120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707 Registered in Australia Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia ABN 96 004 458 404 ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 8 August 2012 Dear Sir, Attached is the Rio Tinto 2012 interim results presentation given today by Tom Albanese, chief executive, and Guy Elliott, chief financial officer. Yours faithfully, Stephen Consedine Company Secretary
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120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707
Registered in Australia Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia ABN 96 004 458 404
ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000
8 August 2012
Dear Sir, Attached is the Rio Tinto 2012 interim results presentation given today by Tom Albanese, chief executive, and Guy Elliott, chief financial officer. Yours faithfully, Stephen Consedine Company Secretary
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 presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding Rio Tinto’s present and future business strategies and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause Rio Tinto’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors identified in Rio Tinto's most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this presentation.
Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed its historical published earnings per share.
• Solid financial results driven by record operational performance of iron ore division − Underlying earnings of $5.2 billion − Net earnings of $5.9 billion − Underlying EBITDA of $10.1 billion − Cash flows of $7.8 billion
6
$ billions H1 2011 H1 2012 Movement Underlying EBITDA 14.3 10.1 -29% Underlying earnings 7.8 5.2 -34% Net earnings 7.6 5.9 -22% Cash flows from operations 12.9 7.8 -39% Capital expenditure 5.1 7.6 +49%
Interim dividend (US cents per share) 54.0 72.5 +34%
H1 2010 includes $0.4 billion (pre-tax) and $0.2 billion (post-tax) profit on disposal from Maules Creek and Vickery. H1 2012 earnings and EBITDA includes $0.2 billion and $0.3 billion respectively for the profit on the sale of Extract and Kalahari interests.
Underlying EBITDA Underlying earnings
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
H1 08 H1 09 H1 10 H1 11 H1 12
Underlying EBITDA Underlying earnings
• Benefit from gradual transition to shorter term pricing: some cyclical weakness
• Increased production of diamonds and TiO2
• Doubling stake in RBM to 74%, expected to complete during second half 2012
• Strategic review of diamonds business announced in March
Diamonds and Minerals underlying results US$ billions
11
Diamonds and Minerals: pricing momentum
H1 09 included $0.8 billion (pre and post-tax) profit on disposal of undeveloped potash properties
• Capturing value from assets that are not aligned with our strategy − >20 divestments worth a total
of $12 billion completed since 2008 • Introducing new partners to projects • Acquisition of high quality assets − Control of Turquoise Hill − Doubling stake in RBM to 74% − Hathor exploration potential
• Strategic review and divestment processes under way − Diamonds − Pacific Aluminium / other − Palabora − Turquoise Hill non-core assets
China stimulus supports Q4 demand, but near term risks remain • Eurozone debt crises and fragile US recovery create ongoing
near-term uncertainty • Central government launched a series of pro-growth policies since April 2012 • Expect this to lead to renewed demand from fourth quarter of 2012
20
China stimulus measures announced since April 2012
NDRC (Federal)
April 2012 280 new projects approved Focused on industrial innovation and clean energy
May 2012 135 new projects approved Baosteel and Wuhan alone granted permission to build RMB 134 billion of new steel capacity
June 2012 70 projects approved 69 projects relate to green energy and new energy production
State
July 2012 Jiangsu province City of Nanjing “30-point plan” to increase consumption
July 2012 Zhejiang province City of Ningbo to implement 24 stimulus measures, including a fund to support new business, tax cuts for qualified companies
July 2012 Hunan province City of Changsha 5 year investment plan, valued at $130 billion. Involves 195 development projects including airport, subway, energy production
Value creating divestments has been a continuous process
31
Major divestments from 2008 to 2012 US$bn Greens Creek 0.8 Cortez 1.7 Kintyre 0.5 Potasio Rio Colorado 0.9 Corumbá 0.7 Ningxia 0.1 Jacobs Ranch 0.8 Alcan Composites 0.3 Cloud Peak 1.3 Alcan Packaging Food Americas 1.2 Alcan Packaging global pharma 2.0 Medflex / Beauty 0.1 Talc 0.3 Kalahari Minerals-Extract Resources 0.4 Other including exploration properties 0.8 Total to date 11.9
Reconciliation of underlying earnings to net earnings
32
$m H1 2012 H1 2011
Underlying earnings 5,154 7,781
Impairment charges net of reversals (115) (157)
(Losses)/Profits on consolidation and disposal of interests in businesses (51) 29
Loss after tax from discontinued operations – 10
Exchange and derivative gains / (losses) Exchange (losses)/gains on US dollar net debt and intragroup balances (165) 82
Gains on currency and interest rate derivatives not qualifying for hedge accounting
22 15
Gains/(losses) on commodity derivatives not qualifying for hedge accounting
21 (34)
MRRT 1,043 –
Other exclusions (24) (139)
Net earnings 5,885 7,587
Earnings impact from price variance -$1,936 million $US million
33
Breakdown of price variance
-278 -709 53 -67 1,110 53 -83 -17
201
-4 29
-1,200
-1,000
-800
-600
-400
-200
0
200
400
Copper Aluminium Gold Other Iron ore Th coal Met coal Uranium Ind mins Diamonds Other (netof hedging)
Earnings impact from volume increases $366 million $US millions
34
Breakdown of volume variance (increases)
62
0 10
0
219
47
4 0
24
0
50
100
150
200
250
Copper Aluminium Gold Moly Iron ore Coal Industrialminerals
