rio Tinto
20%
98%41%
2%
39%
©2019, Rio Tinto, All Rights Reserved48
Multiple low-cost, value-accretive capital options
Koodaideri
-30
-
30
60
90
120
2017
Approved replacement
Bubble size indicates capacity
Sustaining capex of ~$1 billion per year for the next three years
Pilbara replacement mines capital includes West Angelas, Robe Valley and Koodaideri development from 2019
Koodaideri underpins Pilbara Blend, low cost operations and capacity optionality
Post-Koodaideri replacement options are expected to be lower capital intensity and will leverage off existing infrastructure
Unapproved replacement
Pilbara development options$ per tonne installed capital intensity
©2019, Rio Tinto, All Rights Reserved49
Productivity options to continue to deliver cash benefits
Best PracticePartnering
with SuppliersData & Technology Automation
Yard improvements and scheduling
Dumping improvements
Track maintenance
Consist reliability
Asset health monitoring Ore sensitive dumper settings
Debottlenecking opportunities
Effective equipment utilisation and maintenance
optimisation
Mine planning optimisation
Autonomous trucks (including retro-fit)
Autonomous drills
AutoHaul®
Roll by rail detection
Operations Centre optimisation
Payload optimisation
Explosives charging improvements
Track maintenance strategy
Next generation train control
Brake car elimination
Inter-machine control loops
Productivity monitoring apps
Automated inspections
Iron Ore to deliver
additional free cash flow of
~$0.5 billion per year from 2021
©2019, Rio Tinto, All Rights Reserved50
Priority remains to optimise infrastructure capacity and build flexibility
Future system capacityCurrent system capacity
Mt/a
Mt/aMt/a
~360*
~330-340
~360
Building rail capacity to provide dynamic flexibility
Mine capacity of ~360Mtpa, with Silvergrass fully ramped up and productivity gains
2019 shipments guidance is 338 – 350Mt
Note (*) once Silvergrass fully ramped up
Rail and mine capacity expected to match nameplate port capacity by the end of 2019
Market driven to meet customer demand
Optimise and test port capacity
©2019, Rio Tinto, All Rights Reserved51
Further opportunity exists to optimise mines
Mines Train Load Out
Mine & Haul Process Stockpile & Load out
Plant
Asset Productivity(Effective utilisation, rates, yield)
Technology and automation(Process control loops)
Asset Reliability(Scheduled loss, unscheduled loss)
Equipment Reliability(Mean time between failure, availability)
Tonnes per car(Dynamic tuning for mass and volume)
Train load time(Reclaimer efficiency, stockpile management,
control system improvements)
Equipment Productivity(Effective utilisation, payload, truck speed)
Technology and automation(AHS, ADS, MAS)
Technology and automation(Automated train loading, expert control systems)
©2019, Rio Tinto, All Rights Reserved52
Optimising rail capacity and improving flexibility
Mainline Yard and Port (Dumper)Train Load Out
Stockpile & Load out
Ore car-dumping
Mainline network operating strategy (Network operation, common tactics,
reduced delays and stoppages)
Reduced dump cycle times (Control system machine learning and
analytics, interface management)
Yard operations (Optimised scheduling, mobility solution,
RFID for rolling stock management)
Train maintenance (Automated condition monitoring, further
automation in workshops)
Rail track maintenance (Optimum speed, productivity and reliability)
Autohaul®(Optimised speed, advanced signalling, reducing
variability)
Tonnes per car(Dynamic tuning for mass and volume)
Train load time(Reclaimer efficiency, stockpile management,
control system improvements)
Technology and automation(Automated train loading, expert control systems)
Rail
©2019, Rio Tinto, All Rights Reserved53
AutoHaul® completed in 2018
>3millionkilometrescompleted in autonomous mode since deployment
~6%Speed improvementin autonomous mode
World’s first fully-autonomous, heavy-haul rail network completed and deployed in December 2018
Regulator approval received in May 2018
Full implementation of autonomous programme in December 2018
Aluminium
55
Aluminiumstable operations squeezed by raw material costs
Operating metrics2018 2017
comparison2019
guidance
Average aluminium price* $2,470 / t + 11%
Average alumina price*** $474 / t + 34%
Production – bauxite 50.4mt - 1% 56-59Mt
Production – alumina 8.0Mt - 2% 8.1-8.4Mt
Production – aluminium 3.5Mt - 3% 3.2-3.4Mt
Canadian smelters –hot metal cash costs*****
$1,533 / t + 15% Refer to p41 of results presentation
Financial metrics ($bn)
Revenue 12.2 + 11%
EBITDA 3.1 - 10%
Margin (integrated operations) 32% - 3pp
Operating cash flow 2.3 - 12%
Sustaining capex 0.8 + 33%
Replacement and growth capex 0.9 + 32%
ROCE 8% - 2pp
©2019, Rio Tinto, All Rights Reserved
1% primary metal productivity creep****
Raw material and energy inflation impacted EBITDA by $0.5 billion
Volatility in markets from tariffs and sanctions: – increase in mid-west premium
effectively offset tariff increase– Alumina market upside capped
by legacy contracts - $0.5 billion
Amrun completed ahead of schedule and below budget
Completed disposals:– Dunkerque Aluminium divestment
completed for $0.4 billion, net of completion adjustments
– Surplus land at Kitimat for $0.6 billion * Realised price, including VAP and mid-west premium | ** Realised price, dry metric tonne, FOB basis
*** Platts Alumina PAX FOB Australia | **** Excluding Becancour and Dunkerque smelters***** Operating costs defined as hot metal cash costs for the Canadian smelters (alumina at market price)
Aluminium
56 ©2019, Rio Tinto, All Rights Reserved
– Aluminium underlying EBITDA of $3.1 billion declined by 10% compared with 2017. Stronger prices in H1 2018 were more than outweighed by the impact of legacy alumina sales contracts, raw material cost inflation and lower aluminium volumes
– The average realised price per tonne averaged $2,470 in 2018 (2017: $2,231)
– The 2018 cash LME aluminium price averaged $2,110 per tonne, an increase of 7% on 2017
– The mid-West premium rose 111% to $419/tonne (2017: $199/tonne), driven by the 10% US tariff implemented on 1 June which is included in our operating costs
– VAP represented 57% of the primary metal we sold (2017: 57%) and generated attractive product premiums averaging $224/tonne of VAP sold (2017: $221/tonne)
