Rio Tinto Alcan Financial community site visit June 2008

Transcription

1 Rio Tinto Alcan Financial community site visit June 2008

2 Cautionary statement This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited ( Rio Tinto ) and comprises 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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 forwardlooking statements speak only as of the date of this presentation. Rio Tinto expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers (the Takeover Code ), the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Services Authority and the Listing Rules of the Australian Securities Exchange) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Rio Tinto s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 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. Information about BHP Billiton included in this presentation is based on public information which has not been independently verified. Certain statistical and other information about Rio Tinto included in this presentation is sourced from publicly available third party sources. As such it presents the views of those third parties, but may not necessarily correspond to the views held by Rio Tinto. Important Information Proforma financial information included in this presentation has not been audited and has not been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. Such proforma information has been prepared on the basis of IFRS. Actual financial results may have differed from those presented herein. 15 June 2008 Financial community site visit (15-20 June 2008) 2

3 Dick Evans Chief Executive Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 3

4 Positive outlook on industry fundamentals Most favourably positioned in a highly attractive industry Rio Tinto Alcan s triple advantage - bauxite, power and technology Quality growth Rio Tinto Alcan in Australia 15 June 2008 Financial community site visit (15-20 June 2008) 4

5 Aluminium demand continues apace, driven largely by China Primary aluminium consumption kt 70,000 60, % 50, % 40,000 30,000 20, % 14.7% 10,000 0 World China China s expected compound annual growth rate from : 11.1% Source: WBMS; CRU, Aluminium Quarterly Industry & Market Outlook, January 2008; Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 5

6 Aluminium inventories remain historically low 5000 Inventories as Weeks of Shipments $/tonne LME 3-mos Unwrought WW Inventory Ratio Mar wks Weeks Shipments Source: International Aluminium Institute, Rio Tinto Alcan, LME, NYMEX 15 June 2008 Financial community site visit (15-20 June 2008) 6

7 Forward markets continue to recognise profound structural changes Aluminium 5-year forward curve USD/tonne June Dec , Dec Dec March 2008 analyst consensus Dec, Aluminium 5-Year Forward Curve Source: Reuters, LME 15 June 2008 Financial community site visit (15-20 June 2008) 7

8 Industry cost structure pressured Bauxite, Alumina and Coke Price Indices Green and Calcined Coke (Gulf Coast) Bauxite (China) Alumina (Spot) Jan = Electricity-Related Price Indices Energy-Related Price Indices Mid-C (Day ahead) Oil - WTI 220 Nord Pool (Next Year) Hydro Quebec (NYISO HQ) 220 Gas - NYMEX 1mo Coal - globalcoal NEWC index Jan = 100 Jan = Source: Rio Tinto Alcan, CRU, NYMEX, Nordpool, NYISO, Thomson Reuters, globalcoal 15 June 2008 Financial community site visit (15-20 June 2008) 8

9 Particularly in China, ensuring cost curve continues to increase and steepen Rio Tinto Alcan capacity weighted average Cash cost, 2007 USD/tonne Chinese weighted average Average Spot price 2007 US$2638/t with consensus long run RMB:USD rate of 5.5:1 (27% appreciation from current spot) + $465/tonne 2007 with RMB:USD rate = Chinese smelters Cumulative production kt Note: Rio Tinto Alcan share of assets only Source: CRU Primary aluminium Smelting Costs 2007 Edition Smelter Cost Profiles and the Benchmarking Model Version 2.0; Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 9

10 Supply side risks remain Electricity shortages due to structural challenges and weather events Increased environmental and community sensitivities Increased competition for energy in the few remaining structurally long energy regions Rapidly escalating capital costs, due to competition for construction expertise and resources, rising input costs and the weakened USD 15 June 2008 Financial community site visit (15-20 June 2008) 10

11 Positive outlook on industry fundamentals Most favourably positioned in a highly attractive industry Rio Tinto Alcan s triple advantage - bauxite, power and technology Quality growth Rio Tinto Alcan in Australia 15 June 2008 Financial community site visit (15-20 June 2008) 11

12 Most favourably positioned in a highly attractive industry Scale, strength and balance across the upstream aluminium value chain Modern, low cost operations High quality, extensive bauxite assets Unrivalled power position in self owned, clean energy Technological leadership One of the most extensive major project pipelines in the aluminium industry 15 June 2008 Financial community site visit (15-20 June 2008) 12

13 Reminder of key earnings sensitivities 2007 average price/exchange rate Sensitivity Effect on Rio Tinto Alcan full year underlying earnings ($m) Aluminium 120c/lb +/-10c/lb 620 Canadian dollar 93USc +/-10c 150 Australian dollar 84USc +/-10c 165 Euro 137USc +/-10c 50 Additional factors One to three month lag in alumina pricing Approx one month lag in aluminium pricing Coke and pitch prices up strongly Energy prices up strongly Source: Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 13

