Partner of choice for economic and social development in Quebec

Transcription

1 Partner of choice for economic and social development in Quebec Alfredo Barrios, chief executive, Rio Tinto Alcan 18 February 2015, Board of Trade of Metropolitan Montreal ** Check against delivery ** Thank you Madame Labelle for that kind introduction. Good afternoon ladies and gentlemen. As chief executive of Rio Tinto s global Aluminium business, I am delighted with this opportunity to talk to such a distinguished audience here in my newly adopted city. Over the next few minutes, I will speak about the Aluminium group s commitment to Quebec, and how a strong Rio Tinto is good for Quebec s economic and social development. As a newcomer to Montreal who has lived in 10 different cities around the world, I d like to say right off the top that I admire the dynamism of Montreal, and its status as a vital international hub for global business and commerce. Along with my wife, Elena, and three children all of whom moved to Montreal with me we have come to appreciate what I m sure everyone else in this room already knew namely, what a terrific place this is to live, a city with outstanding universities and rich cultural, culinary and entertainment offerings. We re excited to be here and to have discovered your great hockey team... although we re still struggling to follow the puck! From my first introduction to Rio Tinto, it was evident that we shared a commitment to sustainable development. By listening carefully to our stakeholders and consistently aiming to align their needs with our own we create mutual value. Earlier today, as some of you may have heard, I was happy to announce that Rio Tinto is donating $3 million over three years to the Sainte-Justine Foundation. Our contribution will enable the creation at Sainte-Justine of the National Centre for Rare Genetic Diseases, which will focus on the development of innovative approaches to diagnose and treat children affected by rare genetic diseases. If you attend the Festival International de Jazz de Montréal or have visited the new Rio Tinto Alcan Planetarium in east-end Montreal, just to name a couple of examples, you will know that Rio Tinto has been and remains deeply committed to working hand-in-hand with our communities even in these uncertain times. Our aluminium business went through a very rough patch following the global financial crisis. Yet, thanks to the support of Rio Tinto, we continued to invest over $10 million annually in Quebec communities even while the aluminium business was operating at a loss. Support from the Rio Tinto Alcan Canada Fund benefits a wide range of healthcare, education and cultural initiatives in the communities where we operate including Aboriginal communities. For instance, 2014 saw the inauguration of a Pathways to Education centre at Mashteuiatsh, in the heart of the Lac Saint-Jean Innu community. Pathways to Education encourages young people to stay in school and succeed academically, by providing homework assistance and tutoring services as well as one-onone support for participating students. This is the third such centre associated with our company here in Quebec and the first ever Pathways centre launched in a First Nations community anywhere in Canada. Page 1 of 8