– EBITDA margins were 32% in 2018, compared to 35% in 2017
– Bauxite revenues includes $371 million of freight in 2018 ($266 million in 2017)
– In 2018, we sold the Dunkerque aluminium smelter in France to Liberty House for $0.4 billion, net of completion adjustments, and a wharf and land in Kitimat, British Columbia to LNG Canada for $0.6 billion
higher prices and volumes offset by raw material cost headwinds
Underlying EBITDA 2017 vs 2018$ million
3,423 3,616
3,095 283
136 185
(132) (94)(491)
(215)
0
1,000
2,000
3,000
4,000
2017 underlyingEBITDA
Price Exchange rates Energy Inflation Flexed2017 underlying
EBITDA
Volumes& Mix
Cash costreductions
Other 2018 underlyingEBITDA
©2019, Rio Tinto, All Rights Reserved57
Strategy for outperformance through the cycle
Bauxite Aluminium
Competitive advantage Industry-leading bauxite positionSize, quality, proximity to markets
Low first quartile costLow-carbon, low-cost power
Strategic focus Market-paced growth Strong cash flow generation
Key enablers
Competitive alumina supply to our smelters
Commercial excellence from mine to market
Strategic goal Leading performance through the cycle
©2019, Rio Tinto, All Rights Reserved58
We will maintain our low-cost position
Raw materials & energy lifting weighted average production costs by 12% in real terms vs. 2013
Costs pressures expected to ease in 2019
Rio Tinto well placed
‒ Balanced alumina
‒ Self-generated hydro power
‒ 90% own anode production
‒ 55% own calcination capacity for Canadian assets
‒ Advantaged bauxite position: proximity to China, supply reliability, high alumina, expandable resource
Source: CRU and internal analysis. Aluminium costs include hot metal and cold metal costs net of market and product premiums. Commodity price increases calculated between 1 January 2017 and December 2018
2017 2018
Commodity Index (base 2016 Jan)
Aluminium LME +31%
CPC (US Gulf) +76%
Caustic (NE Asia) +44%
CTP (N. America) +94%
Aluminium cost curve (2019 $/t)
1,000
2,000
3,000
0% 25% 50% 75% 100%
2013 2018 Rio Tinto weighted-average
201650
100
150
200
250
300
05/01/2016 04/01/2017 04/01/2018
©2019, Rio Tinto, All Rights Reserved59
Unrivalled assets in the Saguenay, Quebec
* Capacity per pages 286 and 287 of 2018 Annual Report
©2019, Rio Tinto, All Rights Reserved60
Productivity options to continue to deliver cash benefits
Best PracticePartnering
with SuppliersData & Technology Automation
Aluminium to deliver additional free cash flow of ~$0.5 billion per year from 2021
Automated anode change
Autonomous metal / anode transport
Bauxite
Alumina
Aluminium
Creep
Casthouse utilisation
Fixed cost compression Advanced process control
Sweetening
Bauxite mix optimisation
Fixed cost compression
Creep & asset utilisation Energy optimisation
Flocculation & additives technology
Predictive analytics & optimisation in real time
Advanced process control
Creep Rail debottlenecking & payload optimisation
Bauxite integrated operations centre
Equipment utilisation
Mine planning optimisation Shipping optimisation
Predictive analytics & optimisation in real-time
Bauxite grade optimisation
Aluminium Operations Centre - predictive analytics & optimisation in real-time
©2019, Rio Tinto, All Rights Reserved61
Bauxite: asset performance drives productivity
Gove
Weipa
Debottlenecking the value chain through data analytics (constraint identification / elimination)
‒ Processing system rates increases for minimal capital expenditure at Gove and Weipa
‒ Increased HME productivity with increases in fleet payload and utilisation
Mine to Market optimisation across the value chain: volume and product quality
‒ Integrated Operations Centre allowing real time decision making on ore grade, shipping
Performance improvements: 2018 YTD vs 2016
+7% +8%
+43%+23%
Plant rateHaul truck utilization
©2019, Rio Tinto, All Rights Reserved62
Smelters creeping at 1% per annum, double industry average
Long history of cutting-edge smelter productivity
‒ Industry-leading technology, expertise and innovation
‒ Creep innovation the engine of technology productivity
Low capital intensity, high-return investments
‒ Productivity growth on installed asset base
Canadian Brownfield growth options
‒ Alma, AP60… value over volume
Amperage creeping history
20182008
+12%
Alma
20182008
+11%
20182008
+11%
Grande Baie Laterriere
FFF
©2019, Rio Tinto, All Rights Reserved63
Enhancing margins through VAP
Value added product (VAP) enhances margins
‒ VAP 51% of portfolio, targeting >63%
‒ Additional revenue $223 per tonne
‒ VAP margin over remelt improvement of $0.4bn by 2022
Further scope to grow margins through commercial excellence
‒ Customer partnerships: North American automotive light-weighting
‒ Market differentiation
‒ RenewAlTM low CO2 aluminium
‒ Proximity and reliability
‒ Technology and product development
Rio Tinto VAP product mix1
Slab37%
Billet27%
Foundry22%
High Purity7%
Rod & Other7%
201 265 186 191
334
Slab Billet Foundry High Purity Rod & Others
Rio Tinto VAP product premiums$ per tonne
©2019, Rio Tinto, All Rights Reserved64
Amrun ramping up in 2019
Tier 1 investment with low market risks
• 23 Mt total capacity: replaces East Weipa (13 Mt), captures China market growth (10 Mt)
• First quartile cost curve position, low technical risks
First shipment in Q4 2018 with full ramp-up in 2019
Range of expansion options that can be developed in line with market demand
©2019, Rio Tinto, All Rights Reserved65
Section 232 impact
0.7
2.3
0.8
0.7
1.1
2017
5.6
Other imports
Middle East
US production
Canada
Russia
US total primary metal consumption (Mt)
Tariff providing some support to restarts: 0.6 Mt of capacity restarts announced1
• Of which ~0.5 Mt restarted or in progress• Additional 0.26 Mt idle, could potentially restart2
• New capacity unlikely
US primary metal demand expected to grow by 0.3 Mtpa from 2017 to 2020
Metal being priced from Canada at Midwest Premium duty-paid, which reflects 10% tariff3 from 1 June 2018
1. Hawesville (+150kt), New Madrid (190kt), Warrick (270kt)2. Mount Holly (+120kt), Wenatchee (140kt)3. Segmented financial results: Primary Metal revenue will reflect higher realised price incorporating higher LME, higher mid-west premium and increased VAP
premium, with EBITDA reflecting operating costs that include an additional cost from the 10% tariff on sales to the US from 1 June 2018.
