Download - Rio Tinto Coal Australia Bill Champion Jun12 UBS

7/29/2019 Rio Tinto Coal Australia Bill Champion Jun12 UBS

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Rio Tinto Coal AustraliaUBS Australian Resources, Energy & Utilities Conference

Bill Champion, Managing Director, Rio Tinto Coal Australia

June 2012


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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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China and India will continue to drive energy demand growth,with coal remaining an important energy source

0

2

4

6

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10

12

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16

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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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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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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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Strong long

term outlook

Current

challenges

Honing our

competitive edge


Strong long

term outlook

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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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Longer timelines on environmental approvals

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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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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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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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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?