Mike Jolley – President Director PT Rio Tinto
Indonesia
China Nickel 2008 – 28th May 2008,
Shanghai
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presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following
conditions.
Forward looking statements
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amended, and Section 21E of the Security Exchange Act, as amended. 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.
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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 "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. Rio Tinto expressly disclaims any obligation or undertaking
(except as required by applicable law, the City Code on Takeovers and Mergers (the “Takeover Code”), the UK Listing
Rules, the Disclosure and Transparency Rules of the Financial Services Authority and the Listing Rules of the Australian
Securities Exchange) to release publicly any updates or revisions to any forward-looking statement contained herein to
reflect any change in Rio Tinto’s expectations with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
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.
1
Aluminium
Copper
Diamonds
Energy
Iron Ore
Industrial Minerals
2
Underlying earnings*
Earnings by commodity
(2007)
7.34
7.44
US$bn
Diamonds &
Industrial
Minerals 6%
Energy 6%
6
5.0
Aluminium
13%
Copper 43%
4
2.3
2
1.1
1.3
1.5
1.7
1.5
1.4
Iron Ore
32%
0
98
99
'00
'01
'02
'03
'04
'05
'06
'07
* 1998 to 2003 data are adjusted earnings under UKGAAP. From 2004, data are underlying earnings under
IFRS.
Source: Rio Tinto
3
!
Ability to strike deals
• Rio Tinto has an extensive history of creative deal-making
– Alcan - aluminium
– Oyu Tolgoi, Mongolia – copper
– Simandou, Guinea, West Africa – iron ore
Project expertise
• Pilbara, Western Australia – iron ore
• Yarwun, Queensland – alumina refinery
• Hail Creek, Queensland – coal mine
Operational synergies
• Nickel mining has synergies with Rio Tinto’s existing
operations and expertise
Source:Rio Tinto
4
" # "$%
&
World GDP
2000 terms, PPP basis, USD Trillions
Developing
Developed
CAGR
4.3%
140
2005-25
forecast
Rest of world
India
100
3.5%
80
South America
Asia Pacific developed
Europe
40
20
1975
5.0
6.5
China
54
60
0
1975-05
actual
125
120
20
CAGR
%
2.6
2.7
North America
2005
2025
Source: World Bank for 1975 and 2005 data; Global Insight for growth estimates to 2025; Rio Tinto Economics
5
'
(
2007 Population
Distribution
2007
Expenditure per capita
US$ (2007 terms)
2022
30%
6
25%
5
20%
4
15%
3
10%
2
5%
1
0%
Nickel
0
5,000
10,000
15,000
20,000
25,000
30,000
Average income per capita
35,000
40,000
0
45,000
GDP per capita
(in 2000 US$)
Note: Expenditure profile is based on Rio Tinto estimates of global income and consumption relationships and average real terms
prices between 1990-2006.
Source: Global Insight for population distribution: Rio Tinto estimates for nickel expenditure profiles.
6
'
(
)*
+
,
&
Nickel demand under various scenarios
Ktpa
2007-15 2015-25
4,500
4,000
3,500
3,000
CAGR, Percent
Upside
6.2
6.1
5.1
4.3
Rio Tinto
Rio Tinto
Base
case
Brook Hunt
2,500
2,000
1,500
1,000
500
0
2005
2010
Source: Global Insight: Rio Tinto; Brook Hunt
2015
2020
2025
7
-
&
Demand
Nickel supply and demand balance, Ktpa
3000
2500
2000
1500
1000
500
Nickel pig iron
Projects in
base case
Base case
refined output
• Delays in bringing new supply online
are likely, due to:
– Increased project costs and
equipment shortages
– Increased labour and local
resident disputes.
• Laterite nickel is particularly affected
because production is very large
scale, with a large environmental
footprint, and high capital
requirements including co-located
processing facilities
• Nickel pig iron is small-scale, very
high cost marginal production. Ni pig
iron production will likely decline as
supply increases from conventional
sources to meet excess demand
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: Brook Hunt, Rio Tinto analysis
8
&
.