Diamonds Other
Earnings impact from volume decreases -$584 million $US millions
35
Breakdown of volume variance (decreases)
*Aluminium
-327
-38
-148
-29
0 0 -16 -9 -17
-350
-300
-250
-200
-150
-100
-50
0
Copper Aluminium Gold Moly Iron ore Coal Industrialminerals
Diamonds Other
Modelling earnings 36
Earnings sensitivity
2012 first half average price / rate 10% Change
Impact on full year underlying earnings
($m)
Copper 367c/lb +/-37c/lb 234
Aluminium $2,081/t +/-$208/t 399
Gold $1,652/oz +/-$165/oz 32
Iron ore +/-10% 1,073
Coal* +/-10% 186
A$ 103 Usc +/-US10.3c 981
C$ 99 Usc +/-US9.9c 256
*For both thermal and coking coal
Iron ore
Movement in underlying earnings H1 2011 vs H1 2012 $US millions
• Record first half production and sales from the Pilbara partly offset lower prices • Continued evolution of sales contract portfolio, c.40% sold on quarterly lag • Pilbara expansion projects obtain further funding approval, on track for expansion to 283 Mt/a
by end 2013 and 353 Mt/a by H1 2015 • Further progressive commitment of $0.5 billion at Simandou
5,952 4,753 42 219
-1,110 -43 -11 -107 -94 - 95
HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12
37
• Impact of lower prices and lower volumes from temporary reduction in grades at Kennecott Utah Copper and no metal share from Grasberg
• Escondida copper production up 29% compared to H1 2011 • Construction of Oyu Tolgoi project 90% complete and on track for first commercial production
in H1 2013 • Approved major sustaining projects at Escondida and Kennecott Utah Copper • Increased stake in Turquoise Hill (formerly Ivanhoe) to 51% and appointed directors on the
board of Turquoise Hill, including the CEO and CFO
Copper 38
Movement in underlying earnings H1 2011 vs H1 2012 $US millions
1,237
556 18
10 86
279 424
12 36 44
HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12
Aluminium 39
Movement in underlying earnings H1 2011 vs H1 2012 $US millions
• 15% lower LME price half on half • Canadian dollar weakened against US dollar • Unfavourable raw material costs, mainly coke, pitch and caustic • 2012 H1 one-off events include: − Yarwun 2 start-up − Alma lock-out − Shawiningan transformer
344
24
-406
107 -38 -29 55 -124 7 108
HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash ClosingBalance
• Earnings impacted by lower prices and Australian cost inflation.
• Offset by higher volumes and the sale of interests in exploration properties, which delivered a $249 million pre and post-tax gain.
• Production of hard coking coal and semi-soft coking coal were 9 per cent and 17 per cent above impacted first half 2011.
Energy
Movement in underlying earnings H1 2011 vs H1 2012 $US millions
375 307
9 61 169
47 23 8 132 97
HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12
40
Diamonds & Minerals 41
Movement in underlying earnings H1 2011 vs H1 2012 $US millions
• Underlying earnings are 107% higher than the first half of 2011 reflecting strong prices and offsetting the sale of the talc business in mid-2011
• The group benefited from higher prices across the industrial minerals business and increased diamonds production. • Strong earnings were partially offset by higher study costs related to expanding titanium dioxide mining and refining capacity, and
divestment of the talc business in mid-2011.
• On 1 February 2012, Rio Tinto announced that it will increase its stake in Richards Bay Minerals to 74 per cent through the acquisition of BHP Billiton's 37 per cent interest.
98
203
197
-21 22 2 -14 -9
-30
-42
HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12
• Intersegment includes insurance proceeds in H1 2011 • Other operations comprises mainly Pacific and Other Aluminium(1), Areas under Management
and Engineered Products (including Cable and Constellium). • Exploration rebuilding portfolio and lower divestment proceeds • Other includes higher corporate costs, increased technology and innovation activity,
offset by currency movements on non-USD funds
(1) Other Aluminium comprises Lynemouth, Sebree and Speciality Alumina
Provisional pricing
• H1 2011: driven by a decline in copper 3 month forward price between the end of 2010 and the end of June 2011 and a 11% increase in tonnes provisionally priced at 30 June 2011 resulting in an unfavourable earnings impact of $9m
• H1 2012: driven by decreased copper 3 month forward prices over the last 5 months and a 30% increase in tonnes provisionally priced at 30 June 2012, resulting in an unfavourable earnings impact in H1 2012 of $7m
43
Open shipments
(million lbs)
Provisional pricing effect
(US$m)
30 Jun
2012
31 Dec
2011 H1
2012 H1
2011
Escondida 203 146 – (7)
Northparkes 32 33 (7) (2)
Grasberg JV/Other
0 2 – (1)
235 181 (7) (9)
Earnings reconciliations 44
H1 2012 Energy Resources of Australia US$m Earnings per ERA press release (A$54m) (62) Increase depreciation of closure asset (8) Tax and unwinding of discount 5 Less: Minority interests 24 Other (12) Underlying earnings as reported by Rio Tinto (53)
Palabora US$m Earnings per Palabora press release (R338m) 43 Interest and FX gain/loss on net debt (net) (13) Tax effect on above items 2 Tax on unremitted earnings 24 Less: minority interest (42.3%) (29) Underlying earnings as reported by Rio Tinto 27
Variance analysts methodology
• Price = Change in commodity price x prior year sales volumes
• Exchange = (Change in exchange rates x Prior year cost of sales) + Relative movements in exchange gains and losses on working capital
• Inflation = Inflation rate x Prior year cash cost of sales
• Volume = Change in sales volumes x Current year margins
• Cost = cash cost variance + non cash cost variance + impact of energy price changes + one-off costs − Energy = change in input price x prior year usage − Cash cost = Change in cash unit costs x Prior year sales volumes − Non cash cost = Change in non cash unit costs x Prior year sales volumes