Delivering value through the cycle Michael Gollschewski, managing - PowerPoint PPT Presentation

Delivering value through the cycle Michael Gollschewski, managing director Pilbara Mines Global Iron Ore & Steel Forecast Conference 8 March 2016, Hyatt Regency, Perth First iron ore shipment from Dampier August 1966

2 Cautionary statement This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this present ation you acknowledge that you have read and understood the following statement. Forward-looking statements This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, “target”, “set to” or similar expressions, commonly identify such forward-looking statements. Examples of forward-looking statements include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this presentation. For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on marke t prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty. In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward- looking statements which speak only as to the date of this presentation. Except as required by applicable regulations or by law, the Rio Tinto Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward-looking statements will not differ materially from actual results. In this presentation all figures are US dollars unless stated otherwise. Disclaimer Neither this presentation, nor the question and answer session, nor any part thereof, may be recorded, transcribed, distributed, published or reproduced in any form, except as permitted by Rio Tinto. By accessing/ attending this presentation, you agree with the foregoing and, upon request, you will promptly return any records or transcripts at the presentation without retaining any copies. This presentation contains a number of non-IFRS financial measures. Rio Tinto management considers these to be key financial performance indicators of the business and they are defined and/or reconciled in Rio Tinto’s annual results press release and/or Annual report.

3 Safety is fundamental to our business Iron Ore all injury frequency rate Per 200,000 hours worked 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Wellbeing 450 employees trained as peer supporters

4 The best iron ore business Rio Tinto Pilbara Iron Ore Key Achievements in FY15 • • Achieved an average FOB EBITDA margin of 69% Lowest cost producer in the Pilbara over last ten years • Exceptional earnings with EBITDA of 60%, despite • Tier 1 assets; Tier 1 people price falls • • System wholly owned and operated Record production • • Leading the market in innovation Continuous improvement in productivity Rio Tinto Pilbara EBITDA margin vs. iron ore spot price 2015 Wood Mackenzie iron ore cost curve (Mt/a) USD/wmt CFR 80% 180 140 EBITDA margin (FOB WA, US$/dmt) 120 60% Iron ore price 120 100 40% 80 60 20% 60 0% 0 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20 0 0 250 500 750 1000 1250 1500 RTIO Pilbara Price Source; Rio Tinto, Wood Mackenzie

5 High-cost supply continues to exit the market China domestic production Iron ore market balance Mt Liaoning Inner 100 100 Mongolia 1,900 National Total 100 Shanxi 50 50 350 32 50 0 0 1,850 5 0 275 -35 300 Hebei 100 1,800 110 250 50 -60 0 1,750 -35 Shandong -20 100 1,700 50 0 1,650 Anhui 100 50 Southwest 1,600 100 0 50 CY2014 0 Other Production ( Mt) Provinces 100 CY2015 Production (Mt) 50 0 • There was ~110Mt of additional low cost supply added to the market in 2015 • We expect new supply entering the market in 2016 to be offset by continued exits of marginal production • Rio Tinto’s share of the contestable iron ore market has remained fairly constant at ~18 % Source; Rio Tinto

6 Our strategy Production at the Value driven Maximising right cost investment portfolio value • Lowest cost producer in • Fully integrated system • 20% Productivity increase • World’s largest autonomous Pilbara • Reduced operating costs and FY15 truck operator • Average rail cycle time • Pilbara infrastructure project working capital • Tracked over 400 individual reduced from 42 hours to 35 completed on time in 2015 improvement initiatives hours Source; Rio Tinto, company reports

7 Production at the right cost Pilbara cash unit cost US$ per tonne • Relentless focus on cash 20.4 18.7 • H2 2015 cash unit cost of US$13.8/t 16.2 13.8 • Pre-tax cash cost improvements were US$428 million in 2015 H1 2014 H2 2014 H1 2015 H2 2015 • Cumulative saving of US$1.1 billion since compared with the 2012 base Haul truck engine life extension Hrs 40000 • Reduced working capital by more than 83% in 38000 35000 2015 30000 28000 25000 25000 22000 20000 15000 2013 2014 2015 2016 Source; Rio Tinto

8 Maximising the portfolio value Product options System optimisation • Consistent quality • Maximise output • Pilbara Blend • Quality specification Improved cycle time from • Understanding customer • Real time data & decisions 42 hours to 35 hours requirements High value initiatives • System-wide • Focused • Breakthrough improvement

9 Value driven investment Autonomous Haul Trucks Performance Nammuldi incremental investment Effective utilisation indexed to all manned sites 5 Mt/a, commenced 2015/2016 5 Mt/a, commencing in 2017 120.0% Access low phosphorous ore for Pilbara Blend RTVis 110.0% Improved utilisation of ore body Improved drill and blast accuracy Reduced explosive costs 100.0% Autonomous Trucks & Drills 13% improvement in load & haul costs 14% improvement in effective truck utilisation 90.0% 10% increase in drill availability Jan-15 Apr-15 Jul-15 Oct-15 Source; Rio Tinto

10 Looking forward • Safety is fundamental to our business • Our strategy remains clear and consistent • Tier one assets • Operating excellence • Returns to shareholders Cape Lambert ore train