©2019, Rio Tinto, All Rights Reserved66
Relevance of Alunorte curtailment, Rusal sanctions and alumina legacy contracts
Total 2017 Alumina market 133 Mt, of which 60 Mt outside China
• China: net importer 2.9Mt in 2017, net exporter estimate 0.2Mt in 2018
Alunorte: 2017 production: 6.38 Mt (~11% of ex-China volumes)
- ~60% used for Hydro’s own needs (Norway, Albras, Qatalum, Alouette, etc.)
- 50% curtailed March 1, 2018 (RT covered with volume from Pacific)
Rusal:
• Aluminium: supplies 15% of world’s demand ex-China
- 2017: supplied 0. 7 Mt to US (13% of demand), 1.6 Mt to Europe ex-Russia (19% of demand)
• Alumina: accounts for 6.7 Mtpa, i.e. 13% of ex-China market
- 3.4 Mtpa outside Russia: Aughinish (1.9 Mtpa), Ewarton (0.65 Mtpa), QAL (0.8 Mtpa1)
Legacy alumina contracts
• Supply of ~2.2Mtpa, LME-linked, with bulk of volume with ending dates between 2023 and 2030 (~30% rolled off post-2023).
• $460m negative impact in 2018, based on average prices of $2,110/t for LME and $474/t for Alumina over the year.
• ~$100m negative EBITDA impact for every 10% increase in Alumina index price, ~$60M negative impact for 10% decrease in Aluminium LMEindex. The opposite impact applies if index pricing moves in the other direction.
1. 20% ownership
©2019, Rio Tinto, All Rights Reserved67
Modelling Aluminium EBITDA
H1 raw material prices are purchase prices. Due to contractual and inventory time lags, a change in the value of a raw material index will not lead to an EBITDA impact before 3 to 6 months, depending on the raw material and on the specific contractual arrangements.
Note: The sensitivities give the estimated effect on underlying EBITDA 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.
EBITDA sensitivityH1 2018
average price/rate
Impact on FY 2018 underlying EBITDA of 10% price/rate change
$m
Estimated impact forfull year 2018 vs 2017
$m
Aluminium $2,209/t 887
Caustic soda (FOB) $587/t 31
Petroleum coke (FOB) $440/t 32 ~$400m ($229m at H1 18)
Green coke (FOB) $152/t 15
Pitch (FOB) $801/t 16
Coal $104/t 19 ~$100m ($50m at H1 18)
A$ 77USc 236
C$ 78USc 119
Modelling aluminium costs
68 ©2019, Rio Tinto, All Rights Reserved
($/t) Impact a $100/t change in each of the input costs below will
have on our 2018 Canadian smelting unit cash cost of $1,533/t
Alumina (FOB) 191
Green petroleum coke (FOB) 34
Calcined petroleum coke (FOB) 30
Coal tar pitch (FOB) 7
Canadian* smelting unit cash** cost sensitivity
* Canadian smelters include all fully-owned smelters in Canada (Alma, AP60, Arvida, Grande-Baie, Kitimat, and Laterrière), as well as Rio Tinto’s share of the Becancour and Alouettesmelters | ** The smelting unit cash costs refer to all costs which have been incurred before casting, excluding depreciation but including corporate allocations and with alumina at market price, to produce one metric tonne of primary aluminium.
Copper & Diamonds
70
Copper & Diamonds strong operational performance
Operating metrics2018 2017
comparison2019
guidance
Copper price 297 c/lb + 6%
Production – mined copper 634kt + 33% 550-600kt
Production – refined copper 275kt + 39% 220-250kt
Production – diamonds 18.4Mct - 15% 15-17Mct
Unit cost* 109 c/lb - 21% 110-120 c/lb
Financial metrics ($bn)
Revenue 6.5 + 34%
EBITDA 2.8 + 46%
Margin 43% + 4pp
Operating cash flow 2.1 + 25%
Sustaining capex 0.3 + 32%
Replacement and growth capex 1.6 + 35%
ROCE 9% + 7pp
©2019, Rio Tinto, All Rights Reserved
Improved performance at Escondida– Resulting in $786 million
of dividends received
Significant productivity improvements delivered at Kennecott
OT underground project – Progressed well in 2018
– Signed the Power Agreement with the Government of Mongolia
– Reviewing the existing schedule
Successful divestment of Grasberg for $3.5 billion
Completion of the A21 pipe at Diavik
* Unit costs for Kennecott, OT and Escondida utilises the C1 unit cost calculation where Rio Tinto has chosen Adjusted Operating Costs as the appropriate cost definition. C1 costs are direct costs incurred in mining and processing, plus site G&A, freight and realisation and selling costs. Any by-product revenue is credited against costs at this stage
Copper & Diamonds
71 ©2019, Rio Tinto, All Rights Reserved
1,904 1,780
2,776
1 356
26 316
260 65
(25) (52) (48)(27)
0
1,000
2,000
3,000
2017underlyingEBITDA
Price Exchangerates
Energy Inflation Flexed2017
underlyingEBITDA
Volumes Cash costreductions
Exploration &evaluation
Escondidastrike
Grasbergproduction
Other 2018underlyingEBITDA
– Underlying EBITDA of $2.8 billion was 46% higher than 2017. Our strong performance was primarily driven by increased volumes of copper and gold, lower costs linked to productivity improvements at our managed operations, and Escondida running at full capacity after the 2017 strike
