notice to asx · 07.09.2015 · the rio tinto group does not undertake any obligation to publicly...
TRANSCRIPT
Notice to ASX
Vaughn Walton Assistant Company Secretary
Tim Paine
Joint Company Secretary
Rio Tinto plc
6 St James’s Square,
London SW1Y 4AD
United Kingdom
T +44 20 7781 1345
Registered in England
No. 719885
Rio Tinto Limited
120 Collins Street
Melbourne 3000
Australia
T +61 3 9283 3333
Registered in Australia
ABN 96 004 458 404
Diamonds & Minerals investor roadshow 7 September 2015
Attached is a presentation given today by Alan Davies, Rio Tinto chief executive Diamonds & Minerals as
part of an investor roadshow commencing in Australia.
The presentation will also be available on Rio Tinto’s website at: www.riotinto.com/presentations
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September 2015Sydney
Well positioned for consumer driven growthAlan Davies, chief executive, Diamonds & Minerals
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©2015, Rio Tinto, All Rights Reserved
Cautionary statement
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement.
Forward-looking statements
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, “target”, “set to” or similar expressions, commonly identify such forward-looking statements.
Examples of forward-looking statements include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this presentation.
For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty.
In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as to the date of this presentation. Except as required by applicable regulations or by law, the Rio Tinto Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward-looking statements will not differ materially from actual results. In this presentation all figures are US dollars unless stated otherwise.
Disclaimer
Neither this presentation, nor the question and answer session, nor any part thereof, may be recorded, transcribed, distributed, published or reproduced in any form, except as permitted by Rio Tinto. By accessing/ attending this presentation, you agree with the foregoing and, upon request, you will promptly return any records or transcripts at the presentation without retaining any copies.
This presentation contains a number of non-IFRS financial measures. Rio Tinto management considers these to be key financial performance indicators of the business and they are defined and/or reconciled in Rio Tinto’s annual results press release and/or Annual report.
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Diamonds & Minerals: delivering strong margins
Well positioned for consumer-driven growth
Borates Titanium DioxideDiamonds
44% EBITDA margins
Argyle undergroundramp up continues
through 2015
A21 pipe project at Diavik underway
42% FOB EBITDA margins
Stable borate demand as increased Asian
demand offsets lowerEuropean demand
MDDK processing plant completed in 2014
27% FOB EBITDA margins
Softer market conditions as industry absorbs
feedstock inventories
2 of 9 furnaces at RTFT
currently taken offline
26% FOB EBITDAmargins in salt
Uranium facing challenging market
ERA mining stockpiles and rehabilitating
Ranger mine
Salt & Uranium
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Delivering on our promises
1FY 2014 vs FY 2012 and H1 2015 vs H1 2014 gross controllable operating, exploration and evaluation cost reductions. Excludes Simandou and includes volume impacts. 2Reported December 2012 trade working capital vs reported June 2015 trade working capital. Excludes Simandou. 3FY 2014 vs FY 2012 and H 1 2015 vs H1 2014 reductions in capital expenditure. Excludes Simandou, includes EAU capex. 4 FY 2014 vs FY 2012 and H1 2015 vs H1 2014 increases in free cash flow. Excludes Simandou.
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Reducing working capital
Reducingcosts
Improve
Year on year gross controllable operating, exploration & evaluation cost reductions January 2013 to June 20151
US$829million
Reducingcapex
Strengthen
Progressing high value projects
Year on year capex reductions January 2013 to June 20153
A21
Argyle
MDDK
MDDK
Zulti
South FS
Simandou
FS
Increasing free cash flow
Deliver
Year on year increases to free cash flow since 20124
US$708million
US$898 million
Reduction to H1 2015 since Jan. 20132
US$1,542million
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Well positioned for consumer-driven growth
*Income classes by average annual household income.
Source: McKinsey Insights China - Macroeconomic model update, April 2012; Rio Tinto estimatesSource: Rio Tinto estimates
• Geared to demand growth in later stages of economic development
• Supported by increasing per capita incomes in emerging economies
• Uranium growth mainly driven by reactor build in China
• Expanding Chinese urban middle class fuelling consumer-driven growth
• Chinese urbanisation rates to increase from ~55% to ~65% by 2025
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Poor & Mass
Middle Class
Upper MiddleClass
Affluent
2022E2012
3
100
120
140
160
180
200
2015 2020 2025 2030
TiO2 feedstocks Diamond jewellerySalt (Asia only) ZirconRefined borates Uranium
Mid-to-late cycle demand trajectoriesIndexed 2015
Driven by consumptionChinese urban households* (percentage)
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Strong market position in attractive industries6
49% 20%
RT share of 2014 sales
RT share of 2014 sales
Note: Forecast CAGR figures are for demand growth over the period.
Source: Rio Tinto estimates.
41%
High-grade chloride
High-grade sulphate
~4% CAGR
TiO2 feedstock demand and supply‘000 TiO2 units
Zircon demand and supply‘000 tonnes
40% 5-mol
RT share of 2014 sales
25%Boric Acid
Refined borates demand and supply‘000 tonnes B2O3
Diamond demand and supplyIndexed 2015
11%*
RT share of 2014 production
(*volume)
50
75
100
125
150
2015 2016 2017 2018 2019 2020
Demand Supply
0
~4% CAGR ~3% CAGR
~4% CAGR~4% CAGR
500
750
1000
1250
1500
1750
2000
2015 2016 2017 2018 2019 2020
Demand Supply
~4% CAGR0
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2015 2016 2017 2018 2019 2020
Demand Supply Inventory
~4% CAGR 500
750
1,000
1,250
1,500
1,750
2,000
2015 2016 2017 2018 2019 2020
Demand Supply Inventory
~3% CAGR
0
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• Global marketer with integrated mine-to-market capabilities
• Value-based pricing
• Diversified geographic, customer and product mix
• Commercial excellence driven by market insight
• Creating new markets for our products e.g. fashion jewellery
• Creating new demand through developing new applications using our deep technical insights e.g. borates in wood preservation
• Track record of value creation e.g. pink diamonds tender
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Maximising value through customer and market orientation
Fashion jewellery Argyle Pink Diamonds®
Technology Centre, Suzhou
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Demand-led operating philosophy
• 2014 TiO2 feedstock production back to 2011 level.
