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Rio Tinto Coal AustraliaUBS Australian Resources, Energy & Utilities Conference
Bill Champion, Managing Director, Rio Tinto Coal Australia
June 2012
7/29/2019 Rio Tinto Coal Australia Bill Champion Jun12 UBS
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2012, Rio Tinto, All rights reserved
Cautionary statement
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (Rio Tinto) and consisting of the slides for apresentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions.
Forward-looking statementsThis presentation includes forward-looking statements. All statements other than statements of historical facts included in thispresentation, including, without limitation, those regarding Rio Tintos f inancial position, business strategy, plans andobjectives of management for future operations (including development plans and objectives relating to Rio Tintos products,production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statementsinvolve 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 dif ferent from any future results, performance or achievementsexpressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding Rio Tintos present and future businessstrategies and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause RioTintos 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 andtransport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operationalproblems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities bygovernmental authorities such as changes in taxation or regulation and such other risk factors identified in Rio Tinto's mostrecent 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 unduereliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date ofthis presentation.
Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limitedwill necessarily match or exceed its historical published earnings per share.
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Presentation overview
Strong long
term outlook
Current
challenges
Honing our
competitive edge
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Safety
3.54
1.35
1.060.95
0.760.68 0.64
0.85
0.68
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD
All Injury Frequency Rate (AIFR)
4
Total number of injuries plus medical treatment cases per 200,000 hours worked
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2012, Rio Tinto, All rights reserved
China and India will continue to drive energy demand growth,with coal remaining an important energy source
0
2
4
6
8
10
12
14
16
18
20
2009 2015 2020 2030
0
2
4
6
8
10
12
14
16
18
20
2009 2015 2020 2030
Total primary energy demand* by region
Primary energy demand*
Source: International Energy Agency WEO 2011
Billion tonnes oil equivalent
R.O.W.
China
India
Total primary energy demand* by fuel mix
Coal
Biomass, Hydro& otherrenewables
Nuclear
Gas & Oil
* Current Policies scenario assumes no new climate change related policies beyond those currently in place are implemented
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2012, Rio Tinto, All rights reserved
Chinese thermal coal imports very responsive to increasinginternal costs, haulage distances and domestic/import arbitrage
0
2
4
6
8
10
12
14
16
18
110
115
120
125
130
135
140
145
150
155
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12
ChineseImp
orts-Mt/mth
SouthernChin
aDeliveredPrice-
US$/tCV6000NAR
Arbitrage Window China Imports [RHS] Chinese Domestic
Newcastle Richards Bay
Projected contribution to ex-China import growth
Average Chinese Internal Coal Haulage Distance (km)
500
550
600
650
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source:Rio Tinto, SX Coal, Global Coal, McCloskey, Global Trade Atlas, RTE&M Analysis
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2012, Rio Tinto, All rights reserved
0%
1%
2%
3%
4%
5%
6%
2012 2013
Other
India
Europe and North Asia
Projected seaborne supply growthProjected contribution to ex-Chinaseaborne demand growth
Source: Wood Mackenzie Source: Wood Mackenzie
0
50
100
150
200
250
300
2011 2012 2013
Other Canada US Australia
Metallurgical coal market remains tightly balancedNew supply regions supporting increased production driven by emerging markets demand
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2012, Rio Tinto, All rights reserved
Strong long
term outlook
Current
challenges
Honing our
competitive edge
Presentation overview
Strong long
term outlook
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2012, Rio Tinto, All rights reserved
Combined impacts are squeezing themining industrys productivity and growth
50
100
150
200
250
300
350
400
Jan-09 Jan-10 Jan-11 Jan-12
Spot iron ore (62% Fe, fob)AluminiumCopperGoldOilThermal coal
Capital intensityMarket volatility
Source: Bank of America Merrill Lynch
Combined impacts
Daily commodity prices(Jan 2009 = 100)
$/1600/oz
$2000/t
$3.70/lb
$140/t
$97/bbl
$110/t
Thermal Coal Capital CostUS$ per tonne
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
2001 2004 2007 2010
Prices at9 May 2012
Increasing taxes
Extra regulation delayingapprovals
Growing difficulty inaccessing skilled labour
Rising cost ofinfrastructure access
Strong exchange rate
Input cost escalation
In isolation these factors may not seem to have significant impact.
