Rio Tinto Iron Ore. Alan Smith President Rio Tinto Iron Ore Asia

Transcription

1 Rio Tinto Iron Ore Alan Smith President Rio Tinto Iron Ore Asia

2 Cautionary statement 2 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 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 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 that are beyond the Rio Tinto Group s control. 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 forwardlooking 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.

3 Rio Tinto a world leader in mining 3 Aluminium Leading position in: bauxite alumina aluminium Copper Leading position in: copper molybdenum Diamonds & Minerals Leading position in: titanium dioxide and zircon borates, diamonds and salt Energy Leading position in: uranium export coking and thermal coal Iron Ore Leading position in: seaborne iron ore

4 Rio Tinto Iron Ore 4 Global iron ore shipments of Mt in 2014 Unrestricted access to ports and rail and geographic proximity to customers Operations in Australia and Canada and iron ore projects in India and Guinea Iron ore train Pilbara comprises of 15 mines,1,700 km of rails, and 4 independently operating port terminals Real time visibility across all assets and the end to end value chain Cape Lambert Relentless focus on production at the right cost, value-driven growth and maximising portfolio value through specialised sales and marketing expertise

5 Pilbara - the world s best iron ore business Industry-leading returns EBITDA margin (percentage) 66% 61% 53% 41% Integrated supply chain to seamlessly deliver a future 1 Mt/day Industry-leading EBITDA margins to continue 5 Rio Tinto BHP Vale FMG H Source: Rio Tinto; BHPB; Vale and FMG financial statements. supported by industry-leading cost position 2020 industry cost curve (Real 2013 US$/wmt CFR) Rio Tinto BHP (Pilbara) RTIO Pilbara BHP Billiton (Pilbara) Vale Vale FMG Pilbara Fortescue (Pilbara) Technology and innovation leadership Sufficient resources to sustain industry reference Pilbara Blend products Expected to remain the lowest cost major producer Anticipate a unit cost of around US$35/t by Mtpa Rio Tinto, Wood Mackenzie. Note: Includes shipping and sustaining capital expenditure, taxes and royalties and is adjusted for inflation and exchange rates. Mtpa

6 Value maximisation continues through 360 Mt/a completion and moving into production Mt/a infrastructure programme is ~80% complete and on nominated schedule for H ~40 Mt/a of low-cost, brownfields growth approved and in implementation at a capital intensity of ~$9/t On track for delivering 330 Mt in 2015 and 350 Mt by 2017 Cape Lambert car dumper Silvergrass investment decision able to be deferred until 3Q 2015 at the earliest Expecting Mt/a delivered at an industry-leading capital intensity of ~US$ /t (100% basis) Cape Lambert shiploader

7 Iron Ore Company of Canada - delivering a differentiated and high quality product 7 Robust EBITDA margins EBITDA margin (percentage) ~34% ~41% ~37% Robust EBITDA margins Fully integrated operations High quality 65%+ Fe products with low contaminants H High-quality pellets make up ~60% of sales, sold into proximate and growing DR and BF segments delivering high quality low contaminant product Percentage of 2013 sales DR pellets 12% Concentrate 41% Operational flexibility to increase the percentage of DR pellets Growing demand for high-quality, low contaminant concentrate in Asia 47% BF pellets Source (top chart): Rio Tinto financial statements. Source (bottom chart): Rio Tinto Marketing Analysis: 2013 sales.

8 Long-term iron ore fundamentals remain robust 8 China s crude steel production forecast (Mt/a) Ex-China crude steel production forecast (Mt/a) 2,000 1,600 1, China is forecast to reach ~1Bt of crude steel production by 2030 Driven by exports of manufactured goods and replacement demand Iron ore demand growth from emerging economies where more than 80% of the world s population live Other contestable iron ore markets likely to develop over the coming decades including ASEAN, India, Africa, the Middle East JKT EU 27 India ASEAN Middle East Africa Other Source (top chart): Rio Tinto Industry Analysis Source (bottom chart): Rio Tinto Industry Analysis

9 The integration of marketing and operations maximises portfolio value 9 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2014 products by market % China Japan Korea, Taiwan Atlantic Other PBF PBL RRF RRL HIY Conc. Pellets Source: Rio Tinto Sales & Marketing Product offering and customer segmentation drives our mine development and production planning Iron Ore s Technical Marketing team work with customers, researchers and universities to maximise the value-inuse of our products Pilbara Blends are the most marketed and commercially liquid ores in the market Reported spot transactions highlight that Pilbara Blend Fines consistently achieve a premium over the Platts 62% Fe index

10 High customer demand for Rio Tinto iron ore products Pilbara off-take agreements by pricing mechanism Q Actual Q Lagged Spot Source: Rio Tinto Sales & Marketing Monthly Consistently high demand for Rio Tinto iron ore products across varied market conditions due to our reputation of providing stable quality and reliable supply Of our 2014 volume: ~85% was sold under term contracts ~15% sold into the spot market, in support of robust and transparent indices Aim to produce Pilbara Blend products from multiple high grade hematite/goethite deposits, across the Pilbara, for many years to come

11 250 Strong relationships enable supply chain optimisation Pilbara shipments to Japan and China (Mt) Since 1966 Rio Tinto has shipped over 3Bt to Japan and China billionth tonne shipped to China 1 billionth tonne shipped to Japan Continuing partnerships with Japan, including the Robe River joint venture, remain central to our business The Channar Joint Venture was established in 1987 and has delivered over 200Mt to China The Bao-HI Joint Venture was established in 2002 and has delivered over 130Mt to China Shipments on a 100% basis and includes all Pilbara operations controlled by Rio Tinto. Partnerships allow Rio Tinto to improve sales processes and lower transaction and administration costs Source: Rio Tinto Sales & Marketing

12 Concluding comments 12 Long-term customer relationships are key to Rio Tinto s success Iron ore market fundamentals remain robust Rio Tinto s resource, integrated logistics and marketing drives sustainable longterm value Commitment to technology and innovation is key to Rio Tinto s competitive edge Pilbara Blend delivers sustained premiums and creates additional value Pilbara 360Mt/a delivers compelling and resilient project economics Haul truck