&
*
*
Current assets
Eagle Project – high grade ore
body with exceptional value per
ton of ore and exiting upside
prospects
Source: Rio Tinto
Sulawesi Project – large
scale, high grade laterite
opportunity – one of the
largest undeveloped nickel
deposits
9
#
(
Active exploration
Under review
No present interest
Mid Continent
Lakeview
•
Project stage
Order of Magnitude
•
Exploration Results
42 drill holes outline an
initial mineralised zone
Brazil
Namibia
Programme
B13 Nickel
Bushveld
Advanced Project
•
Target Testing
Project of Merit
•
Source: Rio Tinto
Project stage
Exploration Results
55 historical drill holes outline an
initial mineralisation zone,
drilling about to commence
10
/
& &
*
*
&
Overview
Ore grade
• Very high grade ore deposit
• Major optionality
• Strategic location
World’s undeveloped nickel resources
Ni equiv. grade (%)
5
Key statistics (attributable basis)
Competitors 2
Eagle1
Rio Tinto share (%)
4
100
2010
First production expected
3
Base case annual production (ktpa)
16
Initial capex for base case ($billion)
0.3
2
1
Production profile
Note: bubble size reflects total potential annual capacity
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
25
20
15
10
5
0
ktpa
-
Contained Ni equiv
MTonnes
2010
11
12
13
14
Nickel equivalent calculated using long term analyst consensus metal prices 14 May 2008 – US$6.32/lb Ni, US$1.55/lb Cu, US$9.4/lb Co,
Source: 1. Rio Tinto Annual Report 2007, Eagle has Probable Ore Reserves of 3.2Mtonnes @ 3.89% Ni 2. Competitor projects – Brook
Hunt.
15
16
11
'
.
12
0
&
'
% !
• In 1999 Approval in Principle given to negotiate a Contract of Work.
• In 2000, laterite nickel deposit discovered straddling the border of the Central and
South East Sulawesi Provinces of Indonesia.
• Currently ranks as one of the largest known undeveloped laterite nickel deposits in
the world.
• Progress on the negotiation stalled by discussion over the draft mining law. “Interim
Mechanism” decree issued by the Minister of Energy and Mineral Resources in 2004.
• Negotiations with the Government to persist with the CoW stance since early 2005.
• Discussions with the regional governments on relevant clauses of the CoW have
commenced.
• When this process is complete the CoW will be submitted to the Indonesian
parliament for review.
• The Central Government committed to complete negotiation of the CoW before the
new mining law is introduced.
Source: Rio Tinto
13
1
!
Overview
Overview
Key statistics (attributable basis)
• Large scale, low cost, high grade laterite
Rio Tinto share (%)
•
First production expected
opportunity
One of the world’s largest undeveloped
nickel opportunities, with potential further
regional deposits of a similar size
#
100
2015
Base case annual production (ktpa)
46
Expansion case annual production (ktpa)
39
Sulawesi Nickel Inferred Resource1
• Total Resource: 162Mt @ 1.62% Ni and 0.08% Co
Potential Production profile
Tonnes, Thousands
100
80
60
40
20
0
Expansion
Base case
Source: Rio Tinto, 1: Rio Tinto Sulawesi Nickel Resource press release, 28 May 2008. To date the Sulawesi project does not have any defined Ore
Reserves, accordingly, the projected levels of production shown in the ‘Base Case’ and ‘Expansion’ profiles are conceptual in nature and
subject to identification of sufficient Ore Reserves to support these production levels.
