Rio Tinto is on a journey, and let me share with you just how we are travelling.

Transcription

1 Slide 1 - Slide 2 - Slide 3 - Good morning everyone and thank you for that kind introduction. Rio Tinto is on a journey, and let me share with you just how we are travelling. At the beginning of last year, I outlined our plan to transform the business, to deliver the value that you expect and deserve as shareholders. In some ways it was about getting back to basics, but being mindful of continuing to move the company forward. Since then, we have done just that. We ve been totally focused on building a stronger, more tightly run business while delivering impressive results and creating options for the future. We re now reaping the rewards from our substantial cost savings and productivity gains, through stronger cash flows, even at lower commodity prices. We've pruned back capital expenditure, but not at the expense of growth. And we are ramping up sales and production following the completion of five major capital projects in Today we have announced another major landmark, with iron ore shipments from the Pilbara now consistently at the expanded 290 million tonne annual capacity rate. So, we ve made a good start, and there is more to do to sustain and build on these gains. Today I ll give you a flavour of how we are transforming many of our businesses, and adding considerable value, through innovation. I ll talk about the excellent operational performance that we are delivering, and the competitive advantage that we are building on in our iron ore business. And, as capital allocation continues to be a key area of focus for us, I would like to remind you how we have enhanced our processes and discipline, and of some of the options that we have to deliver greater value in the future. Slide 4 Let me start by touching on our long-held strategy, to invest in long-life, low cost, expandable operations, in the most attractive industry sectors. Whilst the strategy is consistent, in recent years we were a business that had lost its way. But we are now refocused, and comfortably back on track. We delivered a strong set of results in 2013, our balance sheet is getting stronger and our operations are humming. 1

2 So while our strategy remains the same, our execution is much stronger. We are constantly challenging the way things are done, and the possibilities of mining. Our innovation culture means we have a passion for excellence, and strive to find smarter ways to continually improve the way we operate, perform, grow, and deliver sustainable value. This is creating a real competitive advantage for our businesses. Slide 5 Importantly, our innovation programme is delivering results now. The Mine of the Future TM is fast becoming today s reality. Innovation is transforming our business to work in new ways and learn faster. It is a key enabler, delivering impressive productivity gains and cost savings. From autonomous trucks to driverless trains in the Pilbara, with our vast network of four port terminals, 15 mines and 1600km of railway, all controlled from our Operations Centre in Perth, we are at the forefront of the mining industry. And it is not just an iron ore story. Last September we produced first metal at our leading edge AP60 aluminium smelter in Quebec. This is the most advanced smelting technology in operation today, producing 40 per cent more metal per cell than AP30, at a significantly lower carbon intensity. And across many of our copper and coal sites, we are optimising mineral processing from our Processing Excellence Centre in Brisbane, unveiled in March of this year. Slide 6 This is a world-first, state-of-the-art facility, and is part of our suite of innovative technologies. By harnessing and examining big data in real time, the Processing Excellence Centre allows us to optimise mineral processing across a broad range of sites, anywhere in the world from a single location. This is maximising productivity and improving performance. We've assembled a world-class team to work with live data and tackle improvements in processing. From Brisbane, they are currently linked to copper processing at Kennecott in the US and Oyu Tolgoi in Mongolia, as well as five coal sites in Australia. 2

3 Slide 7- This is ground breaking stuff which is already delivering results, so let me show you what I mean with a real live example. The PEC team is continuously monitoring the copper flotation processes at Kennecott and Oyu Tolgoi. Instability and variability across the circuit was identified, impacting copper and gold recoveries. By refining the control strategy over the flotation process, the joint site and PEC teams were able to stabilise the system. This has generated annualised cash savings in excess of US$80 million already. And, might I say, all within weeks of its launch. Slide 8 - Over in the Pilbara, we have been operating autonomous Komatsu trucks since We are ramping up the fleet size, and now have 53 driverless trucks in operation at three of our fifteen mines. This is the largest autonomous fleet in operation anywhere in the world, and will continue to expand as we grow the business further and replace ageing trucks. Autonomous haulage doesn t just save manpower and the associated fly-in, fly-out costs although that is of course a key element. It s a virtuous circle, with an all-important safety benefit from reduced interaction with manned vehicles, and increased visibility and control of the operating environment. Once the autonomous programme is fully rolled out and reaches a steady state, we expect to achieve a 10 to 15 per cent improvement in utilisation rates. This will lead to lower sustaining capex, due to a reduction in the overall number of trucks in operation. Also in the Pilbara, we re leading rail innovation. The AutoHaul R driverless trains programme is a vital part of our growth programme. When complete, it will be the first heavy haul network in the world to be fully automated. The savings and productivity gains that it will deliver will be stunning. For example, did you know that at present we drive more than 70,000 kilometres each week in the Pilbara, just to get our train drivers in the right place to start or finish their shift? That equates to 3.2 million kilometres each and every year. So again, AutoHaul R will significantly transform our business. 3