2 Like many businesses in Quebec, we face many challenges and opportunities. One thing is clear: we are intent on maintaining our position as a partner of choice here in Quebec. Let me begin by thanking employees and colleagues in Rio Tinto s Aluminium group for their warm welcome. They made adjusting to my new role in a new company much easier. Since coming aboard last June, I ve been truly impressed by the calibre and commitment of everyone in our organisation. I feel very fortunate to have been given the opportunity to lead this outstanding team. As I ve said before, I think I have one of, if not the best job in the mining industry! To help put my remarks here today in context, let s step back for a minute and see where we are coming from in terms of Rio Tinto s presence in Quebec and Canada. Globally, Rio Tinto employs 60,000 employees in 40 countries and invests in long-life, low-cost, expandable operations in five main product groups: aluminium; copper; diamonds and minerals; energy; and iron ore. The Group had a lengthy history and significant presence here well before acquiring Alcan: other major assets in Quebec include wholly owned Rio Tinto Fer et Titane, which operates a titanium dioxide mine and processing facilities; Rio Tinto also is the 60 per cent owner and operator of the Iron Ore Company of Canada. IOC operates a mine, concentrator and pelletising plant in Labrador City (NL), along with port facilities in Sept-Îles and a 418 kilometre railroad that links the mine to the port. Elsewhere in Canada, Rio Tinto is the 60 per cent owner and operator of the Diavik Diamond Mine, located in the remote Northwest Territories, some 220 kilometres south of the Arctic Circle. We also have an exploration arm that is active across the country in the search for attractive new mineral resources. And l mustn t forget to mention our Aluminium group s smelter in Kitimat, British Columbia, which is undergoing a major transformation. Over all, Rio Tinto employs approximately 13,000 people across the country and has probably the largest footprint of any mining and minerals enterprise operating in Canada. Montreal serves as headquarters for IOC and for Rio Tinto s other Canadian operations, as well as the global HQ for our Aluminium group which alone employs some 18,000 people in 27 countries. Many of you know that the primary raw material required to produce aluminium is bauxite ore. Bauxite is mined, then refined into a white powder called alumina, which is then processed in a smelter to produce aluminium. Our portfolio of world-class assets span this entire production chain and includes bauxite deposits and mines in three countries Australia, Brazil and Guinea; four alumina refineries in three countries Australia, Brazil and Canada; and 16 aluminium smelters in nine countries. While the majority of our smelters are concentrated in Canada and Australia, we also have operations in France, Iceland, the UK and the Middle East. It has been more than seven years since Rio Tinto acquired Alcan, a period that included the worst global financial and economic crisis since the Great Depression from which the global economy and commodity markets have yet to fully recover. As noted earlier, like most companies operating in our sector and the commodities markets in general, we have been through some challenging times. I think the fact that Rio Tinto has continued to invest and grow its aluminium operations here in Quebec and Canada reaffirms its commitment to this region. Page 2 of 8

3 Rio Tinto is a resilient business, with low-cost, long-life assets that enable us to build value throughout the cycle. In fact, it is when times are tough that the quality of our business really shines through. This was evident in the solid 2014 financial results made public last week. Rio Tinto reported underlying earnings of $9.3 billion. More to the point for many of us here in Quebec is the fact that our Aluminium product group also turned in a strong performance for 2014 proof that the tough decisions and determined efforts of our employees over the past several years, and our continuous focus on efficiency and productivity, are delivering results. Whatever the prevailing economic or market environment, the safety of our people remains Rio Tinto s most important priority. So first and foremost with respect to the Aluminium group s 2014 performance, I m pleased to report we succeeded in maintaining a steady downward trend in workplace injuries. Over the last 10 years, we have reduced the number of injuries at our operations by 76 per cent. In the past year alone, we achieved a 25 per cent improvement. Turning to the 2014 financials, we increased the Aluminium group s underlying earnings by 124 per cent from 2013, to $1.25 billion. We also delivered cash cost improvements of $168 million, which brings cumulative savings over the past three years to more than $800 million. Furthermore, for the first time since 2010, our Aluminum group was free cash flow positive. I am proud of these results. I am also mindful that they reflect some very difficult decisions that had to be taken, which resulted in the divesture or closure of 25 per cent of our global smelting capacity and 30 per cent of refining capacity over the past several years. There are a number of Rio Tinto colleagues here today, and I would like to take this opportunity to publicly thank them along with employees across our Aluminium group for their commitment and perseverance. Congratulations on a job well done! I also wish to acknowledge that the progress we have made in transforming our Aluminium group is greatly due to the efforts of my predecessor, Jacynthe Côté. I had the pleasure and privilege of working alongside Jacynthe for several months while transitioning into my new role. As those of you who know her will surely attest, I found Jacynthe to be not only an exceptional human being but also an outstanding leader and great ambassador for Canada. The Montreal business community is very fortunate to have her in its ranks. To sum up on the current state of affairs at our Aluminium group, we managed to post some very impressive results in tough times. We really have accomplished a lot. While not wanting to put a damper on things, let me also share a cautionary message I have been directing to colleagues and employees: the transformation journey is not yet over for our product group. If we want to keep the competition in the rear-view mirror, we have to keep our eyes on the road ahead, our foot on the accelerator and both hands on the wheel. The fact remains that market conditions continue to be uncertain and prices volatile not just for aluminium but for the mining industry overall. Following a short-lived rally last summer, aluminium prices have retreated back to levels seen at the beginning of Hence, we must be very disciplined and rigorous in the deployment of our strategy to further strengthen our business, rein in costs and make every dollar count. We must bear in mind, too, that it is not only our Aluminium group that is being put to the test. The year 2015 is shaping up to be a tough one for the entire mining industry with Rio Tinto, including our Page 3 of 8