– Copper & Diamonds generated $2.1 billion in cash from operating activities, a 25% increase on 2017. This included $786 million of dividends from Escondida. Working capital, productivity and cost management initiatives also contributed to favourable cash flows
– Average copper prices increased 6% to 297 US cents per pound, and the average gold price rose 1% to $1,269 per ounce compared with 2017. Price changes, including the effects of provisional pricing movements, resulted in a $25 million decrease in underlying EBITDA compared with 2017
– At 31 December 2018, the Group had an estimated 240 million pounds of copper sales that were provisionally priced at 277 cents per pound. The final price of these sales will be determined during the first half of 2019. This compares with 250 million pounds of open shipments at 31 December 2017, provisionally priced at 304 cents per pound
strong operational performance
Underlying EBITDA 2017 vs 2018$ million
©2019, Rio Tinto, All Rights Reserved72
Sector-leading attributes
Robust long-term demand
Constrained supply
Deficit expected towards end of decade
Long-life, low-cost, expandable assets
Interests in Tier 1 copper mines
Productivity & processing optimisation at Kennecott
OT process control innovations and blasting optimisation
Broad customer base for underground volumes at Oyu Tolgoi
Medium-term growth potential from Oyu Tolgoi
Longer-dated optionality at Resolution
Exploration pipeline, including Winu
Attractive industry fundamentals
Multiple, stronggrowth options
Leading mine to market productivity
Large, high-qualityresources
©2019, Rio Tinto, All Rights Reserved73
Strategy to deliver further value
Develop our people & partnerships
Deliver medium-term growth and progress long-term options
Maximise value from existing operations
Unlock additional value through productivity initiatives
©2019, Rio Tinto, All Rights Reserved74
Productivity options to continue to deliver cash benefits
Best PracticePartnering
with SuppliersData & Technology Automation
Effective equipment utilisation and maintenance optimisation
(MTBF)
Ore grade distribution
Payload optimisation
Mining
Resources
Copper & Diamonds to deliver additional free cash flow of ~$0.15 billion per year from 2021
Increase concentrator throughput
Improved feed characterisation
Mine planning optimisation
Light- weighting of truck beds
Planning and schedule
Shorter haul times
Integrated operations
Tolling of concentrate for value
Maintenance tactics and centralisation of maintenance
Increase mining rates in South wall pushback
Increase metal recovery from East Wall
Processing
©2019, Rio Tinto, All Rights Reserved75
Kennecott – a stronger contributor to cash
Asset optimisation
– Maximise smelter and refinery productivity by blending third-party concentrate
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
©2019, Rio Tinto, All Rights Reserved76
Oyu Tolgoi - the leading Tier 1 copper project
Highest quality, major copper development globally
Average underground copper grade of 1.66% Cu and 0.35g/t Au1
> 20% IRR
$5.3 billion approved capex, first quartile opex
Productivity improvement in both project development & operations
1 Refer to the statements supporting these reserve grades and production targets set out on slide 2 of this presentation
©2019, Rio Tinto, All Rights Reserved77
Non-managed interest in Escondida
Escondida
Strong cash flows underpin dividends of $786 million in 2018
No additional significant capex required for near future
Los Colorados extension delivers incremental mill capacity of 100ktpd1
Desalination plant fully commissioned and operating well
1 Per BHP 2017 Annual Report | 2 Metal strip may be adjusted for various events over time
©2019, Rio Tinto, All Rights Reserved78
Future optionality for the Copper business
ExplorationResolution
Continued focus on copper exploration, primarily the Americas
~60% Rio Tinto exploration spend is focused on copper
16 copper exploration projects ongoing
La Granja regional exploration
Indicated and inferred mineral resource of 1,787Mt @ 1.53% Cu1
Continuing to advance permitting process. Predictable timetable and pathway for positive Record of Decision
Strengthening our licence to operate
Complete permitting by 2020, pre-feasibility study by 2021
1 Refer to the statements supporting these resource grades set out on slide 2 of this presentation
©2019, Rio Tinto, All Rights Reserved79
Delivering medium-term growth and progressing long-term options
Supply surplus Supply deficit
2017 2030
Kennecott South push back underpins margin & volume increase
Oyu Tolgoi HNL1 development to first production Ramp-up copper production
Escondida LCE & EWS1 ~1.2 Mtpa average production capacity2
Resolution Project permitting & continued studiesPotential project execution
Exploration Sustained & committed programme with an emphasis on Australia and the Americas
2018
1 Los Colorados Concentrator Extension and Escondida Water Supply. 2 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.
