Download - Andrew Harding, Rio Tinto - Rio Tinto
Generating significant business value
Andrew Harding
Chief executive officer – Iron Ore, China, Japan, Korea
AJM Global Iron Ore & Steel Forecast Conference, Perth 2014
©2014, Rio Tinto, All Rights Reserved
Cautionary statement
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and consisting of the slides for a
presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions.
Forward-looking statements
This presentation includes forward-looking statements. All statements other than statements of historical facts included in this
presentation, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of
management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts
and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry
results, to be materially different from any future results, performance or achievements expressed or implied by such forward-
looking statements.
Such forward-looking statements are based on numerous assumptions regarding Rio Tinto’s present and future business strategies
and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause Rio Tinto’s actual
results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels
of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably,
the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and
economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as
changes in taxation or regulation and such other risk factors identified in Rio Tinto's most recent Annual Report on Form 20-F filed
with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking
statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking
statements. These forward-looking statements speak only as of the date of this presentation.
Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will
necessarily match or exceed its historical published earnings per share.
2
©2014, Rio Tinto, All Rights Reserved
3
Bringing capacity on-line to meet growth in traditional and developing regions
Source: China National Bureau of Statistics, CISA, Rio Tinto
Source: United Nations, Global Insight, Rio Tinto
Chinese steel demand Million tonnes per annum
Growth fundamentals 2010-30 CAGR %
6.1
2.0
0.3
0 5 10
GDP per capita
Urbanpopulation
Population
6.1
2.3
1.0
0 5 10
3.7
2.2
1.0
0 5 10
GDP per capita
Urbanpopulation
Population
2.4
1.9
1.6
0 5 10
China
ASEAN Middle East
India
0
100
200
300
400
500
600
700
800
2011 2012 2013 2014
≈4 %
(e)
7.5% 2.2%
©2014, Rio Tinto, All Rights Reserved
Monthly Q Lagged
Q Actual
Spot
• Pilbara Blends continue to be base load products for Asian steel industry
• Unprecedented demand for 2014 off-take opportunities due to our reputation of providing stable quality and reliable supply
• Of our 2014 volume:
• ~85% will be sold under term contracts
• ~15% uncontracted for sale into the spot market, in support of robust and transparent indices
• Pilbara Blend sustainable for decades to come
2014 Pilbara off-take agreements
by pricing mechanism
4
Rapid uptake of 2014 off-take opportunities with unfulfilled demand for Rio Tinto iron ores
©2014, Rio Tinto, All Rights Reserved
• Mine, rail and port network wholly-
owned by IOC ( Rio Tinto 58.7%)
• Consistently high quality products
with the lowest phosphorous in the
industry
• 2013 saleable production of 15.4Mt,
9% higher than 2012
• CEP project adds mining fleet, ore
delivery, grinding and spiral capacity
and power infrastructure
• Concentrate expansion project to
23.3 Mt/a expected in H1 2014.
Iron Ore Company of Canada operations
5
Iron Ore Company of Canada - fully integrated mine to port system
©2014, Rio Tinto, All Rights Reserved
6
The Pilbara – high quality assets, fully owned and operated, with great optionality
• System fully
integrated via
Operations Centre
• All product blending
undertaken at port
• Strong Resources &
Reserves position
provides optionality
Rio Tinto Pilbara operations
Assets • 15 mines
• 1,600kms of rail
• 4 independent
port terminals,
with 11 berths,
• 3 power stations
©2014, Rio Tinto, All Rights Reserved
0
10
20
30
40
50
60
70
80
Q1 Q2 Q3 Q4
• Severe weather impacts in 1Q, 2Q
and 4Q 2013.
• Increasing capacity and system
alignments enabled improving
performances beyond 237Mt/a
rating
• 2013 mine production of 251Mt
(YoY +5%)
• 66.5Mt mine production and
68.8Mt shipping in Q4 2013
• Strong contribution to EBITDA and
underlying earnings
7
Pilbara performance key to delivering strong 2013 financial results
Pilbara mine production Million tonnes per quarter
2010
2011
2012
2013
290
237
Source: Rio Tinto
2013 2012 Change
Production
(Million tonnes100%)
266.0 253.5 +5%
Underlying EBITDA
($ millions)
17,442 15,679 +11%
Underlying earnings
($ millions)
9,858 9,247 +7%
Iron Ore results Global 2013 vs 2012
©2014, Rio Tinto, All Rights Reserved
8
Continuous improvement outcomes realise significant value
Mine
• “Right- sizing” the fleet initiative optimising cycle
times and payload management
• 6 out of 55 West Angelas haul trucks
redeployed to other mines
• Reductions to occur at other mines
Rail
• Continued train cycle improvements with
electronic controlled pneumatic brakes and
additional consists
• Payload increases through new train specs and
mass and volumetric loading controls
• 2013 new consist payload record of 27kt
Port
• Parker Point outload capacity increased 12Mt/a
• Changes to reclamation control program
and stockpile profiling