4 colleagues at IOC, being no exception. Iron ore prices fell by almost 50 per cent in 2014, and copper prices have declined by 20 per cent over the past six months. So it s imperative that we pull our weight. With the best assets and best people in the industry reflected in a steadily improving performance I have no hesitation in saying that Rio Tinto Alcan is clearly the world s best aluminium business. The next step is to make our Aluminium product group an attractive business to invest in. Even with those impressive results I just talked about, we still are not recovering the substantial investments that have been made in our smelting operations. That means we have to further improve our returns and cash flow, in order to cover the cost of capital, pay our share of the Rio Tinto dividend and fund future capital expenditures. By doing so, we will have earned the right to invest and grow, but it will take some time. Looking to the future, after several very challenging years, there is renewed optimism and positive sentiment about where the aluminium industry is headed in the medium and long term. However, we need to remain cautious in the short term, as we are likely to continue experiencing the significant market volatility seen in the past couple of months due to the high level of metal stocks, significant idle capacity, and lingering economic uncertainty. Fine, you might say. But where does that leave us in terms of the Aluminium group s current and future intentions vis-à-vis Montreal, Quebec and, for that matter, Canada? The short, straight answer is that Rio Tinto s Aluminium group is here to stay and grow. As a matter of fact, we are looking forward to having an even higher profile here in Montreal when our global Aluminium headquarters and the Rio Tinto Canada regional office move into the top floors of the gleaming new 26-storey Deloitte Tower, currently rising a few blocks from here. Rio Tinto will be the largest tenant in Montreal s first LEED Platinum office development which, to put the icing on the cake, is being built with aluminium sourced from our Saguenay Lac-St-Jean facilities! LEED buildings are higher performing in terms of energy and water consumption, indoor air quality, and access to natural light. LEED Platinum is the highest possible level of certification and is consistent with Rio Tinto's commitment to sustainability. We are proud to be part of the exciting dynamics that are reinvigorating downtown Montreal. Rio Tinto also is committed to continue investing in state-of-the-art operating facilities, such as those in the Saguenay Lac-St-Jean region that are an important part of our global aluminium group provided, of course, that business returns and the investment climate are favourable. As I indicated earlier, it is worth noting that despite some very lean times for aluminium, and for the mining industry in general Rio Tinto has continued to invest in Quebec and Canada. I would venture to say we can consider ourselves fortunate to have benefitted from being part of a large and diversified global organization that was able to continue investing even in the worst of times, while many stand-alone aluminium competitors were forced to shelve expansion plans. Taking into account total capital expenditures as well as new investments, Rio Tinto has invested in excess of $7.5 billion into its Canadian aluminium operations over the past five years which is all the more remarkable when you consider that Rio Tinto Alcan was cash-negative for five out of seven years. Page 4 of 8