14
World’s Undeveloped
Nickel Resources
5
Competitors3
RT Projects
Eagle1
Ni Equiv. Grade (%)
4
3
Sulawesi
Nickel2
2
1
Note: bubble size reflects total potential annual capacity
0
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Contained Ni Equiv. (ktonnes)
Nickel equivalent calculated using long term analyst consensus metal prices 14 May 2008 – US$6.32/lb Ni, US$1.55/lb Cu, US$9.4/lb Co,
Source: 1. Rio Tinto Annual Report 2007, 2. Rio Tinto Sulawesi Nickel Resource press release, 28 May 2008, There are currently no Reserves and /
or Measured / Indicated Resources for Sulawesi 3. Competitor projects – Brook Hunt.
15
#
&
&
!
Overview
• Rio Tinto is a world leader in sustainable development.
• Initial feasibility study work will focus on
exploration, environmental and community base
line studies.
• Rio Tinto is already active in the provinces.
$500,000 has been committed to community
development work, the first phase of which was
$250,000 for emergency relief and the relocation
of a village that was destroyed in floods that
ravaged the Central Sulawesi Province in 2007.
Source: Rio Tinto
16
&
#
2
Kelian
Kaltim Prima
Coal
Grasberg
Sulawesi
Source: Rio Tinto
17
(
• Since Reformasi, the fall of Soeharto, in 1998, Indonesia has gone through
much change.
• It has held two free elections, in 1999 and 2004, both with >90% turnout.
• The unitary state of Indonesia is increasingly cohesive. It has a good record
in controlling international terrorism, and calls for regional separatism are
fading.
• This period has not been without its turmoil, with 4 Presidents between
1998 and 2004.
• Susilo Bambang Yudhoyono unchallenged in the Presidency since 2004
and remains the most popular candidate ahead of the 2009 election.
• Socially, Indonesia is now a moderate Moslem society with largely tolerant
and pluralistic attitudes,
18
Overview
Asian recovery is clearly evident
GDP profile is still building and displays upward momentum
Growth is led by strong export growth and fixed capital investment
Investors have regained confidence as can be seen in trend of growth in FDI
% change over year ago
10
7.2
7.3
7.5
8.2
10
7.8
5.4
4.7
5
3.6
4.5
4.8
5.0
5.7
5.5
6.3
6.1
6
0.8
-
1992 1993 1994
1995 1996 1997 1998
1999 2000 2001
-5
8
4
2002 2003 2004 2005
2006 2007 2008
2
(2)
-10
(4)
-15
-13.1
Source: Global Insight, note: historical data edge is 2006 for GDP and FDI data
Foreign Direct Investment: inflow
%
Billions current US$
Real GDP Growth 1992 – 2008
•
•
•
•
(6)
e
19
&
1
*
*
&
Prospectivity
Attractive
100
Australia
90
80
Canada
70
USA
60
Brazil
• Macroeconomic growth
indicators suggest Indonesia
is doing well
• Mining industry is lagging
• Regional autonomy has
devolved power and authority
to the regions
Mexico
50
40
Unattractive
Policy Potential Index (Investment Conditions)
Policy Potential / Prospectivity
South
Africa
30
Peru
20
Indonesia
10
60
70
80
Note: Size of bubble represents spending (US$ 20M)
Low
90
100
US$
20M
High
Mineral Potential Index (Prospectivity)
Source: Fraser Institute, MEG.
20
&
&
Overview
• Development of the law and regulation – a long period of
uncertainty ahead
• Existing Contracts of Work – how will they be treated under the new
law?
• Disjunctive title – does the new law provide security of tenure?
• Regional autonomy – does the new law clearly define the
delineation of authority between central and regional governments?
• Uncertainty as to whether the new mining law will unlock the
potential of the mining industry in Indonesia.
21
• Rio Tinto - a world class miner with world class results
• Rio Tinto continuing to add value across future projects
• Rio Tinto has the capability and expertise to deliver
• The nickel market fundamentals are strong
• Rio Tinto is developing a strong portfolio of nickel assets
• Sulawesi is a great asset
• Rio Tinto is well positioned to deliver the Sulawesi project
22
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% !
23