©2019, Rio Tinto, All Rights Reserved80
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
– 94% local employment
– Best in class for water efficiency – 86% of water recycled
– 69% of total procurement spend is national suppliers and 75% of total spend is in-country
Energy & Minerals
82
Energy & Minerals*a challenging year
Operating metrics2018 2017
comparison2019
guidance
IOC pellets $114 / t + 5%
TiO2** $647 / t + 18%
Production – IOC 9.0mt - 20% 11.3-12.3Mt
Production – TiO2 1.1Mt - 15% 1.2-1.4Mt
Production – Borates 0.5Mt - 1% 0.5Mt
Financial metrics ($bn)
Revenue 4.7 - 5%
EBITDA 1.3 - 18%
Margin 28% - 4pp
Operating cash flow 0.9 - 19%
Sustaining capex 0.3 - 6%
Replacement and growth capex 0.1 + 142%
ROCE 8% -2pp
* All numbers exclude coal operations which were disposed | ** Excluding Upgraded Slag (UGS)
Production instability at RTIT an opportunity to improve in 2019
– 2 furnaces currently being rebuilt at Rio Tinto Fer et Titane
Portfolio simplification through divestments of coking coal and Rössing Uranium
Full recovery from strike at IOC
©2019, Rio Tinto, All Rights Reserved
Energy & Minerals
83 ©2019, Rio Tinto, All Rights Reserved
2,803 3,062
2,193
384 445
(2)(31) (92) (5)
(201)(718)
(339) (51)
0
1,000
2,000
3,000
4,000
2017underlyingEBITDA
Price Exchangerates
Energy Inflation Flexed2017
underlyingEBITDA
Volumes Cash costreductions
Coal gains ondisposal and
royalty
Coal disposal One-offs Other 2018underlyingEBITDA
higher prices offset by coal disposal and one-off disruptions
– Underlying EBITDA of $2.2 billion was 22% lower than 2017. Excluding the entire contribution from coal in both years, 2018 EBITDA of $1.3 billion was 18% lower than the 2017 comparative of $1.6 billion
– Coal EBITDA included a $278 million gain from the sales of the Winchester South and Valeria coal development projects and a $167 million pre-tax gain from the revaluation of a royalty receivable arising from the disposal of the Mount Pleasant coal project in 2016
– Net operating cash flows of $1.3 billion were 35% lower than 2017
– We completed the sale of the Kestrel and Hail Creek coking coal mines and the Valeria coal and Winchester South development projects by 1 August 2018 for headline proceeds of $4.15 billion, and expect to pay ~$0.9 billion in tax on these disposals to the Australian Taxation Office in H1 2019
– Excluding the entire contribution from coal in both years, 2018 net operating cash flows of $0.9 billion was 19% lower than the 2017 comparative of $1.1 billion.
Underlying EBITDA 2017 vs 2018$ million
©2019, Rio Tinto, All Rights Reserved84
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
©2019, Rio Tinto, All Rights Reserved85
A lean, scalable operating model running cash-focused businesses
Borates
Commercial excellence driven by market insight
Creating new demand through technical
expertise
Competitiveadvantages
Integrated mine-to-market business model
Strategicfocus
32%
EBITDA
margin
2018margins
IOC
Large ore reserve
Installed capital base
Premium quality pellets
Cost and productivity improvements
37%
EBITDA
margin
TiO2
Wide range of TiO2
feedstock options
Significant co-product contributions
Value over volume operating philosophy
29%
EBITDA
margin
The Energy & Minerals Product Group also includes Dampier Salt Limited and Rio Tinto Uranium.
Multiple end products including construction, agriculture & consumer
products
Key customer segmentsPremium quality pellets and
concentrates to steel producers
Pigment producers, ceramics and titanium
industry
©2019, Rio Tinto, All Rights Reserved86
Borates
Market estimates for borates
Global borates production
'000 tonnes B2O3
0
500
1000
1500
2000
2500
2012 2013 2014 2015 2016 2017 2018F
~4% CAGR
32%
38%
Speciality chemical business with a Tier 1 orebody (Boron) and refining facilities in the US and Europe.
Global marketer with integrated mine-to-market capabilities and a broad suite of refined borate products aligned with addressing customer needs under three commercial pillars:
• Agriculture and the use of refined boron as an essential micronutrient;
• Energy efficiency;
• Urbanisation
Regional and end-use segmentation and contracting positions support commercial performance and production decisions
On-going cost and productivity improvements:• Increasing processing plant productivity,
• Improving supply chain efficiency,
• Ensuring mining pit shell & sequence optimised
RTB’s share of sales in 5-mol
RTB’s share of sales in boric acid
3% Anticipated annual demand growth over the next five years, led by insulation manufacturing and agricultural, biocidal, fire retardancy and glass applications
2.09 Million tonnes B2O3 of borates sold in 2018
©2019, Rio Tinto, All Rights Reserved87
Iron Ore Company of CanadaIron ore pellets/ concentrate productionMillion tonnes, Rio Tinto share
0
2
4
6
8
10
12
2011 2012 2013 2014 2015 2016 2017 2018*
* Full year guidance (9.0 to 10.1mt)
Operations Centre Pilot
Cost and productivity improvements facilitating business transformation:
• Increasing haul truck utilisation by improving shift changes;
• Increasing average payload for haul trucks.
Integrated Operations Centre successfully piloted during 2016.
Full mining and processing operations oversight now in place:
• 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
©2019, Rio Tinto, All Rights Reserved88
Iron & Titanium
TiO2 production1
Million tonnes, Rio Tinto share
TiO2 feedstock demand and supply‘000 TiO2 units
34%
RT share of 2018 sales
40%
High-grade chloride
High-grade sulphate
~3% CAGR~3% CAGR
Source: TZMI
0.00
0.50
1.00
1.50
2.00
2011 2012 2013 2014 2015 2016 2017 2018 2019*
* 2019 guidance 1.2 to 1.4mt1 Excluding rutile and external ilmenite sales
~3% CAGR
Strong market fundamentals in TiO2 remain with positive sentiment in the pigment market and limited signs of inventory build up throughout the supply chain.
Early signs of chloride growth in China remain positive with new chloride pigment plants under construction.
Re-start of latent capacity will be considered as demand grows - value over volume central to RTIT’s strategy.
Continuing to progress the Zulti South feasibility study.
Demand CAGR 2.3%
*
©2019, Rio Tinto, All Rights Reserved89
Maximising ore value through product portfolio
Iron & Titanium revenue breakdown2018, percentage of revenue
Iron & Titanium production breakdown2018, percentage of product tonnes
Data presented on 100% ownership basis, FOB
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
TiO2 feedstocks Metallics Zircon Other
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
TiO2 feedstocks Metallics Zircon Other
Multiple co-product streams deliver maximum value from ore-bodies.
Wide range of TiO2 feedstock options for:
• Multiple chloride and sulphate slags;
• Upgraded slag (UGS);
• Rutile;
• Chloride ilmenite.
Zircon and metallics make significant contributions, as well as leading positions in:
• High purity ductile iron;
• Iron and steel powders;
• Specialist steel billets.
We are well-placed to supply demand growth.
