Rio Tinto Iron and Titanium At TZMI Congress


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Presentation by Harry Kenyon-Slaney, Managing Director Rio Tinto Iron & Titanium, at TZMI Congress, 22 October 2009

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Rio Tinto Iron and Titanium At TZMI Congress

  1. 1. TiO 2 feedstocks: A view into the future Presentation to TZMI Congress, Singapore, 22 October 2009 Harry Kenyon-Slaney Managing Director Rio Tinto Iron & Titanium
  2. 2. Cautionary statement <ul><li>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. </li></ul><ul><li>Forward-Looking Statements </li></ul><ul><li>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. </li></ul><ul><li>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 &quot;SEC&quot;) 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. </li></ul><ul><li>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. </li></ul>
  3. 3. Presentation outline <ul><li>Business updates at RBM and RTF&T </li></ul><ul><li>QMM – Why sustainable development is so important </li></ul><ul><li>TiO 2 industry – a comparison with other commodities </li></ul>
  4. 4. Richards Bay Minerals <ul><li>Production tailored to market demand </li></ul><ul><li>Rebuild and expansion of SF4 complete </li></ul><ul><li>Construction of a Tailings Treatment Plant underway </li></ul><ul><li>Evaluation of cogeneration continuing </li></ul><ul><li>Empowerment transaction nearing completion </li></ul>
  5. 5. Rio Tinto Fer et Titane (RTF&T) <ul><li>SF8 and SF9 reconfigured to process Madagascan ilmenite </li></ul><ul><li>91% TiO 2 Chloride Slag delivered to market </li></ul><ul><li>8 week plant shutdown over summer </li></ul>
  6. 6. QMM is now a reality <ul><li>First ilmenite shipment to Sorel May 2009 </li></ul><ul><li>First chloride slag shipment July 2009 </li></ul><ul><li>Ramp up in line with market demand </li></ul>
  7. 7. Commitment to sustainable development makes us a partner of choice around the world Last 10 years 1998-2007 14.2 <ul><ul><li>Energy and climate change </li></ul></ul><ul><ul><li>Land management </li></ul></ul><ul><ul><li>Biodiversity </li></ul></ul><ul><ul><li>Water management </li></ul></ul><ul><ul><li>Safety </li></ul></ul><ul><ul><li>Health </li></ul></ul><ul><ul><li>Community engagement </li></ul></ul>Environmental stewardship Social well-being <ul><ul><li>Business integrity </li></ul></ul><ul><ul><li>Human rights </li></ul></ul><ul><ul><li>Stakeholder engagement </li></ul></ul><ul><ul><li>Sovereign risk </li></ul></ul><ul><ul><li>Closure and legacy </li></ul></ul>Strong governance Economic prosperity <ul><ul><li>Financial performance </li></ul></ul><ul><ul><li>Socio-economic development </li></ul></ul><ul><ul><li>Supply chain management </li></ul></ul>
  8. 8. QMM’s experience: Environmental stewardship
  9. 9. QMM’s experience: Social well-being
  10. 10. QMM’s experience: Economic prosperity
  11. 11. QMM’s experience: Strong governance
  12. 12. Demand for TiO 2 is still set to increase strongly as the developing world moves from infrastructure to urbanisation GDP per capita 2000 US$ PPP Percentage of saturation level* Diamonds*** Aluminium Crude Steel Copper Salt Titanium Dioxide Zinc Nickel * Saturation level – point at which consumption per capita does not increase with income levels ** Population income distribution is in market exchange rate terms *** Diamonds is classed as a luxury good and hence saturation levels are not reached within the specified time period Source: Rio Tinto
  13. 13. The long term story remains intact: Urbanisation in developing economies will not be derailed by the current downturn Source: Global Insight, CIA Factbook Urbanisation rates across Asia, the United States and European Union in 2008 Urbanisation rates, income and population Note: Size of bubble reflects total population United States Japan India EU15 China China by Province
  14. 14. Lessons from other commodities: Costs and prices have risen in iron ore… Iron ore mining cost curves and prices Source: CRU, Rio Tinto. Cost curves shown up to the marginal tonne. * Annual benchmark for iron ore fines
  15. 15. …and alumina… Alumina cost curves and prices Source: CRU, Rio Tinto. Cost curves shown up to the marginal tonne. * Average FOB spot price Australia, (2008 price 1H)
  16. 16. And in copper the price increased in excess of the costs …. Source: Data is indexed, 2002 = 100 Brook Hunt, * Annual average LME cash price Cost Price
  17. 17. … so what is wrong with the TiO2 feedstock industry? Source: TZMI, Rio Tinto Data is indexed, 2002 = 100. ! Cost Price
  18. 18. The end producer has realised price rises but this has not flowed down the value chain Source: US Bureau of Labour Statistics, Rio Tinto Index - Real $2009
  19. 19. How will the TiO 2 feedstock industry remain viable ? <ul><li>Investment is a precursor to a healthy industry </li></ul><ul><li>Current returns do not justify reinvestment </li></ul><ul><li>Staying power is needed to be ready for the upturn </li></ul><ul><ul><li>Rigorous working capital management </li></ul></ul><ul><ul><li>Strong cost control </li></ul></ul><ul><ul><li>Retain growth options </li></ul></ul><ul><ul><li>Supply both sulphate and chloride sectors </li></ul></ul>
  20. 20. Concluding remarks <ul><li>RBM and RTF&T have taken action to address impact of the global economic crisis </li></ul><ul><li>Demand is weak but will recover as consumer confidence returns </li></ul><ul><li>QMM is an outstanding resource – but don’t underestimate the challenge of bringing on a project in a developing country </li></ul><ul><li>Producers across the supply chain need to make an adequate return on investment for the industry to satisfy future demand </li></ul>