4 Slide 9 - Our Mine of the Future TM innovations underpin our Pilbara expansions, and are core to their success. And what a success the Pilbara growth programme has been. Last August, we loaded the first shipment from the new Cape Lambert B wharf. The infrastructure element of our 290 expansion was completed four months early, and $400 million under budget. We announced today that our Pilbara operations are now consistently running at the expanded nameplate capacity of 290 million tonnes per annum. This is a great achievement by the Iron Ore team, two months ahead of schedule. Our impressive track record comes in some measure through our innovation culture and, unquestionably, the quality of our people. Autonomous haulage has meant fewer trucks are required at the new mines. And innovative sourcing and procurement have also delivered considerable savings, with much of the construction equipment coming from emerging supplier powerhouses such as China, Indonesia and Thailand. Slide 10 So we ve successfully ramped up our iron ore production to 290 million tonnes, and we re now focusing our efforts on the second phase expansion, towards 360 million tonnes per year. The 360 infrastructure is fully approved and remains on track to be completed in just over twelve months time. There is likely to be production and shipping variability in the coming months, as we complete and commission the 360 expansion, and realise the integration of AutoHaul R. At the end of last year we announced our breakthrough pathway to grow mine capacity through low cost brownfield expansions. This will save more than $3 billion of capex compared with our previous estimates, and gives us greater flexibility and control as to how quickly or slowly we bring on the extra tonnes. All in all it translates into a capital intensity of between $120 and $130 per tonne for our entire expansion programme. Slide 11 - So to round off on iron ore, let me just remind you why this is, quite simply, a stunning business. Our average cash costs in the Pilbara last year, that is to mine the ore and move it onto the ship at our ports, was less than 21 US dollars per tonne. 4

5 Our EBITDA margin was around 70 per cent, well ahead of all other Australian producers. We have complete control of four independent port terminals in the Pilbara. And our reserves and resources are more than sufficient to support our operations for several decades, even at 360 million tonnes per year. Slide 12- But growth at Rio Tinto isn t just about the best iron ore business in the industry. We have a pipeline of high quality projects across the whole of our portfolio. We have exciting potential growth in Copper, in particular from the underground development at Oyu Tolgoi in Mongolia. Here, we are continuing to finalise the feasibility study, while working with the Mongolian Government to agree the best pathway forward for progressing the second phase of construction. The greenfield La Granja mine in northern Peru is also making good progress, with the pre-feasibility study due for completion by the end of this year. Investing in bauxite is a key area of focus for our Aluminium group, with the Gove mine due to commence exports and the South of Embley expansion at Weipa moving up the agenda. And our iron ore options are not confined to Australia. The Simandou project in Guinea is making progress, with a constructive and collaborative process underway to finalise the Investment Framework, and identify a funding plan for the infrastructure development. Slide 13 - So we are preserving our future options for investment whilst we focus on our current priorities. This year is all about paying down debt and strengthening the balance sheet. But as we move towards a more sustainable balance sheet, we will be able to give the Board more options to allocate capital to investments in growth and enhancing cash returns to shareholders. Slide 14 - Any investment in growth will of course be within the capital constraints we have set out, with capex declining to less than $11 billion this year, and around $8 billion in Last year we completed five major capital projects and announced the lower capital intensity route for the Pilbara mines. This will drive our capital expenditure to more sustainable levels. 5

6 At the same time we are set to enjoy significant volume growth of more than eight per cent a year on a copper equivalent basis, with new tonnes coming onstream in iron ore, coking coal, and diamonds, to name a few. Slide 15 - So all in all we are in strong position. Our free cash flows are improving. Our capex is firmly under control. And we are strengthening our balance sheet. All our efforts in 2013 enabled us to increase the ordinary dividend by a further 15 per cent. And, as I said earlier, we expect to be able to present the Board with a range of options around enhanced returns to shareholders in February of next year. So our strategy is clear. It is consistent and we are focused in its implementation. We are leading the industry by transforming many of our businesses through the application of new technologies and innovation, driving increased productivity and further cost savings. Our operations are delivering new tonnes over the coming years as capital expenditure declines. And our capital allocation priorities reflect the discipline and owners culture that I have brought to the business. Thank you. And with that, I would be happy to take any questions. 6