• Aligning production to market demand
− Two furnaces at Sorel taken offline
− Furnaces running to optimise peak power periods
− Continue to flex UGS production
− Temporary shut downs at Havre-Saint-Pierre and QMM
• 2014 borates production back to 2011 level
• Diamond underground production continues at Diavik and Argyle volumes ramping up
− Diamonds business works with value chain to secure optimal placement for products in slow market
− Diamonds business well positioned to take advantage of medium term recovery
0
10
20
2011 2012 2013 2014 2015*
Argyle Diavik Murowa
0
20
40
60
80
100
2011 2012 2013 2014
Zircon productionIndexed 2012. Data reflected at a 100% basis
Diamond productionMillion carats. Data presented on a RT share basis
-
0.5
1.0
1.5
2.0
2011 2012 2013 2014 2015*
TiO2 productionMillion tonnes. Data presented on a RT share basis
*Forecast data
Excludes Rutile
1.4mt1.0 to 1.1mt
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Maximising ore value through product portfolio
Production breakdown, 2014
Percentage of product tonnes
Revenue breakdown, 2014
Percentage of revenue
• 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 pig iron
- Iron and steel powders
- Specialist steel billets
• Relative contributions change according to varying dynamics in each market
Data presented on 100% ownership basis, FOB
0% 20% 40% 60% 80% 100%
TiO2 feedstocks Metallics Zircon Other
0% 20% 40% 60% 80% 100%
TiO2 feedstocks Metallics Zircon Other
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• Improving productivity and reliability:
− System and process optimisation
− Consistent and controlled operating procedures
− Working capital optimisation across the supply chain
− LEAN implementation to ensure agility and flexibility
• Ongoing transformation and cost reduction programmes at all sites
• Significant headcount reductions since end 2012
• Focussed capital programme with options to grow to market requirements
− Zulti South (TiO2)
− Bunder (diamonds)
− Jadar (lithium, borates)
− TiO2, Mozambique
− Potash, Canada
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Cost and productivity improvements
Diamonds & Minerals capital spendUS$ million (100% basis and excluding Simandou)
0
10
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015*
0
200
400
600
800
1000
1200
2012 2013 2014 2015*
Sustaining Development
*forecast data. Development spend includes A21 and Zulti South.
Diamonds & Minerals cash operating costsIndexed 2012
33%
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Compelling project pipeline
• Work continues on the feasibility study
• Maximises the use of installed smelting capacity
• Enables Richards Bay Minerals to sustain current production rates for the next two decades
• Due to market conditions, an investment decision is now expected in mid-2016
• Development of the fourth kimberlite pipe at Diavik, A21, on budget and schedule
• Estimated cost of $350 million over four years (Rio Tinto share $210 million)
• A21 diamond production planned for late 2018
• Provides an important source of incremental supply, ensuring the continuation of existing production levels
Titanium, Zulti SouthDiamonds, Diavik A21
An industry leading TiO2 resource with valuable zircon and rutile co-products
A21 is Diavik’s third dike and open pit
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• World-class, undeveloped high-grade iron ore deposit
• Ratified Investment Framework establishes a robust investment regime
− Separated the mine and infrastructure
− Third party infrastructure consortium to be established
• Feasibility study in progress
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Delivering Simandou feasibility study
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Extremely well positioned to continue delivering cash flow
Mid-to-late cycle commodities driven by rising wealth and consumption
Reshaping industries in which we operate
Demand-led philosophy supported by a global customer and market oriented business model
Cost and productivity improvements will enhance structural position as demand returns and grows
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Appendix
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Finished product
Zirsill
Illmenite
Chloride
Slag
UGS Sulphate
Slag
Co
products
Co
products Ore Zircon Rutile Chloride Slag
Sulphate
Slag
Co
Product
Zirsill
Ilmenite'RTCS' UGS SOREL SLAG
High Purity
Iron, Steel,
Metal
powders
FluxZircon Rutile
Chloride
Slag/Fines
RB Slag
sulphate
Hi Purity
Pig Iron
(90% TiO2) (95% TiO2) (80% Ti02) (99% Ti02) (85%/82% Ti02)
QIT Madagascar Minerals(QMM)
Rio Tinto ownership: 80%
Rio Tinto, Fer et Titane(RTFT)
Rio Tinto ownership: 100%
Richard Bay Minerals(RBM)
Rio Tinto ownership: 74%
QMM- St Luce mineMadagascar
RTFT- Lac Tio mineHavre-Saint-Pierre, Quebec, Canada
RBM - Zulti North / Tisand mineSouth Africa
QMM- Mineral Separation PlantMadagascar
RTFT Metallurgical complexSorel-Tracy, Quebec, Canada9 furnaces (2 of which offline)
UGS plant
RBM Mineral Separation PlantSouth Africa
RBM- SmelterSouth Africa4 furnaces
Dryer/Electrostatic separation
Mine
Processing/Upgrades
Iron & Steel plants
Powder plant
RTIT product portfolio
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