MF Global Seminar 15 October 2009

Transcription

1 MF Global Seminar 15 October 29

2 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 2-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. 15 October 29 MF Global Conference 2

3 Growth in global GDP (percent a year on purchasing power parity basis) 1% 8% Clash of ideologies Post War OECD Growth Maturing OECD Emergence of Developing Countries 6% 4% 2% 2.5% 4.8% 3.3% % -2% -4% Oil price shocks Financial crisis -6% -8% The Great Depression WW2-1% Note: Data prior to 195 excludes Africa, Asia and Former Soviet Union Source: IMF, Rio Tinto 15 October 29 MF Global Conference 3

4 !" # $%&'(!)" Growth in industrial production (percent a year) China s share of world consumption (percent) Global, weighted by share of metals consumption (1) 5 Copper 5 4 Aluminium Traded iron ore OECD Source: IMF, WBMS, CRU, Brook Hunt, Rio Tinto 15 October 29 MF Global Conference 4

5 # *# * Purchasing manager indicators suggest recovery.. but a number of headwinds US Japan Eurozone -8 Apr-8 Jul-8 Oct-8-9 Apr-9 Jul-9 Release of pent up demand, government stimulus and end to destocking is driving current normalisation in demand Excess capacity is still holding back investment and producers are not restocking Structural fiscal deficits will eventually need rebalancing Western consumers unlikely to go back to previous levels of borrowing Source: ISM Factory (US), Nomura JM (Japan), Markit (Eurozone) 15 October 29 MF Global Conference 5

6 * +, Rapid pick up in Chinese economic activity Chinese industrial production and Purchasing Managers Index percent yoy, index Chinese GDP growth percent yoy Industrial production* (LHS) PMI** (RHS) * 3 month moving average ** NBS series. Forward 1 month Source: Reuters Ecowin, Consensus Economics f 21f 15 October 29 MF Global Conference 6

7 # ** # Production Volume Index Acceleration in investment growth in China Increase in fixed asset investment -Aug 29 Per cent yoy (bars denote relative growth) Urban fixed asset investment percent yoy, 3 month moving average Source: Chinese National Bureau of Statistics 15 October 29 MF Global Conference 7

8 # -''%* * Iron ore Chinese iron ore imports million tonnes a month 7 Copper Chinese net unwrought copper imports thousand tonnes a month 5 Aluminum Chinese net unwrought aluminium imports thousand tonnes a month Source: Chinese trade statistics 15 October 29 MF Global Conference 8

9 . -''&/-# * * Daily spot price index (2 October 29 = 1) 3 25 Spot iron ore (62% Fe, fob) Alum inium Copper Gold Thermal coal (NEWC) Minus 6-7% 2 US dollar has declined 11% Plus 4-12% Jul- 6 Oct- 6-7 Apr- 7 Jul- 7 Oct- 7-8 Apr- 8 Jul- 8 Oct- 8-9 Apr- 9 Jul- 9 Oct- 9-1 Source: Metal Bulletin, Reuters Ecowin 15 October 29 MF Global Conference 9

10 # * # *# # *, Aluminium price as ratio of 5 year trailing average (2) Copper price as ratio of 5 year trailing average (2) Current cycle Average of previous cycles (1) Average of previous cycles (1).8 Current cycle Lag from economic trough (quarters) Lag from economic trough (quarters) (1) Average of cycles centred around 1978, 1982, 1992 and 21 (2) Real terms Source: LME, Rio Tinto 15 October 29 MF Global Conference 1

11 .1 2$ 3* * **# World aluminium production and price-cost relationship Western aluminium stocks million tonnes Aluminium prices and costs $ per tonne in real 29 terms 7. 4, 6. 3,5 5. 3, Spot aluminium price Exchange 2,5 2, 1,5 1, Median industry costs 1. Producers Source: IAI, CRU, LME 15 October 29 MF Global Conference 11

12 # * # ** World aluminium shipments Non-China monthly, million tonnes China monthly, million tonnes Year-to-date +9% Year-to-date -29% Source Rio Tinto estimates 15 October 29 MF Global Conference 12

13 4 #* World aluminium production and capacity Western world monthly, annualised million tonnes China monthly, annualised million tonnes Capacity Capacity Production Production Source: IAI, WBMS, Rio Tinto estimates 15 October 29 MF Global Conference 13