Growth & Innovation
©2019, Rio Tinto, All Rights Reserved91
Growth & Innovation enabling value generation across asset lifecycle
Technical Excellence geosciences, mining, processing, infrastructure, asset management, integrated operations
Information Systems & Technologyenterprise services, platforms, digital workplace
Find Study Develop Optimise Close
©2019, Rio Tinto, All Rights Reserved92
Our focus builds on leadership in data, technology & automation
AutoHaulTMIn-field Mine Information
Predictive Insights
Autonomous Haulage System
Deployment
Perth Operating Centre Opens
Predictive Asset Health tool
Data Science Unit Established
Primary SulfideCopper Heap
Leaching
Autonomous Drill Piloted
2015 20162014 2017 2017+2008 2009 2010
First Autonomous Haul Truck Loaded
MAS* / RTVisTM
Fusion Modelling and Deployment
* Mine Automation System
©2019, Rio Tinto, All Rights Reserved93
Driving Rio Tinto mine to market productivity
Performance culture
Operating assets &projects
Customers
Additional $5bnmine to market in 5 years
Deliveroperations of the future
Technical excellenceCommercial excellence
Data & technology
Automation
Partnering with our suppliers
Best practice
Redesign our future
Leverage workforce capability
Refocus on the basics
©2019, Rio Tinto, All Rights Reserved94
Delivering $1.5bn additional free cash flow each year from 2021
* includes step up in Pilbara rail throughput
Iron OreAluminiumEnergy & MineralsCopper & Diamonds
Partnering with our suppliers
Best practice
Automation
Data & technology
Our focus across the value chain
$1.5bn productivity opportunity in 2021 ($5bn cumulative, 2017-2021)Productivity levers
Optimised mine
planning and scheduling
Processing recovery
Speed*
Payload*
Hours operating *
Optimised capacity
Optimised infrastructure
Mining efficiency
Commercial excellence and customer focus
©2019, Rio Tinto, All Rights Reserved95
Number of discoveries by qualityMineral discoveries in the world: all commodities 1975-2016
$0
$5
$10
$15
$20
$25
$30
0
50
100
150
200
1975 1980 1985 1990 1995 2000 2005 2010 2015
Tier 3
Tier 2
Tier 1
Expenditure (2016 US$ b)
Nu
mb
er o
f D
isco
veri
es
Note: Tier 1 deposits are “Company making" mines. They are large, long life and low cost. ie >20 Years ,>200 ktpa Cu or >250koz pa Au, and Bottom Quartile costs. Have an NPV of >$1000m, and Expected Value of ~$2000m in 2013 $Tier 2 deposits are “Significant” deposits - but are not quite as large or long life or as profitable as Tier 1 deposits. They have an NPV of $200-1000m and EV of ~$500m in 2013 $Tier 3 deposits are small / marginal deposits While they can be profitable they often only get developed at the top of the business cycle. At best they don’t meet more than one of the Tier 1 or 2 criteria. NPV of $0 to $200m, EV of ~$100m in 2013 $Unclassified deposits are small deposits that are less than “Major “in size and/or of minimal value. EV of (say) ~$10m
Caution: Incomplete data in recent years
Source: MinEx Consulting © March 2017
Exp
lora
tio
n (
BU
$)
Significant* mineral discoveries (excluding bulk commodities)Western World: 1975 - 2015 (excluding FSU + Eastern Europe + China 1995 - 2015)
©2019, Rio Tinto, All Rights Reserved96
Discovery of copper-gold mineralisation in Western Australia
Early success in copper at Winu*:
– Copper-gold mineralisation intersected
– Mineralisation close to surface 50-100m
– 1.4 km of strike length open to North, South and East
– Located in Western Australia and 100% owned
– Extensive drilling to continue in 2019
– High quality exploration targets emerging
*For full details, see the Notice to ASX dated 27 February 2019 (“Rio Tinto Exploration Update – copper-gold mineralisation discovered in the Paterson Province in the far east Pilbara region of Western Australia”) and accompanying information provided in accordance with the Table 1 checklist in The Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition). These materials are also available on riotinto.com.
©2019, Rio Tinto, All Rights Reserved97
Extensive and successful exploration programme
38%
60%68%
78% 78% 74%
62%
40%32%
22% 22% 26%
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017 2018
OECD+Peru Non-OECD
Exploring across 16 different countriesExpenditure by region, 2013 to 2018
$231 million spent on exploration in 2018Expenditure by commodity
Copper
Diamonds
Iron Ore
Bauxite
Other
Corporate Information
©2019, Rio Tinto, All Rights Reserved99
Dividend policy and capital commitment
Balanced capital allocation
Maintain an appropriate balance between:
– Investment in compelling growth projects with IRR >15%; and
– Total shareholder cash returns of 40-60% of underlying earnings through the cycle
Supplement ordinary dividends with additional returns in periods of strong earnings and cash generation
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
– Outlook for our major commodities
– View on the long-term growth prospects
– Objective of maintaining a strong balance sheet
©2019, Rio Tinto, All Rights Reserved100
Credit rating*
Standard & Poor’s Moody’s
Long-term A A2
Short-term A-1 P-1
Outlook Stable Stable
* 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
©2019, Rio Tinto, All Rights Reserved101
Near-term maturities further reduced in 2018
*Numbers based on year-end accounting value The debt maturity profile does not show the result of capitalised operating leases that was adopted by the group effective 1 January 2019
Gross debt reduced by $2.3 billion in 2018 to ~$13 billion
$1.9 billion nominal value of bonds purchased in 2018
Average outstanding debt maturity of corporate bonds at ~13 years (~ 11 years for all Group debt)
No bond maturities until 2020
0
500
1,000
1,500
2,000
2,500
3,000
3,500
201
9
202
0
202
1
202
2
202
3
202
4
202
5
202
6
202
7
202
8
202
9
203
0
203
1
203
2
203
3
203
4-20
39
204
0
204
2+Gross Debt 2018 debt reductions
31 December 2018 debt maturity profile* $ million
©2019, Rio Tinto, All Rights Reserved102
Modelling EBITDA
Note: The sensitivities give the estimated effect on underlying EBITDA 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.
