MF Global Seminar, presentation by Neal Brewster, Rio Tinto Economics, 15 October 2009

1. Outlook for commodity markets Neal Brewster Rio Tinto Economics MF Global Seminar 15 October 2009

3. Global financial crisis has been the biggest shock to the world economy since the Second World War The Great Depression WW2 Note: Data prior to 1950 excludes Africa, Asia and Former Soviet Union Source: IMF, Rio Tinto 4.8% 2.5% 3.3% Clash of ideologies Post War OECD Growth Emergence of Developing Countries Maturing OECD Growth in global GDP (percent a year on purchasing power parity basis) Financial crisis Oil price shocks

4. In a “metals weighted” world the downturn is comparable to the early 1980’s and “dot-com” downturns Growth in industrial production (percent a year) OECD Global, weighted by share of metals consumption (1) Source: IMF, WBMS, CRU, Brook Hunt, Rio Tinto China’s share of world consumption (percent)

6. percent yoy, index Rapid pick up in Chinese economic activity Chinese industrial production and Purchasing Managers Index Industrial production* (LHS) PMI** (RHS) This may not matter for commodities if the strong Chinese recovery continues; but a longer term shift in the balance of its growth is required Source: Reuters Ecowin, Consensus Economics * 3 month moving average ** NBS series. Forward 1 month Chinese GDP growth percent yoy

7. Inland Chinese provinces have been the focus of Chinese infrastructure spending Production Volume Index Acceleration in investment growth in China Increase in fixed asset investment Jan-Aug 2009 Per cent yoy (bars denote relative growth) Source: Chinese National Bureau of Statistics Urban fixed asset investment percent yoy, 3 month moving average

8. Surge in Chinese imports during 2009 have been the driving force behind commodity markets offsetting fall in demand in other regions Source: Chinese trade statistics Iron ore Aluminum Copper Chinese net unwrought copper imports thousand tonnes a month Chinese iron ore imports million tonnes a month Chinese net unwrought aluminium imports thousand tonnes a month

9. Daily spot price index (2 October 2009 = 100) Minus 60-70% Plus 40-120% After a record decline in 2008H2 commodity prices have staged a strong recovery Source: Metal Bulletin, Reuters Ecowin US dollar has declined 11%

11. Aluminium : Prices in Q1 reflected excessive risk but large stock overhangs have developed World aluminium production and price-cost relationship Source: IAI, CRU, LME Western aluminium stocks Aluminium prices and costs million tonnes $ per tonne in real 2009 terms Median industry costs Spot aluminium price Exchange Producers

12. Consumption is now starting to recover but remains well below previous levels outside China World aluminium shipments Source Rio Tinto estimates Non-China monthly, million tonnes China monthly, million tonnes Year-to-date -29% Year-to-date +9%

13. Large smelter capacity overhangs remain both inside and outside China World aluminium production and capacity Source: IAI, WBMS, Rio Tinto estimates Western world monthly, annualised million tonnes Capacity Production China monthly, annualised million tonnes Capacity Production

14. Copper : Constrained supply and record Chinese imports pushed market back into deficit in H1 but destocking may be a short run negative Low copper stocks and constrained supply growth Source: WBMS, LME, NYMEX, WBMS, Chinese trade statistics Western copper stocks Western world copper mine production monthly, annualised million tonnes thousand tonnes Exchange Producers and consumers 1.1 percent per annum growth in mine production between 2005-9

15. Iron ore spot price and domestic Chinese mine production Chinese steel production is responding to recovery in construction activity and infrastructure spending and driving spot iron ore prices Iron ore : Current spot prices are supported by call on high cost marginal producers required to meet Chinese demand Source: World Steel Association, Chinese trade statistics, Reuters Ecowin Floor space under construction Apparent steel consumption Residential construction and apparent steel consumption in China percent yoy (3 month moving average) Domestic iron ore production (LHS) Spot iron ore price (RHS) $ per tonne (63.5% Fe, cfr China) percent yoy (3 month moving average)

16. Long run price levels are the outcome of a continuous tussle between demand and supply Refined copper consumption and real copper price Consumption Price Production Source: LME, Brook Hunt, Rio Tinto

17. GDP per capita (in 2006 US$ at PPP) Copper consumption (kg/capita) Population d istribution (millions by income group) Future metals consumption trends will be driven by growth in population and wealth in developing nations, particularly China and India Copper Consumption China 2025 India 2008 Global population distribution and per capita copper consumption India 2025 China 2008 China 2008 copper consumption China est. 2025 copper consumption India 2025 copper consumption India 2008 copper consumption Source: Brook Hunt, Ecowin, World Bank, Rio Tinto estimates 2008 Population Distribution 2025 Population Distribution

18. Industrialisation and urbanisation within China have some way to run 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

19. Metals consumption could double in next 15-20 years and implies sustained pressure on capital and people … Capital spending by non-ferrous mining sector ($billion in 2009 terms) Base metals Steel raw materials Aluminium Precious metals Traded energy Fertiliser Other Note: Base metals consists of cobalt, copper, lead, manganese, molybdenum, nickel, tin and zinc Steel making consists of seaborne coking coal and seaborne iron ore Aluminium consists of alumina refining and aluminium smelting Precious metals consists of gold, silver, PGMs and diamonds Energy consists of seaborne thermal coal and uranium Based on current unit capital costs and Rio Tinto demand projections and assuming sustaining capital at 4% of revenue. Sources: MICA (CRU), Rio Tinto estimates Estimates for 2009 industry capex $26-55bn Future sustaining and new capital spending requirement ($billion in 2009 terms)

20. … and resources. The location and grade of Copper ore will create challenges for the industry. Notes: 1 Existing mines and funded projects 2 Rio Tinto classification Source: Brook Hunt Q2 2009 Increasing depth . . . Underground copper production 1 (% of global production) … and higher risk Current production and project capacity in high risk 2 regions … decreasing grade… Copper Industry average grade 1 (% Cu) % Global production % New project capacity