14 ## ## # # /$ * Low copper stocks and constrained supply growth Western copper stocks thousand tonnes Western world copper mine production monthly, annualised million tonnes 1,8 1,6 1,4 1,2 1, Exchange Producers and consumers percent per annum growth in mine production between Source: WBMS, LME, NYMEX, WBMS, Chinese trade statistics 15 October 29 MF Global Conference 14

15 ## ## #, Chinese steel production is responding to recovery in construction activity and infrastructure spending and driving spot iron ore prices Residential construction and apparent steel consumption in China percent yoy (3 month moving average) Apparent steel consumption (1) Floor space under construction Iron ore spot price and domestic Chinese mine production percent yoy (3 month moving average) Spot iron ore price (RHS) $ per tonne (63.5% Fe, cfr China) May 8 Sep 8 9 May 9 Sep 9 6 (5) Domestic iron ore 4 (1) production (LHS) 2 (2) (15) Source: World Steel Association, Chinese trade statistics, Reuters Ecowin 15 October 29 MF Global Conference 15

16 4 # * ## Refined copper consumption and real copper price 2 18 Consumption/production (million tonnes) Price (c/lb in real 29$) 9 Production Price Consumption Source: LME, Brook Hunt, Rio Tinto 15 October 29 MF Global Conference 16

17 5 # * ##*#6# Global population distribution and per capita copper consumption Population distribution (millions by income group) 2, 1,8 1,6 India 28 China 28 India 225 China 225 Copper consumption (kg/capita) Copper Consumption ,4 1,2 China est. 225 copper consumption 8 1, China 28 copper consumption India 225 copper consumption 28 Population Distribution 225 Population Distribution , 1, 15, 2, 25, 3, 35, 4, 45, 5, 55, 6, India 28 copper consumption GDP per capita Source: Brook Hunt, Ecowin, World Bank, Rio Tinto estimates (in 26 US$ at PPP) 15 October 29 MF Global Conference 17

18 * Urbanisation rates across Asia, the United States and European Union in 28 1 Urbanisation rates, income and population Urbanisation rate (percent) China EU15 Japan National averages Chinese provinces United States 2 India Note: Size of bubble reflects total population 1, 2, 3, 4, 5, GDP per capita (US$ at PPP rates in 26 terms) Source: Global Insight, CIA Factbook 15 October 29 MF Global Conference 18

19 7#3$8)-' ## ###9 8 7 Capital spending by non-ferrous mining sector ($billion in 29 terms) Future sustaining and new capital spending requirement ($billion in 29 terms) Estimates for 29 industry capex $26-55bn 6 5 Other Fertiliser Traded energy Precious metals Aluminium 3 2 Steel raw materials 2 1 Base metals Note: Base metals consists of cobalt, copper, lead, manganese, molybdenum, nickel, tin and zinc Steel making consists of seaborne coking coal and seaborne iron ore Aluminium consists of alumina refining and aluminium smelting Precious metals consists of gold, silver, PGMs and diamonds Energy consists of seaborne thermal coal and uranium Based on current unit capital costs and Rio Tinto demand projections and assuming sustaining capital at 4% of revenue. Sources: MICA (CRU), Rio Tinto estimates 15 October 29 MF Global Conference

20 9 : ## : Increasing depth... Underground copper production 1 (% of global production) decreasing grade Copper Industry average grade 1 (% Cu) and higher risk Current production and project capacity in high risk 2 regions 4% 1.17% 1.3% 2% 26% 12% Current New Projects % Global production % New project capacity Notes: 1 Existing mines and funded projects 2 Rio Tinto classification Source: Brook Hunt Q October 29 MF Global Conference 2

21 9 :1* # Long run upwards pressure on Chinese costs will support long run aluminium prices 9, 8, 7, 6, 5, 4, 3, 2, 1, Chinese electricity generation requirements TWh Chinese smelters will face increasing competition for access to power Renminbi appreciation is expected to resume once export market conditions stabilise Carbon pricing will lead to upwards industry cost and price pressure and benefit low carbon sources of production Source: IEA World Energy Outlook (28) 15 October 29 MF Global Conference 21

22 Spot metals prices are 4-12% above Q1 cyclical lows but remain well under previous peaks Stimulus spending, loans growth and stocking activities in China provided initial basis for recovery Could see some pay-back for this in coming months but may be offset by normalisation in developed world consumption levels Strong longer run fundamentals remain intact 15 October 29 MF Global Conference 22