The Pilbara Blend Bold Baatar, managing director, Iron Ore Sales - PowerPoint PPT Presentation

The Pilbara Blend Bold Baatar, managing director, Iron Ore Sales & Marketing and Marine Singapore Iron Ore Week 19 May 2016 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 presentation 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 market 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 The market Our Pilbara business The Pilbara Blend Weakness in China and developed markets impacted ore demand in 2015 China’s net steel exports stable at ~100Mt/a Developed market weakness impacted ex-China Million tonnes annualised Million tonnes annualised 2014 World ex-China crude steel production 1,000 1,000 China steel consumption China steel net exports 800 800 600 600 400 400 200 200 0 0 2014 H1-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 2014 H1-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 China’s imported ore remained steady Majors accounted for ~51% of 2015 supply Million tonnes annualised Percentage of contestable iron ore market Domestic ore consumption* 1,600 Imported ore consumption Domestic share (3MMA, RH axis) Rio Tinto 19% 23% = 51% 1,200 BHP Billiton Vale ~1.7 25% 21% 21% 21% 20% 20% 800 19% billion 19% 15% FMG tonnes 16% = 49% China Rest of market 400 17% 10% 0 2014 H1-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 * Total Iron ore requirements – imported ore consumption Source: Company reports, GTA, WSA, Mysteel and Rio Tinto analysis.

4 The market Our Pilbara business The Pilbara Blend High-cost iron ore supply continues to exit the market Iron ore market balance • There was ~110Mt of additional low cost ore Million tonnes supply added to the market in 2015, 1,900 displacing higher cost ores 1,850 • We expect new supply entering the market in 1,800 -95 110 1,750 2016 to be offset by continued exits of -35 -20 marginal production 1,700 1,650 • Seasonally low steel stocks at traders and 1,600 0 mills - limiting downside to steel demand 2014 New Marginal China 2015 Demand vs 2014 Supply Seaborne supply China’s iron ore production China steel stocks at traders and mills Million tonnes Million tonnes 40 2012-2015 2016 35 30 25 20 15 10 5 - W1 W11 W21 W31 W41 W51 CY2014 Production (Mt) CY2015 Production (Mt) Source: Mysteel, CISA, Rio Tinto Analysis

5 The market Our Pilbara business The Pilbara Blend China’s steel mill profit margins have improved considerably this year, stimulating production China’s crude steel production breakdown China steel mill profit margins RMB/tonne Million tonnes annualised 800 China steel consumption China steel net export 900 700 864 Private Billet Margin 852 842 850 600 Private Rebar Margin 819 500 SOE HRC Margin 104 800 110 98 400 756 755 115 750 300 200 97 700 112 100 760 650 744 0 742 704 -100 658 600 645 -200 550 -300 1H15 2H15 Jan-16 Feb-16 Mar-16 Apr-16 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Source: Mysteel, RTIO Analysis • Chinese Government stimulus since mid-2015 in the form of lending, monetary easing, and support to property and infrastructure sectors, has boosted Chinese steel demand and prices • China’s steel demand and production increased in March and April

The market Our Pilbara business The Pilbara Blend 6 The Pilbara - a fully integrated system… Leading edge technology ~30TB analysed by the OC per month 1 Drill & Blast 2 Load & Haul 3 Process 4 Rail 5 Ship > 400 kilometres of > 12,000 kilometres ~1 billion tonnes > 15,000 kilometres > 300 million tonnes conveyors drilled each year rail travel per day rock moved per year ore shipped annually across the Pilbara RUSSIA Equivalent to the Enough to fill the MCG 8 times the length of Almost a return trip on the Cargo shipped through diameter of the earth every two days the Channel Tunnel Trans-Siberian railway the Panama Canal Note: approximate comparative estimates based on publically available information

7 The market Our Pilbara business The Pilbara Blend Blending consistently reduces variability Mines Port Terminals Products Stockpile stacking and reclaiming

8 The market Our Pilbara business The Pilbara Blend World class analysis and sampling 2015 product quality variability from mean • We ensure our customers get the Percentage Phosphorus Silica Alumina products we have promised • Cape Lambert B has the world’s largest fully automated iron ore port laboratory • Each shipment is sampled every two minutes and over eight tonnes Ship (post blend) Mine/Rail (pre blend) of material is collected and handled by robots that analyse chemistry, size and moisture, ensuring accurate invoicing Fully automated iron ore port laboratory at Cape Lambert B ensures world class analysis and sampling

9 The market Our Pilbara business The Pilbara Blend Pilbara Blend Fines is the industry reference iron ore Reported spot transactions • Spot liquidity is fundamental to 10 support price formation Delta to Platts 62% ($/dmt) 5 • The 62% Fe segment is the most liquid segment in the spot market 0 • PBF is the most traded product in -5 the 62% Fe market -10 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 • Anecdotally, some of our Platts 65% Fe Platts 62% Fe MBIO 58%+P 65% Transactions 62% Transactions 58% Transactions customers refer to the Pilbara Blend as the USD equivalent in the Reported spot transactions of 62% Fe products iron ore industry 48 72 • PBF spot price outcomes 189 233 consistently outperform the market on a fixed price and floating price 360 basis 355 2015 2016 YTD annualised PBF Other Aust. 62% Fe fines Brazilian 62.5% fines Source: S&P Platts, Metal Bulletin, Argus, Rio Tinto analysis

10 The market Our Pilbara business The Pilbara Blend Lump is an important value driver Jan-Apr 2016 iron ore price range • Premium lump products remain in US$/dmt CFR scarce supply 100 80 • The YTD Platts lump premium has 60 averaged ~$8/dmt above the 62% Ave: $59 Ave: $51 40 Fe index 20 • Lump demand in China should 0 62% index Lump outperform iron ore growth due to: Major iron ore lump products in 2015 − Exit of domestic concentrate Million tonnes − Evolving burden practises 100 PBL 80 − Increased environmental regulation 60 • Rio Tinto is the largest supplier of 40 lump with 89 Mt of Pilbara Blend 20 lump and Robe Valley lump RVL 0 shipped in 2015 Rio Tinto Peer 1 Peer 2 Source (top): S&P Platts Source (bottom): Company reports, Rio Tinto analysis