14 Integration is progressing well Oct 2007 Feb 2008 Jan 2010 Preparation Planning Implementation Delivered /6 31/12 30/6 31/12 Report outs Post-tax synergies in 2010 $600 M $940 M $1,100M 1 On track with H target of total $170 million in period synergy benefit (15%) Rigorous governance and delivery processes Experience and track record of synergy delivery 1 Internal management target 15 June 2008 Financial community site visit (15-20 June 2008) 14

15 Positive outlook on industry fundamentals Most favourably positioned in a highly attractive industry Rio Tinto Alcan s triple advantage - bauxite, power and technology Quality growth Rio Tinto Alcan in Australia 15 June 2008 Financial community site visit (15-20 June 2008) 15

16 A leading position in Bauxite Bauxite Billion tonnes Resources Reserves Rio Tinto Alcan 1 UC Rusal Vale Chalco Alcoa 2 1 Rio Tinto Alcan reserves and resources have been determined in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, Dec 2004 (the JORC Code). 2 AWAC volume split 60% to Alcoa and 40% to Alumina Ltd; the only exception is the Brazilian mine of Pocos de Caldas which Alcoa owns independently of AWAC Source: Information for Rio Tinto Alcan extracted from Rio Tinto Alcan Proforma 2007 results release 12 March 2008: Information for other major producers extracted from Brook Hunt 2006 (most recent data available). 15 June 2008 Financial community site visit (15-20 June 2008) 16

17 94% of power secured on long-term basis including 64% hydro Sustainable, low cost energy supply Secured energy sources Rio Tinto Alcan 2007 smelter energy sources Short & mediumterm contracts (6%) Gas/coal thermal (25%) Nuclear Hydro (64%) Long-term Contracts (46%) Self generated (48%) (11%) Low carbon footprint 3,583 MW own hydro-electric generating installed capacity in Canada (2,809 MW average generation) Compares favourably to global aluminium industry total of 40% hydro based power for smelting Long standing water rights held in perpetuity in Québec and British Colombia Low exposure to fluctuating energy prices Compares favourably to global aluminium industry average of 30% self-generated power for smelting Source: Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 17

18 Clean, secure power base not easily replicable Extremely scarce set of assets and water rights Current hydro-electric Quebec PASSES DANGEREUSES RESERVOIR STORAGE CAPACITY HM LAC MANOUANE RESERVOIR STORAGE CAPACITY HM developments in Quebec highlight cost of replacement British Columbia CHUTE-À-LA-SAVANE POWERHOUSE INSTALLED CAPACITY 210 MW 1953 CHUTE-DU-DIABLE POWERHOUSE INSTALLED CAPACITY 205 MW CHUTE-DES-PASSES POWERHOUSE INSTALLED CAPACITY 750 MW (UNDERGROUND POWERHOUSE) 1926 Installed capacity 896MW STORAGE CAPACITY HM 3 CHUTE-À-CARON POWERHOUSE INSTALLED CAPACITY 224 MW ISLE-MALIGNE POWERHOUSE INSTALLED CAPACITY 402 MW 1931 Installed capacity 2,687MW SHIPSHAW POWERHOUSE INSTALLED CAPACITY 896 MW 1943 Note: Lac Manouane and Passes Dangereuses are water reservoirs Source: Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 18

19 Technology as a key driver of growth and operational excellence A three-pronged technology strategy: AP-50 Leading through operational excellence Maintain and enhance proprietary AP technology leadership Develop new breakthrough technologies with step changes in energy consumption and environmental impact Cell Heat Recovery Drained Cathode 15 June 2008 Financial community site visit (15-20 June 2008) 19

20 Cell technology leadership through proprietary AP series Full economic cost leadership with emphasis on energy conservation and environment Operating cost USD/tonne Energy efficiency DC MWh/tonne Smelter using AP technology 3,000 2,500 2,000 1,500 42% of 1 st quartile capacity uses AP technology Average: 1, % of 1 st quartile capacity uses AP technology 1, Average: Cumulative production Mt Cumulative production Mt Source: Rio Tinto Alcan AP50 Launch Orlando, February 26, 2007 p. 6; CRU Primary Aluminium Smelting Costs 2007 Edition Smelter Cost Profiles and the Benchmarking Model Version June 2008 Financial community site visit (15-20 June 2008) 20

21 Positive outlook on industry fundamentals Most favourably positioned in a highly attractive industry Rio Tinto Alcan s triple advantage - bauxite, power and technology Quality growth Rio Tinto Alcan in Australia 15 June 2008 Financial community site visit (15-20 June 2008) 21