But cumulatively they can transform a good value proposition and render it marginal.
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10
0
200
400
600
800
1,000
1,200
1,400
2008A 2009A 2010A 2011A 2012
forecast
0
10
20
30
40
50
60
70
2008A 2009A 2010A 2011A 2012
forecast
Increasing strip ratios, common across Australian mines, arecontributing to increased waste movement across RTCA
Total material moved and production
Production (excluding Kestrel Mine)
Million tonnes; 100% basis
1.7x
Total material moved (excluding Kestrel Mine)
Million tonnes; 100% basis
1.2x
Source: RTCA
* 2012 forecast consists of January to April actuals and forecast figures for May to December
* *
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2012, Rio Tinto, All rights reserved
Longer timelines on environmental approvals
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2012, Rio Tinto, All rights reserved
Presentation overview
Current
challenges
Honing our
competitive edge
Strong long
term outlook
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RTCA is focused on maximising
operational performance to drive value
Focusing
Capac Know
Plann
Deploym
Deepprojec
Broadbuildin
Centrservicsites
RTCA Business Improvement Asset Management Programme
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Starting to see strong results from Deep Dive projects
Mount Thorley Warkworth - increasedaverage truck loads per shift
Kestrel Mine Extension increasedunderground roadway developmentrates
Hunter Valley Operations increasedblasted inventory
Hail Creek projects focused on:
Shovel productivity
Coal recovery
Haul truck standardisation costsavings and flexibility, dozers are next
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Improving blasted inventory Hunter Valley Operations, NSW.
Standardised specifications in place for 830E Komatsu trucks.
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Focus on improving wet weather management
Initiatives on all sites:
Wet weather planning andpreparedness
Road and ramp design and
construction
Truck driver training
Site-specific examples:
Hunter Valley Operations
240 tonne haul truck trial Clermont Mine All weather
roads project.
10 per cent calendar time impacted by wet weather
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All weather roads project - Clermont Mine, Qld.
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2012, Rio Tinto, All rights reserved
We are completing our project ramp-upat Clermont and progressing KME
Clermont Mine ramp-up
Clermont Mine ramping up to ~12Mt rate, asBlair Athol Mine winds down to ~3Mt
Ramp up slowed to fine tune IPCC
Hopper relocation underway to allow ongoingramp up
Potential to expand production from 12Mtpa to15Mtpa
Kestrel Mine Extension (KME)
KME offers long life (2032), low cost, coking coal
Production to start 2013, incremental production(~1Mt), lower operating costs
Kestrel West resource could provide top-upproduction to maintain output
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In-pit crusher - Clermont Mine, Qld. CHPP Upgrade project - Kestrel Mine, Qld.
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2012, Rio Tinto, All rights reserved
We have an attractive long term growth pipelinethat will be sequenced as we firm up value potential
Queensland
Hail Creek
Expanded to 8Mtpa nameplate rate
Resource optimisation focused onunderground potential
Options to supplement by regional open cuts atElphinstone and Mount Robert
Valeria Large resource (semi-soft / thermal)
Focused on establishing metallurgical coal potential
Winchester South
Potential for coking products (semi-hard/soft andPCI) and thermal
Focused on building metallurgical coalquality knowledge
New South Wales
Mount Pleasant
Full feasibility study - focus on value engineeringto lower capital cost
HVO Southern / Auckland
Focused on building ore body knowledge
Provide future options to expand or extend HVO
life depending on market conditions
MTW underground options
Focused on building ore body knowledge andunderstanding interaction with open cut
Community challenges make this a priority
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Exploration drilling underway - Valeria, Qld. Mount Pleasant Project, NSW.
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2012, Rio Tinto, All rights reserved
Return on assetsProportion of metallurgical coal production
Source: Annual Reports
* Assets are calculated as average over the year. Note: AAL, BHP and XTA NPAT all derived from EBIT at an assumed 30% tax rate.
Proportion of metallurgical coal sales and return on assets
Given our product mix, RTCA generates strong return on assetsrelative to peers
0%
10%
20%
30%
40%
50%
60%
70%
XTA RTCA AAL BHP
Met coal production/Total coal production NPAT/NOA*
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0%
10%
20%
30%
40%
50%
60%
70%
XTA RTCA AAL BHP
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Questions?
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