20-F 1 d686920d20f.htm 20-F 20-F
Table of Contents











(Mark One)





For the fiscal year ended: 31 December 2013




For the transition period from:                      to                     




Date of event requiring this shell company report                     


Commission file number: 1-10533   Commission file number: 001-34121

Rio Tinto plc

  Rio Tinto Limited
  ABN 96 004 458 404
(Exact Name of Registrant as Specified in Its Charter)   (Exact Name of Registrant as Specified in Its Charter)

England and Wales

  Victoria, Australia
(Jurisdiction of Incorporation or Organisation)   (Jurisdiction of Incorporation or Organisation)

2 Eastbourne Terrace

  Level 33, 120 Collins Street

London, W2 6LG, United Kingdom

  Melbourne, Victoria 3000, Australia
(Address of Principal Executive Offices)   (Address of Principal Executive Offices)

Julie Parent, T: 514-848-8519, E: julie.parent@riotinto.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class


Name of Each Exchange

On Which Registered

   Title of Each Class    Name of Each Exchange
On Which Registered
American Depositary Shares*    New York Stock Exchange      
Ordinary Shares of 10p each**    New York Stock Exchange      
6.500% Notes due 2018    New York Stock Exchange    6.500% Notes due 2018    New York Stock Exchange
7.125% Notes due 2028    New York Stock Exchange    7.125% Notes due 2028    New York Stock Exchange
1.875% Notes due 2015    New York Stock Exchange    1.875% Notes due 2015    New York Stock Exchange
3.500% Notes due 2020    New York Stock Exchange    3.500% Notes due 2020    New York Stock Exchange
5.200% Notes due 2040    New York Stock Exchange    5.200% Notes due 2040    New York Stock Exchange
8.950% Notes due 2014    New York Stock Exchange    8.950% Notes due 2014    New York Stock Exchange
9.000% Notes due 2019    New York Stock Exchange    9.000% Notes due 2019    New York Stock Exchange
2.500% Notes due 2016    New York Stock Exchange    2.500% Notes due 2016    New York Stock Exchange
4.125% Notes due 2021    New York Stock Exchange    4.125% Notes due 2021    New York Stock Exchange
1.125% Notes due 2015    New York Stock Exchange    1.125% Notes due 2015    New York Stock Exchange
2.000% Notes due 2017    New York Stock Exchange    2.000% Notes due 2017    New York Stock Exchange
3.500% Notes due 2022    New York Stock Exchange    3.500% Notes due 2022    New York Stock Exchange
4.750% Notes due 2042    New York Stock Exchange    4.750% Notes due 2042    New York Stock Exchange
1.625% Notes due 2017    New York Stock Exchange    1.625% Notes due 2017    New York Stock Exchange
2.875% Notes due 2022    New York Stock Exchange    2.875% Notes due 2022    New York Stock Exchange
4.125% Notes due 2042    New York Stock Exchange    4.125% Notes due 2042    New York Stock Exchange
1.375% Notes due 2016    New York Stock Exchange    1.375% Notes due 2016    New York Stock Exchange
2.250% Notes due 2018    New York Stock Exchange    2.250% Notes due 2018    New York Stock Exchange
3.750% Notes due 2021    New York Stock Exchange    3.750% Notes due 2021    New York Stock Exchange
2.250% Notes due 2016    New York Stock Exchange    2.250% Notes due 2016    New York Stock Exchange
Floating Rate Notes due 2015    New York Stock Exchange    Floating Rate Notes due 2015    New York Stock Exchange
Floating Rate Notes due 2016    New York Stock Exchange    Floating Rate Notes due 2016    New York Stock Exchange


* Evidenced by American Depositary Receipts. Each American Depositary Share Represents one Rio Tinto plc Ordinary Shares of 10p each.
** Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

Securities registered or to be registered pursuant to Section 12(g) of the Act:


Title of Class


Title of Class Shares


Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:


None   None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:


Title of each class

   Number      Number     

Title of each class

Ordinary Shares of 10p each

     1,425,376,417         435,758,720       Shares

DLC Dividend Share of 10p

     1         1       DLC Dividend Share

Special Voting Share of 10p

     1         1       Special Voting Share

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*    Yes  x    No    ¨


* This requirement does not apply to the registrant until its fiscal year ending December 31, 2013.

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, or non-accelerated filers. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer    x    Accelerated Filer    ¨    Non-Accelerated Filer    ¨

Indicate by check mark which basis of accounting the registrants have used to prepare the financial statements included in this filing:




International Financial Reporting Standards as issued

by the International Accounting Standards Board  x

   Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrants have elected to follow:    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

This document comprises the annual report on Form 20-F and the annual report to shareholders for the year ended December 31, 2013 of Rio Tinto plc and Rio Tinto Limited (the 2013 Form 20-F). Reference is made to the cross reference to Form 20-F table on pages i to iii hereof (the Form 20-F Cross reference table). Only (i) the information in this document that is referenced in the Form 20-F Cross reference table, (ii) the cautionary statement concerning forward-looking statements on page v and (iii) the Exhibits, shall be deemed to be filed with the Securities and Exchange Commission for any purpose, including incorporation by reference into the Registration Statement on Form F-3 File No. 333-175037, and Registration Statements on Form S-8 File Nos. 333-184397, 33-46865, 333-8270, 333-7328, 333-13988, 333-147914 and 333-156093 and any other documents, including documents filed by Rio Tinto plc and Rio Tinto Limited pursuant to the Securities Act of 1933, as amended, which purport to incorporate by reference the 2013 Form 20-F. Any information herein which is not referenced in the Form 20-F Cross reference table, or the Exhibits themselves, shall not be deemed to be so incorporated by reference.