2018average price/ rate
($m) impact on FY 2018 underlying EBITDA of 10% price/rate change
Copper 297c/lb 388
Aluminium $2,110/t 612
Gold $1,269/oz 46
Iron ore (62% Fe FOB) $61.2/dmt 1,566
A$ 75USc 721
C$ 77USc 354
Oil $71/bbl 78
Underlying EBITDA sensitivity
©2019, Rio Tinto, All Rights Reserved103
Accounting treatment of principal operationsAlumina % Location Accounting treatment Aluminium (cont’d)
Jonquiere 100.0 Canada Full consolidationTiwai Point (NZAS) 79.4 New Zealand Proportional consol
Queensland Alumina 80.0 Australia Proportional consol
Sao Luis (Alumar) 10.0 Brazil Proportional consol Tomago 51.6 Australia Proportional consol
Yarwun 100.0 Australia Full consolidation Bauxite % Location Accounting treatment
Aluminium Gove 100.0 Australia Full consolidation
Alma 100.0 Canada Full consolidation Porto Trombetas (MRN) 12.0 Brazil Equity accounted unit
Alouette JV 40.0 Canada Proportional consol Sangaredi (note 1) 23.0 Guinea Equity accounted unit
Arvida 100.0 Canada Full consolidation Weipa 100.0 Australia Full consolidation
Arvida AP60 100.0 Canada Full consolidation Borates
Bécancour 25.1 Canada Proportional consol Boron 100.0 US Full consolidation
Bell Bay 100.0 Australia Full consolidation Copper
Boyne 59.4 Australia Equity accounted unit Escondida 30.0 Chile Equity accounted unit
Grande Baie 100.0 Canada Full consolidation Kennecott 100.0 US Full consolidation
ISAL 100.0 IcelandFull consolidation – asset
held for saleOyu Tolgoi 33.5 Mongolia Full consolidation
Kitimat 100.0 Canada Full consolidationTurquoise Hill Resources (TRQ) 50.8 Canada Full consolidation
Laterrière 100.0 Canada Full consolidation
Sohar 20.0 Oman Equity accounted unit
©2019, Rio Tinto, All Rights Reserved104
Accounting treatment of principal operationsDiamonds % Location Accounting treatment Iron ore (cont’d) % Location Accounting treatment
Argyle Diamonds 100.0 Australia Full consolidation West Angelas 53.0 Australia Proportional consol (note 4)
Diavik Diamonds 60.0 Canada Proportional consol Western Turner Syncline 100.0 Australia Full consolidation
Iron ore Yandicoogina 100.0 Australia Full consolidation
Brockman (2 and 4) 100.0 Australia Full consolidation Salt
Channar JV 60.0 Australia Proportional consol Dampier Salt 68.4 Australia Full consolidation
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 100.0 Canada Full consolidation
Iron Ore Company of Canada (IOC)
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 consolidationEnergy Resources of Australia (ERA)
68.4 Australia Full consolidation
Pannawonica (Mesas J and A)
53.0 Australia Proportional consol (note 4) Rössing 68.6 Namibia Full consolidation
Paraburdoo 100.0 Australia Full consolidation
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 (see slide 80). 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).
©2019, Rio Tinto, All Rights Reserved105
Principal corporate activity 2010 to 2012
2010• Sale of majority of Alcan Packaging to Amcor $1,948m• Sale of Coal & Allied undeveloped properties (Maules Creek and Vickery) – Rio Tinto share $306m• Sale of Alcan Packaging Food Americas to Bemis Inc $1,200m• Increase in stake in Ivanhoe Mines to 40.1% $1,591m• Sale of remaining 48% stake in Cloud Peak Energy $573m
2011• Increase in stake in Ivanhoe Mines to 42.1% and participation in rights offering $751m• Increase in stake in Ivanhoe Mines to 46.5% $502m• Acquisition of Riversdale Mining Ltd (net of cash acquired) $3,690m• Sale of talc business to Imerys – enterprise value $340m• Increase in stake in Ivanhoe Mines from 46.5% to 49% $607m• Increase in holding in Coal and Allied from 75.7% to 80% $266m• Acquisition of Hathor $536m• Buy-back of Rio Tinto plc shares (up to 31 December 2011) $5,500m
2012• Purchase of remaining shares in Hathor $76m• Increase in stake in Ivanhoe Mines from 49% to 51% $308m• Buy-back of Rio Tinto plc shares (up to 26 March 2012) $1,500m• Rio Tinto completes formation of Simandou JV with Chalco $1,350m
• Increase in stake in Richards Bay Minerals from 37% to 74% $1,700m
Note: only selected transactions are shown.
©2019, Rio Tinto, All Rights Reserved106
Principal corporate activity 2013 to 2017
2013• Sale of Eagle $315m• Sale of Palabora Mining Corporation $373m
• Sale of Northparkes $820m
• Sale of Altynalmas Gold (held by Turquoise Hill subsidiary) $235m
• Sell-down of interest in Constellium $670m
2014
• Sale of Clermont thermal coal mine $1,015m
2015
• Buy-back of Rio Tinto Limited shares (off-market) $425m• Buy-back of Rio Tinto Plc shares (ongoing throughout 2015) $1,575m
2016• Sale of Bengalla thermal coal Joint Venture $617m
• Sale of Mt Pleasant thermal coal project $221m
• Sale of Lochaber aluminium smelter $410m
2017• Sale of Coal & Allied $2,690m
• Buy-back of Rio Tinto Limited shares (off-market) ~$575m
• Buy-back of Rio Tinto plc shares ~$1,500m
Note: only selected transactions are shown. Based on amounts announced in Rio Tinto media releases: may vary from Cash Flow Statement due to timing, completion adjustments and exchange rates.