5 Recent sizeable investments in Quebec by Rio Tinto have included: The installation of a new high-efficiency, 225-megawatt turbine at our Shipshaw hydropower plant in the Saguenay, at a cost of approximately $275 million; and Construction of the new Arvida Aluminium Smelter, AP60 Technology Centre, also in the Saguenay region, at a cost of some $1.1 billion. Our leading-edge AP60 technology has established a new industry benchmark in terms of productivity and energy efficiency. The new technology is 40 per cent more productive than its predecessor. Teams at our Arvida Research and Development Centre will drive further development of the AP60 technology platform, keeping Quebec at the forefront of global industry knowhow. In another positive development for the economy of the Saguenay region, we reached an agreement in December with the Quebec Government to extend the life of our, long-established Arvida smelter which was slated to close this year through to the end of Over the next five years, Rio Tinto will invest up to $50 million in Arvida s environmental performance. I wish to thank the government of Quebec for assenting to this win-win agreement that will sustain 1,000 jobs. During the past five years, Rio Tinto has invested nearly $1.3 billion in maintaining our Quebec aluminium facilities over and above the cost of major new projects such as the Arvida-AP60 complex. Just last September, for instance, we announced an investment of close to $15 million at the Alma smelter on a project that will add 12,000 tonnes to the plant s annual capacity. Meanwhile, on the other side of the country, preparations are being finalised for full commissioning of the transformed smelter at Kitimat during the first half of Leveraging our wholly owned Kemano hydropower resource and benchmark AP Technology, the $4.8 billion Kitimat Modernisation Project will increase production capacity by more than 48 per cent while reducing overall environmental emissions by nearly 50 per cent. This project essentially replaces the original 60-year-old Kitimat smelter. With the new plant, we are solidifying our presence in Northwest B.C. for another six decades, maintaining quality jobs and contributing to the region s economy. Once Kitimat comes on stream, some 80 per cent of our Aluminium group s smelting assets will be in the first quartile of the industry cost curve, compared with just 40 per cent as recently as I believe it is clear from these significant recent investments that Rio Tinto is committed to supporting us in our goal of building the world s best aluminium business with Quebec and Canada continuing to play a lead role. Thanks to the best assets and the best people in the industry many of them right here in Quebec we are well positioned to achieve that goal. However, as I indicated earlier, the industry context remains challenging: commodity prices have continued to drop sharply; metal prices are still volatile; and, with the notable exception of our neighbours to the south, the economic recovery has yet to take hold in major market regions such as Europe and Japan: furthermore, we can no longer count on uninterrupted double-digit economic growth in China. Against that backdrop of uncertainty, productivity and costs will remain a major focus. Simply put, we will have to continue driving performance in order to improve returns and earn the right to invest and grow. We have a responsibility to get it right not only for the people who invest in us, but also for key stakeholders like governments, our host communities and employees. Page 5 of 8

6 Quebec has been home to a flourishing aluminium industry for more than a century and for good reason, namely its ability to generate abundant quantities of clean, renewable energy. There is no question that the availability of competitively priced hydropower has represented a significant competitive advantage to Quebec and, yes, to Rio Tinto Alcan, in an increasingly carbon-constrained world. Our global smelter portfolio benefits from the industry s strongest energy position: 80 per cent of our energy mix is non-fossil-fuel-based, and 50 per cent is self-generated most of that in Quebec and B.C. Aside from cost considerations, I can tell you that a growing number of our customers now acknowledge this clean-energy consideration as benefitting their own carbon footprints and sustainability agendas. Indeed, Quebecers have reason be proud of our position as a global industry leader in terms of green aluminium. Consider that one tonne of primary aluminium produced with hydropower, and utilizing the state-of-the-art technology deployed at our AP60 plant generates, on average, six times less GHG emissions than aluminium produced in China, and four times less than aluminium produced in other parts of the world. All the more reason to ensure that, going forward, aluminium producers in Quebec continue to benefit from assured supplies of competitively priced power, rather than having the energy and the large numbers of jobs that otherwise would be sustained in our industry exported elsewhere. The recent agreement with the Quebec Government that extends the life of our Arvida smelter In the Saguenay is a great example of how we can work together to ensure that our operations remain competitive, and maintain quality jobs in the regions. These are the types of initiatives that we need to focus on. Before wrapping up my remarks, I would like to take a brief look at the prospects for our industry from a broader, market perspective. As I noted earlier, we have recently seen some very welcome signs of optimism and positive sentiment about where the aluminium industry is headed in the medium to long term. Demand for our metal is expected to increase at four per cent per year through This is supported by growing intensities in many applications most notably the transport sector where manufacturers are planning to use significantly more aluminium in the future. Aluminium s unique properties its light weight, strength and resistance to corrosion are driving increasing market penetration in the automotive market. A recent major study conducted by consultants Ducker Worldwide predicts that, within the next 10 years, seven out of 10 new pickup trucks produced in North America will be aluminum-bodied, as competitors follow the lead of Ford, which recently introduced its first aluminum-bodied F-150 model. Many other leading automakers have been increasing the amount of aluminium used in various lightweight and fuel-efficient car models. From aerospace and rail transport to beverage cans, buildings and construction, electrical and electronics applications and packaging, aluminium is an essential element of our modern life. Infinitely recyclable, aluminium truly is the metal of the future in terms of its unparalleled potential for contributing to sustainable development. In conclusion, I want to assure you that, at Rio Tinto, we are determined to see that aluminium continues to figure prominently in Quebec s future. Page 6 of 8

