Delivering value through the cycle Michael Gollschewski, managing - - PowerPoint PPT Presentation

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Delivering value through the cycle Michael Gollschewski, managing - - PowerPoint PPT Presentation

Delivering value through the cycle Michael Gollschewski, managing director Pilbara Mines Global Iron Ore & Steel Forecast Conference 8 March 2016, Hyatt Regency, Perth First iron ore shipment from Dampier August 1966 2 Cautionary


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SLIDE 1

Delivering value through the cycle

Michael Gollschewski, managing director Pilbara Mines Global Iron Ore & Steel Forecast Conference 8 March 2016, Hyatt Regency, Perth

First iron ore shipment from Dampier August 1966

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SLIDE 2

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

  • f 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 marke t 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. 2

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SLIDE 3

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Safety is fundamental to our business

Iron Ore all injury frequency rate

Per 200,000 hours worked

Wellbeing

450 employees trained as peer supporters

3

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SLIDE 4

The best iron ore business

20 40 60 80 100 120 140 250 500 750 1000 1250 1500

2015 Wood Mackenzie iron ore cost curve (Mt/a)

USD/wmt CFR

60 120 180 0% 20% 40% 60% 80%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Iron ore price (FOB WA, US$/dmt)

EBITDA margin RTIO Pilbara Price

Rio Tinto Pilbara EBITDA margin vs. iron ore spot price

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Rio Tinto Pilbara Iron Ore

  • Achieved an average FOB EBITDA margin of 69%
  • ver last ten years
  • Tier 1 assets; Tier 1 people
  • System wholly owned and operated
  • Leading the market in innovation

Key Achievements in FY15

  • Lowest cost producer in the Pilbara
  • Exceptional earnings with EBITDA of 60%, despite

price falls

  • Record production
  • Continuous improvement in productivity

Source; Rio Tinto, Wood Mackenzie

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SLIDE 5

CY2015 Production (Mt) CY2014 Production (Mt)

50 100 50 100 50 100 50 100 50 100 50 100 50 100 50 100

Liaoning Southwest Shanxi Inner Mongolia Shandong Other Provinces Anhui Hebei

250 300 350

National Total

32 5 275

High-cost supply continues to exit the market

  • There was ~110Mt of additional low cost supply added to the market in 2015
  • We expect new supply entering the market in 2016 to be offset by continued exits of

marginal production

  • Rio Tinto’s share of the contestable iron ore market has remained fairly constant at ~18%

110

  • 35
  • 60
  • 35
  • 20

1,600 1,650 1,700 1,750 1,800 1,850 1,900

Mt

Iron ore market balance China domestic production

5

Source; Rio Tinto

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SLIDE 6

Our strategy

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Maximising portfolio value Value driven investment Production at the right cost

  • Lowest cost producer in

Pilbara

  • Reduced operating costs and

working capital

  • Tracked over 400 individual

improvement initiatives

  • Fully integrated system
  • 20% Productivity increase

FY15

  • Average rail cycle time

reduced from 42 hours to 35 hours

  • World’s largest autonomous

truck operator

  • Pilbara infrastructure project

completed on time in 2015

Source; Rio Tinto, company reports

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SLIDE 7

20.4 18.7 16.2 13.8 H1 2014 H2 2014 H1 2015 H2 2015

Production at the right cost

Pilbara cash unit cost

US$ per tonne 22000

25000 28000 38000 15000 20000 25000 30000 35000 40000 2013 2014 2015 2016

Haul truck engine life extension

Hrs

7

  • Relentless focus on cash
  • H2 2015 cash unit cost of US$13.8/t
  • Pre-tax cash cost improvements were

US$428 million in 2015

  • Cumulative saving of US$1.1 billion since

compared with the 2012 base

  • Reduced working capital by more than 83% in

2015

Source; Rio Tinto

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SLIDE 8

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Maximising the portfolio value

Product options

  • Consistent quality
  • Pilbara Blend
  • Understanding customer

requirements

High value initiatives

  • System-wide
  • Focused
  • Breakthrough improvement

System optimisation

  • Maximise output
  • Quality specification
  • Real time data & decisions

Improved cycle time from 42 hours to 35 hours

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SLIDE 9

Value driven investment

Autonomous Trucks & Drills

13% improvement in load & haul costs 14% improvement in effective truck utilisation 10% increase in drill availability

RTVis

Improved utilisation of ore body Improved drill and blast accuracy Reduced explosive costs

Nammuldi incremental investment

5 Mt/a, commenced 2015/2016 5 Mt/a, commencing in 2017 Access low phosphorous ore for Pilbara Blend

90.0% 100.0% 110.0% 120.0% Jan-15 Apr-15 Jul-15 Oct-15

Autonomous Haul Trucks Performance Effective utilisation indexed to all manned sites

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Source; Rio Tinto

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SLIDE 10
  • Safety is fundamental to our

business

  • Our strategy remains clear and

consistent

  • Tier one assets
  • Operating excellence
  • Returns to shareholders

Looking forward

Cape Lambert ore train

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