©2019, Rio Tinto, All Rights Reserved107
Principal corporate activity 2018 to 20192018
• Sale of 82% interest in Hail Creek coking coal mine and 71.2% interest in Valeria coal development project to Glencore $1,700mn
• Sale of 75% interest in Winchester South coal development project to Whitehaven Coal Limited $200m
• Sale of 80% interest in Kestrel coking coal mine to consortium comprising EMR Capital and PT Adaro Energy Tbk $2,250m
• Sale of 100% interest in wharf and land in Kitimat to LNG Canada $576m
• Sale of 100% interest in Dunkerque aluminium smelter in France to Liberty House $500m
• Sale of interest in Grasberg mine to Inalum $3,500m
• Buy-back of Rio Tinto plc shares ~$3,300m
• Buy-back of Rio Tinto Limited shares (off-market) ~$2,100m
2019
• Ongoing buy-back of Rio Tinto plc shares (by 27 Feb 2019 - $1.1bn remaining, to be completed no later than 28 Feb 2020) ~$600m
Note: only selected transactions are shown. Based on amounts announced in Rio Tinto media releases: may vary from Cash Flow Statement due to timing, completion adjustments and exchange rates.
©2019, Rio Tinto, All Rights Reserved108
Ongoing major capital projects
All numbers on 100% basis (US$)Approved
capital cost Status
Copper - Investment to extend mine life at Rio Tinto Kennecott, US beyond 2019
$0.9bn Funding for the continuation of open pit mining via the push back of the south wall: the project largely consists of simple mine stripping activities. Further funding for increased levels of waste removal was approved in 2018 in response to further geotechnical information.
Copper – development of the Oyu Tolgoi underground mine in Mongolia (Rio Tinto share 34%), where average copper grades of 1.66% are more than three times higher than the open pit.
$5.3bn The project was approved in May 2016. The detailed engineering design work and overall construction is mostly on track, but more detailed geo-technical information and difficult ground conditions have required a review of the mine design. This, combined with fit-out and commissioning challenges with the main production shaft, is ultimately expected to result in a further revised ramp-up schedule to sustainable first production (beyond the nine month delay indicated in October 2018). Detailed design work is underway to estimate the impact these issues will have on cost and schedule.
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. First ore produced in Q4 2018
Aluminium – Investment in a second tunnel at the 1000MW Kemano hydropower facility at Kitimat, British Columbia, Canada
$0.5bn Approved in 2017. We expect to complete the project by late 2020. It will ensure the long-term reliability of the power supply to the modernised Kitimat smelter.
©2019, Rio Tinto, All Rights Reserved109
Ongoing major capital projects
All numbers on 100% basis (US$)Approved
capital cost Status
Iron ore – Investment in West Angelas and the Robe Valley in the Pilbara region of Western Australia to sustain production capacity. Rio Tinto’s share of capex is $0.8bn
$1.55bn Approved in October 2018, the investments will enable us to sustain production of our Pilbara Blend™ and Robe Valley products. Construction is planned to begin in 2019 and first ore is expected in 2021
Iron ore – Investment in Koodaideri, a new production hub in the Pilbara region of Western Australia, to sustain existing production in our iron ore system
$2.6bn Approved in November 2018, the investment incorporates a processing plant and infrastructure including a 166-kilometre rail line connecting the mine to our existing network. We will start construction in 2019 and expect first production in late 2021. Once complete, the mine will have an annual capacity of 43 million tonnes.
©2019, Rio Tinto, All Rights Reserved110
Geographical analysis of Rio Tinto shareholders
At 18 January 2019
36.8%
7.8%26.0%
14.7%
14.7%
0.5%
UK
Europe
North America
Asia
Australia
Rest of World
©2019, Rio Tinto, All Rights Reserved111
Rio Tinto Executive Committee
CEOJS Jacques
Aluminium(Montreal)
Alfredo Barrios
Copper& Diamonds
(London)
ArnaudSoirat
Energy& Minerals(London)
Bold Baatar
Iron Ore(Perth)
ChrisSalisbury
Legal &Regulatory
Affairs(London)
Philip Richards
HumanResources(London)
VeraKirikova
Growth& Innovation(Brisbane)
Steve McIntosh
CFOJakob Stausholm
Health, Safety &
Environment(Perth)
JoanneFarrell
Corporate Relations(London)
Simone Niven
Commercial(Singapore)
SimonTrott
©2019, Rio Tinto, All Rights Reserved112
Rio Tinto Board – diverse, operational experience
Role Name Sector experience
Chairman Simon Thompson Mining – former executive director at Anglo American and investment banking with NM Rothschild and SG Warburg.
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 Jakob Stausholm CFO from 3 September 2018 as an executive director. He has over 20 years’ experience working in senior finance roles in Europe, Latin America and Asia. He was Group CFO and an executive director of A.P. Moeller – Maersk A/S and Chief Financial, Strategy & Transformation Officer for the Transport & Logistics division from December 2016 until March 2018, having joined the Maersk Group in 2012. From 2008 to 2011 he was Group CFO of the global facility services provider ISS A/S and he was a non-executive director of Statoil ASA from 2009 to 2016 and of Woodside Petroleum from 2006 to 2008. Before that, he spent over 19 years with Royal Dutch Shell in numerous finance positions globally and as Chief Internal Auditor for the group.
©2019, Rio Tinto, All Rights Reserved113
Rio Tinto Board – diverse, operational experience
Role Name Sector experience
Non-executive Directors Megan Clark Metals & mining, science, research & technology - chief executive of Australia’s national research agency. Chair 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. Chair of the Audit committee. Senior independent director.
Moya Greene Former CEO of Royal Mail and previously president and CEO of Canada Post Corp. Also held senior roles at Bombardier and The Toronto-Dominion Bank.
Simon Henry Oil and Gas – former chief financial officer of Royal Dutch Shell. Also a non-executive director of Lloyds Banking Group.
Sam Laidlaw Energy industry background, former CEO of Centrica plc. Non-executive director of HSBC Holdings plc and chairman of Neptune Oil & Gas. Chair of remuneration committee.
Michael L’Estrange International relations – former Secretary to Australian Cabinet and former Secretary of the Department of Foreign Affairs and Trade.
Simon McKeon Former executive chairman of Macquarie Group. Served as chairman of AMP Limited and of the Australian government’s research and development body, CSIRO. Joined the Board in January 2019.