7 In fact, Rio Tinto has identified potential large brownfield growth opportunities here in Quebec that could be tackled when economic and market conditions are right. That being said let me remind you it isn t all about megaprojects. Throughout the cycle, we have carried on investing in numerous small and medium-sized initiatives designed to optimise the productivity and output of our Quebec assets. I m still learning more about Montreal and Quebec every day: one thing that quickly became clear is that the aluminium industry is undeniably among the greatest industrial success stories in Quebec history. Let s build on that success for the benefit of future generations of Quebecers, who deserve to be part of a dynamic, value-creating global industry! To that end, it is important to maintain an attractive investment climate by ensuring competitive fiscal policies and tax regimes, while encouraging investment in crucial infrastructure and affordable, renewable energy sources. It will be essential as well, to move ahead on Aboriginal matters. From Rio Tinto s perspective, ensuring the future well-being of our communities and regions is not just a question of generating jobs and tax dollars, crucial as those considerations may be. Wherever we operate, we strive to ensure that our activities benefit society as a whole. Our commitment to sustainable development is integrated into everything we do. Through Rio Tinto s community programmes, we seek to achieve shared objectives that benefit both our communities and our business. Our programmes are designed to help: Support local business growth; Build infrastructure; Boost training and skill levels; Improve public health and education; and Safeguard the environment and biodiversity. Simply put, we aspire to be a company that is admired and respected for delivering superior value and for being the industry s most trusted partner. I think it would be fair to say that, here in Quebec, Rio Tinto has earned a reputation as a partner of choice on both the economic and social fronts our presence is an undeniable asset for the province and its regions. When I accepted this job, I was eager to come to Montreal and continue to build on that success. My first eight months have only strengthened my resolve to capitalize on the challenges and opportunities that I am confident lie ahead. Lest there be any doubt, allow me to reiterate that Rio Tinto wants to grow in Quebec and wants to continue the 100-plus-year-old bond that has created significant economic and social value for generations of Quebecers. Thank you again for your warm welcome and for providing this opportunity to share our future plans and aspirations with you. Page 7 of 8

8 Contacts on Twitter Media Relations, EMEA/Americas Illtud Harri T M David Outhwaite T M David Luff T M Investor Relations, EMEA/Americas John Smelt T M David Ovington T M Media Relations, Australia/Asia Ben Mitchell T M Bruce Tobin T M Matthew Klar T M Investor Relations, Australia/Asia Rachel Storrs T M Galina Rogova T M Grant Donald T M Rio Tinto plc 2 Eastbourne Terrace London W2 6LG United Kingdom T Registered in England No Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia T Registered in Australia ABN Page 8 of 8