Rio Tinto Investor Seminar
Tuesday, 20 September 2011 11:31 AM
Rio Tinto is holding an investor seminar in London and New York today with an in-depth look at its Copper and Energy product groups.
Highlights from the presentations:
• Rio Tinto’s growth programme is well underway with work progressing on $27 billion of major capital projects, and a $35 billion pipeline of high-quality, unapproved projects currently in the advanced-study phase.
• Growth projects are well balanced between brownfield expansion of existing assets such as iron ore in the Pilbara and newer, world-class quality projects including coal in Mozambique and copper-gold in Mongolia.
• Rio Tinto’s order books are full and commodity prices remain robust. However, customer sentiment is now more cautious and physical markets are softer than they were six months ago, reflecting concerns over the health of the OECD economies and persistent volatility in financial markets.
• Rio Tinto’s estimated net debt as at 31 August was $7.6 billion1, a reduction of $1 billion since 30 June. This has been achieved despite the accelerated share buyback programme and continued investment in growth.
• More than $4 billion of Rio Tinto’s $7 billion share buy-back programme has now been completed.
Rio Tinto chief executive Tom Albanese said “We’ve been saying for quite some time that we expected to see patterns of increased price volatility amidst turbulent financial markets and that scenario is playing out.
“Our order books are full and pricing is strong, but it is noticeable that markets are somewhat weaker than they were six months ago. We are realistic and well-positioned for any number of scenarios – our high-quality growth programme is in full swing to capture the expected increases in longer-term demand, and our balance sheet is very strong and well able to withstand any near-term decline.
“Our long-term view of demand growth is unchanged. As the metal-hungry developing economies grow, demand for copper, aluminium and iron ore will double over 15 to 20 years.
“But challenges on the supply side are limiting the speed of new supply to market. Project finance is tight because of the current market jitters. Permitting delays, labour and equipment shortages, and technically-challenging ore bodies are all contributing factors.
“With Rio Tinto’s exceptional growth projects in a range of countries and commodities, coupled with our leadership in new technologies, we are in an advantageous position.”
Rio Tinto chief financial officer Guy Elliott said “Our balance sheet is robust, monthly cash flow generation remains high and we are able to access debt markets at competitive rates, as we demonstrated just last week with an attractively-priced bond issue.
“Our prudent balance sheet and single A credit rating are highly beneficial, particularly in challenging markets. This approach means we have been able to pursue our strategy of targeted acquisitions and shareholder returns without interruption, successfully completing the Riversdale acquisition in August.”
Other key topics that will be covered at the seminar include:
Group
• While there has been evidence of destocking in China as a result of credit tightening and growth rates continue to slow from very high levels, a policy-induced hard landing remains unlikely this year. Demand growth remains high as the development of provincial cities ramps up and the longer term outlook for Chinese demand is positive.
• Growth across the portfolio includes:
o iron ore is expected to grow by 50 per cent in the five years to 2015
o Oyu Tolgoi first commercial production anticipated in 2013
o production from Australian coal operations will expand by around 50 per cent by 2015 to around 73 million tonnes combined with a strategic objective to grow the Mozambique assets to 25 million tonnes per annum of coking coal by 2020
o in alumina, growth will come from the commissioning of Yarwun 2
• The mining industry continues to face rising pressure as the price of labour and key equipment escalates. Rio Tinto remains a low cash cost producer.
Copper
• Rio Tinto is ramping up production from 2011 as grades improve from our existing operations and with commencement of commercial production from Oyu Tolgoi in 2013 resulting in a compound annual growth rate of about eight per cent for the copper division from 2010 to 2015.
• Rio Tinto Copper has a broad range of high quality projects from brownfield expansion at KUC and Northparkes to some of the largest greenfield projects in the industry at Oyu Tolgoi, Resolution and La Granja.
• Rio Tinto is introducing step-change underground mine technology that gives access to more copper, sooner and with greater efficiencies. Projects include a new tunnel-boring system, which will be piloted in Quarter 3 2012, and a new technology to reduce the energy needed to recover metal from ore which will be piloted in Quarter 2 2012.
Energy
• Australian coal operations have largely recovered from the floods in early 2011, ramping up with an expected compound growth rate of over six per cent to 2015.
• In Mozambique, the Riversdale acquisition, renamed Rio Tinto Coal Mozambique, provides an opportunity for more than 50 years of sustainable growth, with Benga Stage One on track to be commissioned by year-end.
• The Kestrel Mine Extension is well advanced and will extend the life of the mine to 2032. Following the completion of a recent assessment the capital costs of the project have been increased to $2 billion (previously $1.1 billion). The increase is largely from the strength of the Australian dollar and mining inflation since the project was postponed during the global financial crisis.
All currency figures in this report are US dollars
Notes to editors
1. Estimated net debt is unaudited.
2. The seminar will be webcast at 2.30pm BST/09.30am EST and can be accessed on www.riotinto.com. Replays will be available after the close of the seminar.
3. Presentations will be made by Tom Albanese, chief executive, Guy Elliott, chief financial officer, Andrew Harding, chief executive, Copper and Doug Ritchie, chief executive, Energy.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto's business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.
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Bryan Tucker
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Mark Shannon
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David Ovington
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Investor Relations, North America
Jason Combes
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Investor Relations, Australia
Dave Skinner
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Christopher Maitland
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