Examining drivers for investment in primary smelting capacity. International Aluminium Conference Metal Bulletin 23 September 2015

Transcription

1 Examining drivers for investment in primary smelting capacity International Aluminium Conference Metal Bulletin 23 September 2015

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. In this presentation all figures are US dollars unless stated otherwise. 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. 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. 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.

3 Introduction Examining the drivers for investment in primary smelting capacity How key are energy costs and availability? 3 How important is integration upstream or downstream? Is there a case for maintaining high cost smelting on the grounds of market proximity? The role of governments in promoting or discouraging smelter industry growth The Gulf as a net exporter how far can it cast its net and what are the main trades, economic and logistical considerations to be addressed?

4 Aluminium contributes to a better life driving long-term demand 4 Lower GHG emissions through lighter vehicles and buildings and through its recyclability Bringing energy efficiency for cities and buildings in an energy constrained world Preserving food and medicines through its unique barrier properties

5 Primary metal cost drivers 5 Smelter Operating Cost Distribution (CRU) Low cost, Long-term Energy Supply Energy (35%) Alumina (36%) Integrated, secure alumina supply Labour (6%) Other (6%) Other Materials (17%) Source: 2013 CRU Cost Model for Industry average hot metal costs Technology Leadership Accumulated operating knowledge & know-how Global reputation for performance & sustainability

6 Unrivalled position Clean, renewable, self-generated energy 6 Clean, low-cost energy supply Percentage share 3% 6% 19% 72% Hydroelectricity Nuclear Gas Coal 4040 MW owned hydroelectric generating installed capacity in Canada. Compares favourably to global aluminium industry total of about 33 % hydro based power for smelting. Secured energy sources Percentage share 5% Selfgenerated Kemano, British-Columbia 44% 51% Long-term contracts Short and medium-term contracts Long-standing water rights in Canada Compares favourably to global aluminium industry average of about 38 % self-generated power for smelting

7 Focus on low-cost, large-scale assets and exiting high-cost smelters 7 Closures and curtailments Thousand tonnes *Indicates a partial closure Divestments Ningxia smelter (China) 09 Brockville specialty alumina (Canada) 10 Ghana Bauxite mine 10 3 Specialty alumina plants (France and Germany) 12 Gardanne alumina refinery (France) 12 Lynemouth power station (UK) 12 Vigeland power station & refinery (Norway) 13 Sebree smelter (US) 13 Constellium sell-down 13 St-Jean-de-Maurienne smelter & Castelsarrazin facility (France) 13 Alucam (Cameroon) 14 Soral (Norway) 14 ECL 15

8 A clear focused strategy 8 Competitive advantage Tier one bauxite Industry-leading bauxite position First quartile smelters Low-cost, renewable energy portfolio Strategic focus Market-paced growth Cash generation Key enablers Alumina supply and security Commercial excellence Strategic goal Industry-leading performance through the cycle

9 Going forward investments will be focused on improving performance 9 Aluminium cost curves Operating cost (US$ per tonne) % 25% 50% 75% 100% Source: CRU 1 Including the Kitimat modernisation project Arvida Aluminium Smelter AP60 Technology Centre Saguenay, Canada

10 Leading bauxite position driving value-accretive growth Cape York Bauxite 10 Leading bauxite position Global bauxite resources / reserves (Billion tonnes) North of Wenlock 3.0 Resources Reserves Andoom East Weipa RTA Rusal EGA BHP Alcoa Alcoa/AWACHarita Chalco 1 Rio Tinto group Bauxite Reserves and Resources are aggregated form the managed operations as listed in Rio Tinto s 2014 Annual Report dated 6 March 2015 and released to ASX on 6 March The Competent Persons responsible for that previous reporting were L McAndrew (AusIMM Reserves), J Bower (AusIMM Resources), D Butty (EuroGeol Resources/Reserves), R Aglinskas (AusIMM Resources) and JPC de Mel Franco (AusIMM Reserves). Rio Tinto is not aware of any new information or data that materially affects these Reserve or Resource estimates, and confirms that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. Mineral Resources are reported exclusive of Ore Reserves. 2 Competitor data taken from published company data. For BHP the Resources are reported inclusive of Ore Reserves. South of Embley 1.5 billion tonnes Ore Reserves billion tonnes Mineral Resources 1

11 Commitment to sustainable development 11 Smelter GHG emission intensity T CO 2 eq / T Al

12 How technology contributes? AP technology development: Focus on creep and incremental performance improvements AP40 Kitimat AP60 Jonquière AP44 Alma Aluminium operational center Saguenay

13 AP40 Technology 13 Various AP40 technology options have been developed and implemented in the last years. Most of them are running at the industrial scale : Sohar : ka Alouette : ka (Phase 1 and 2) Alma : ka KMP : ka (start up on going) Expected performance with 1650 mm anodes (longest AP40 anodes) as KMP : Line Current (ka) 405 Current Efficiency (%) 0.93 Total Specific energy consumption (MWh/t) 13.1

14 Alma, Saguenay Lac-Saint-Jean AP44 14

15 Alma, Saguenay Lac-Saint-Jean AP44 15

16 Arvida Smelter, AP60 Technological centre Start-up : 2013 AP60 technology 38 pots Capacity : tons AP60 industrial demonstration facility, in collaboration with Arvida Research and Development Centre

17 Rio Tinto: valued partner for the MENA aluminium industry Offering support from mine to refining and smelting Technology Secure, high-quality bauxite supply for increasing needs Marketing and operational excellence Strong track record and commitment to regional social- economic development helping host country and region meet its key challenges 17 Sohar, Oman

18 Conclusion Current environment remains difficult for aluminium producers. But there is good reason to be optimistic about the future. In the medium to longer term, the aluminium market will be a very attractive place to be particularly for lean, clean, low-cost producers. Clean, competitively priced power will be increasingly important as access to power becomes more and more challenging I wish to reiterate Rio Tinto s commitment to sustainable development, which is integrated into everything we do, wherever we operate.

19 Questions?