22 Australian growth projects Weipa Gove Yarwun Bauxite production Millions tonnes per annum Alumina production Millions tonnes per annum 4 4 Alumina production Millions tonnes per annum Options for expansion of production, underpinned by vast resource Potential for capacity to increase from 22mtpa to 35mtpa within five years 1.8mtpa expansion undergoing commissioning and ramp-up Target to reach an operating rate of between 3.4mtpa and 3.8mtpa by the end of mtpa second stage expansion moving forward on time and on budget Potential for third stage expansion of 2mtpa on existing site 15 June 2008 Financial community site visit (15-20 June 2008) 22

23 Quebec: leveraging an aluminium hub Arvida AP-50 Aluminium production (millions of tonnes per annum) Alma 2 Aluminium production (millions of tonnes per annum) ktpa pilot plant, and evaluating the option of adding a 140ktpa second phase demonstration plant Project designed to be expandable (to 400kt- 450ktpa) Approx US$2 bn to US$2.5 bn project capex for 200ktpa pilot plus demonstration plant. Includes infrastructure for 400kt-450ktpa potential capacity. Expected approval early First metal expected in 2012 Stage 2 expansion to add ktpa capacity to existing 415 ktpa smelter. Will utilise latest version of RTA s AP 3X series pot cell technology Approx US$1.0 bn project capex ( ) Currently in pre-feasibility/feasibility and expected to receive approval early Start up expected in H June 2008 Financial community site visit (15-20 June 2008) 23

24 Kitimat: a unique power position Replacement of existing 277ktpa capacity 50yr old Soderburg smelter with 400ktpa capacity pre-bake utilising latest version of RTA s AP series technology Environmental footprint of plant will be reduced by more than 40% Smelter expected to operate in first decile of industry cost curve once completed Approx. US$2.5 bn project capex ( ) Self-owned hydro electric power from the Kemano generating station. When complete, the smelter will utilise all of the firm capacity of the Kemano hydroelectric facility of around MW Advanced feasibility and project preconditions completed. Expected to receive approval within months First shipments expected in Phase out of existing production and ramp up of new capacity expected between Q and Q Source: Rio Tinto Alcan 15 June 2008 Financial community site visit (15-20 June 2008) 24

25 Greenfield smelters Sohar, Oman Sarawak, Malaysia Aluminium production (millions of tonnes per annum) ktpa capacity smelter of which RTA owns 20%. Largest single potline in the world. Will operate in the first decile of the industry cash cost curve First metal on 11 June 2008 with ramp-up to full production by end of 2008 Sohar expansion: actively progressing an option to take an increased stake in a second potline expansion Two AP36 Potlines with total capacity of 720ktpa. RTA to take 60%. Pre-feasibility to complete mid Feasibility would extend to mid First metal in US$3 bn to US$3.5 bn project capex ( ) on a 100% basis. US$1.8 bn to US$2.1 bn for 60% RTA share. Source: Rio Tinto Alcan * Production figures are expressed as RTA Equity Share. 15 June 2008 Financial community site visit (15-20 June 2008) 25

26 Extensive and balanced alumina volume growth Alumina production Million tonnes per annum Gove Alumar + Yarwun II CAGR 9.0% Ma aden QAL Guinea Yarwun III Other Guinea Gove Yarwun 10 QAL Source: Rio Tinto Alcan. Arrows represent first production 15 June 2008 Financial community site visit (15-20 June 2008) 26

27 Impressive pipeline of aluminium growth Forecast aluminium production (millions of tonnes) Aluminium production Million tonnes per annum Sohar Alma II Sarawak Kitimat Sohar II Ma aden CAGR 7.2% AP50 Phase 1 Coega Edea Iceland Rest of World Europe Australia / NZ Canada Source: Rio Tinto Alcan. Arrows represent first production 15 June 2008 Financial community site visit (15-20 June 2008) 27

28 Positive outlook on industry fundamentals Most favourably positioned in a highly attractive industry Rio Tinto Alcan s triple advantage - bauxite, power and technology Quality growth Rio Tinto Alcan in Australia 15 June 2008 Financial community site visit (15-20 June 2008) 28

29 Substantial proportion of Rio Tinto Alcan in Australia 2007 pro forma % of RTA Gove 1.9 Mt Gove 4.7 Mt Weipa 18.2 Mt Bauxite Mt 72% Alumina Mt 80% 3 Aluminium 1 776kt 19% QAL Mt Yarwun 1.3 Mt Boyne 330 kt Tomago 268 kt Bauxite mine Alumina refinery Bell Bay 178 kt Aluminium smelter 1 Production numbers reflect Rio Tinto Alcan share 2 Based on Rio Tinto Alcan share ~80% of QAL 3 Smelter grade alumina only 15 June 2008 Financial community site visit (15-20 June 2008) 29