Table of Contents

Form 20-F Cross Reference Table


Item Number        Number Description    Report section reference  
1.    Identity of directors, senior management and advisors    Not applicable   
2.    Offer statistics and expected timetable    Not applicable   
3.    Key Information      
A    Selected financial information    Performance highlights      v   
      Five Year review      39   
      Dual listed companies structure      234   
      Dividend rights      234   
      Exchange rates      239-240   
B    Capitalisation and indebtedness    Not applicable   
C    Reasons for the offer and use of proceeds    Not applicable   
D    Risk factors    Risk factors      14-17   
4.    Information on the company      
A    History and development of the company    Shareholder information   

Organisational structure


Nomenclature and financial data



      Registered offices      245   

Directors’ report
Operating and financial review

      Divestments and acquisitions      13   
      Major capital projects      12   
      Key performance indicators      10-11   
      Rio Tinto financial information by business unit      197-199   
      Financial statements
    Note 2-Operating segments
B    Business overview    Strategic context      6   
      Group strategy and business model      7-8   
      Group overview      1-2   
      Key performance indicators      10-11   
      Additional financial information   

Iron Ore








Diamonds & Minerals


Financial statements

    Note 3-Operating segments - Additional

      Directors’ report   

Governmental regulations

C    Organisational structure    Financial statements   

Notes 33-36

D    Property, plant and equipment    Metals and minerals production      211-214   
      Ore reserves      215-224   
      Mines and production facilities      226-233   
      Financial statements   

Note 14-property, plant and equipment

4A.        Unresolved staff comments    None   
5.    Operating and financial review and prospects      
A    Operating results   





Diamond & Minerals




Iron Ore

      Sustainable development      18   
B    Liquidity and capital resources    Additional financial information   

Cash Flow


Statement of financial position

      Financial instruments and risk

Capital and liquidity risk management


Treasury management and financial


      Major capital projects      12   
      Financial statements   
          Note 30-Financial instruments and risk     management      158-167   



Table of Contents
Item Number        Number Description    Report section reference  
C    Research and development, patents and licenses      
      Exploration      36   
      Technology & Innovation      37   
D    Trend information    Group overview      1-2   
      Chairman’s letter      3-4   
      Chief executive’s statement      5   
E    Off-balance sheet arrangements    See item 5.A   

Additional financial information
Off balance sheet arrangements and
contractual commitments


Financial statements
Note 31-contingent liabilities and

F    Tabular disclosure of contractual obligations   

Additional financial information
Off balance sheet arrangements
and contractual commitments

6.    Directors, senior management and employees      
A    Directors and senior management    Board of directors      53-55   
      Executive committee      56   
B    Compensation    Remuneration report      68-108   
      Remuneration report tables      98-107   
C    Board practices    Board of directors      53-55   
      Executive committee      56   
      Corporate governance      57-67   
      Executives’ service contracts and termination      76   
      Position held and date of appointment to
      Treatment of STIP and LTIP on termination      76-77   
D    Employees   

Financial statements
Note 5-employment costs


Note 32-average number of employees


Director’s report
Employment policies and communication

E    Share ownership   

Remuneration report tables
Table 2

7.    Major shareholders and related party transactions      
A    Major shareholders   

Shareholder information
Substantial shareholders


Analysis of ordinary shareholders


Twenty largest registered shareholders

B    Related party transactions   

Financial statements
Note 40- related party transactions

C    Interests of experts and counsel    Not applicable   
8.    Financial Information      
A    Consolidated statements and other
financial information
   See Item 18 below   

Financial statements
Note 31- contingencies and commitments


Shareholder information

B    Significant changes   

Financial statements
Note 43-events after the statement
of financial position date

9.    The offer and listing      
A    Offer and listing details   

Shareholder information


Share price information

B    Plan of distribution   

Not applicable

C    Markets   

Shareholder information

D    Selling shareholders    Not applicable   
E    Dilution    Not applicable   
F    Expenses of the issue    Not applicable   



Table of Contents
Item Number        Number Description    Report section reference  
10.    Additional Information      
A    Share capital    Not applicable   
B    Memorandum and articles of association   

Shareholder information
Material contracts


Dual listed companies structure

C    Material contracts   

Shareholder information
Material contracts


Financial statements
Note 30 - Financial instruments and risk management

D    Exchange controls   

Shareholder information
Exchange controls and foreign investment

E    Taxation   

Shareholder information

F    Dividends and paying agents    Not applicable   
G    Statement by experts    Not applicable   
H    Documents on display    Shareholder information   