• Dual reclaiming to maximise ship loading
Pooled fleet railings and payload
26.3
26.4
26.5
26.6
26.7
26.8
26.9
27.0
27.1
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13
Railings
Payload
Railin
gs (
no
. o
f tr
ain
s)
Paylo
ad
(k
t)
Reclaimer
©2014, Rio Tinto, All Rights Reserved
• Improved crane scheduling and
alignment of maintenance shuts
• $1.4M saved at Brockman 4
alone
• Rationalised training and streamlined
delivery
• Cost savings ~$20M/ yr
• Over 200,000 person hours*
returned to the business
• Hire car expenditure savings ~ $4
• Centralised administration function
savings over $5 million per annum
9
Relentless focus on cost- outs to also continue
2013 productivity improvements Hours returned to the business via training transformation
0
30,000
60,000
90,000
120,000
150,000
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
Jan
Fe
b
Ma
r
Ap
r
Ma
y
Jun
Jul
Au
g
Se
p
Oct
Nov
Dec
Monthly Cumulative
*December 2013 annualised Stockpile
©2014, Rio Tinto, All Rights Reserved
WA IO – EBITDA per tonne (US$/t and %)
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
20
40
60
80
100
120
140
H110 H210 H111 H211 H112 H212 H113 H213
EB
ITD
A %
US
$/t
RTIO ($US/t) BHP ($US/t) FMG ($US/t)
RTIO % BHP % FMG %
10
Improvements are maintaining the business as the Pilbara’s lowest cost producer
Source: Rio Tinto ; BHPB; and FMG lodged financial statements Note: RTIO results exclude Dampier Salt and RT Marine
Tonnage based on attributed shipments (adjusted for Robe River at 65% as per financial results). Results as reported. All
publically available information
Full year cash unit cost ($/t)
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013
AUD cost USD cost
• 2013 full year cash unit cost was
US$20.80/t, 11% lower than 2012
• Retaining best margin of Pilbara producers
Source: Rio Tinto
©2014, Rio Tinto, All Rights Reserved
• 290 Mt/a first ore on ship 24 August
• 4 months ahead of schedule
• $US400M under budget
• 220 – 290Mt/a being delivered at a
capital intensity <US$140/t (100%)
• Extra 53Mt/a Pilbara system
nameplate capacity by end 1H
2014
• Nammuldi below water table mine
completion on target for Q4 2014
• Deliberate mine bulk stocks
strategy, with ~5Mt draw- down in
2014
Nammuldi mine development
11
290Mt/a infrastructure complete and now quickly ramping to fill capacity
290Mt/a complete, 360Mt/a wharf in progress
©2014, Rio Tinto, All Rights Reserved
• Infrastructure expansion to 360Mt/a
fully approved and underway
• Expected completion during H1 2015
• Cape Lambert
• All major work packages have
been awarded
• Earthworks complete, civil works
near complete, SMP commenced
• Rail
• All rolling stock contracts awarded
• Duplication earthworks and track
construction complete
• Full commissioning by late 2Q ‘14
12
Infrastructure development to 360 Mt/a progressing on target
Cape Lambert Screenhouse 6
Car dumpers 6 & 7 First train at 37.5kp duplication
©2014, Rio Tinto, All Rights Reserved
• A rapid, low- cost pathway to
increase mine production capacity
by more than 60Mt/a by 2017
• Utilises brownfield mine options
opportunities at existing operations
• Silvergrass decision has been
deferred and Koodaideri mine
decision not required in the medium
term
• US$3 billion saving in growth capital
over the next 3 years
• Capital intensity to reduce from mid
$150s/t to $120-130/t (100% basis)
13
Low- cost, brownfields Pilbara growth pathway extracts significant value
Mine capacity potential (average annualised) Million tonnes per annum
225
250
275
300
325
350
375
2013 2014 2015 2016 2017 2018
Example brownfield expansions Indicative Mt/a
West Angelas (approved 13/02/2014) ~6
Yandicoogina ~8
Brockman ~8
Paraburdoo ~7
Nammuldi ~9
Other ~6 – 10
Source: Rio Tinto
©2014, Rio Tinto, All Rights Reserved
Western Turner Syncline - 1
14
Further value opportunities being realised in sustaining tonnage projects
• Western Turner Syncline phase 2
approved in February 2014
• Additional 7Mt/a to replace Tom
Price ore to commence in mid 2015
• A new WTS phase 1 mine plan
allows extension of trucking model
• At least 3 year deferral of primary
crusher construction and linking to
Phase 1 conveyor
• ~$500M in deferred capital
expenditure
• NPV unchanged
©2014, Rio Tinto, All Rights Reserved
• Autonomous Haulage System update
• >130Mt autonomously moved between 2008-2013.
• Improved safety and control
• Reduced truck numbers
• Expect 10-15% increase in effective utillisation in mature operation
• AutoHaul™
• first heavy haul network in the world to be fully automated
• scheduled to be operational in 2015
• Safety, cycle time and capacity improvements
• Eliminating driver changeovers
• High performing teams
• Cohesive culture is fundamental
• United focus, creative solutions and excellent performance
15
Mine of the Future™ programme continues to turn competitive advantage into real business value
Autonomous haul trucks
AutoHaul™
©2014, Rio Tinto, All Rights Reserved
• Relentless focus on safety
• Continual liaison with full range of
key stakeholders
• Drawing greater value through:
• operational performance across
integrated system
• cash costs/ margin management
• on time/ budget growth projects
• sales and marketing strategies
• utilisation of new technology
• Remaining flexible to changing
internal and external environments
16
Proven sector leadership continues to return significant value
Haul truck