Document on display

I    Subsidiary information    Not applicable   
11.    Quantitative and qualitative disclosures about market risk    Financial review      38   
      Additional financial information      47-52   

Financial statements
Note 30 - Financial instruments and risk management


Cautionary statement about

forward looking statements








12.    Description of securities other than equity securities   

Shareholder information

13.    Defaults, dividend arrearages and delinquencies    Not applicable   
14.    Material modifications to the rights of security holders and use of proceeds    Not applicable   
15.    Controls and procedures   

Corporate governance
Financial reporting

      Report of independent registered public accounting firms      204   
A    Audit committee financial expert   

Corporate governance
Audit committee

B    Code of ethics   

Corporate governance
Other disclosures

C    Principal Accountant fees and services   

Director’s report
Fees for audit and non-audit services


Corporate governance
Governance process




Financial statements
Note 39-Auditors’ remuneration

D    Exemptions from the listing standards for audit committees    Not applicable   
E    Purchases of equity securities by the issuer and affiliated purchasers   

Directors’ report
Share capital



F    Change in Registrant’s Certifying Accountant    Not applicable   
G    Corporate Governance   

Corporate governance
Statement of compliance with governance codes and standards in 2013

H    Mine safety disclosure    Exhibit 99.1      18   
17.    Financial statements    Not applicable   
18.    Financial statements    Report of independent registered public accounting firms      204   
      Consolidated financial statements      110-201   
19.    Exhibits      

For this Annual report on Form 20-F, certain pages of the Annual report have been omitted. The Form 20-F is consistent with the page numbering of the Annual report.



Table of Contents









2013 Annual report

Delivering greater

value for shareholders

Strategic report


Performance highlights      IFC   
Group overview      1   
Chairman’s letter      3   
Chief executive’s statement      5   
Strategic context      6   
Group strategy      7   
Business model      9   
Key performance indicators      10   
Capital allocation      12   
Risk factors      14   
Sustainable development      18   
Product groups   





Diamonds & Minerals




Iron Ore

Exploration      36   
Technology & Innovation      37   
Financial review      38   
Five year review      39   

Directors’ report


Directors’ report      42   
Additional financial information      47   
Board of directors      53   
Executive committee      56   
Corporate governance      57   
Remuneration Report   

Annual statement by the Remuneration Committee chairman


Remuneration Policy Report


Remuneration Implementation Report


Financial statements


Group income statement      111   
Group statement of comprehensive income      112   
Group statement of cash flows      113   
Group statement of financial position      114   
Group statement of changes in equity      115   
Notes to the 2013 financial statements      118   
Financial information by business unit      197   
Australian Corporations Act –
Summary of ASIC relief
Report of independent registered public accounting firms      204   

Production, reserves and operations


Metals and minerals production      211   
Ore reserves      215   
Mines and production facilities      226   

Additional information


Shareholder information      234   
Financial calendar      244   
Contact details      IBC   



Table of Contents

Performance highlights

2013 financial results focus on greater value for shareholders

Rio Tinto’s strong results reflect the progress the Group is making to transform the business and demonstrate how it is fulfilling its commitments to improve performance, strengthen the balance sheet and deliver results. The Group achieved underlying earnings of US$10.2 billion, exceeded cost reduction targets and set production records. In turn, this has enhanced cash flow generation and lowered net debt. The 15 per cent increase in the dividend reflects Rio Tinto’s confidence in the business and its attractive prospects.


Underlying earnings of US$10.2 billion were up ten per cent on 2012.


Operating cash cost improvements of US$2.3 billion(a) exceeded the 2013 target of US$2.0 billion.


Exploration and evaluation savings delivered US$1 billion(a), against the 2013 target of US$750 million.


Production records set for iron ore, bauxite and thermal coal and a strong recovery in copper volumes. Iron ore volumes were bolstered by the completion in August of the Pilbara phase one infrastructure expansion in Western Australia to 290 Mt/a, with ramp-up on track to reach nameplate capacity before the end of the first half of 2014.


Net earnings of US$3.7 billion reflect non-cash exchange losses of US$2.9 billion and impairments of US$3.4 billion, notably the impairment of a previous non-cash accounting uplift on first consolidation of Oyu Tolgoi, a significant project cost overrun at Kitimat and the previously announced curtailment of the Gove alumina refinery.


Cash flows from operations of US$20.1 billion were up 22 per cent and capital expenditure was down 26 per cent to US$12.9 billion.


Net debt reduced to US$18.1 billion at 31 December 2013, US$4.0 billion down on the half year and US$1.1 billion down on the previous year end.


15 per cent increase in full year dividend to 192 US cents per share reflects the sustainable growth of the business.


(a)  Refer to cash costs, exploration and evaluation commentary on page 48, and corresponding reconciliation to profit for the year on page 47.


Year to 31 December 2013

(All amounts are US$ millions unless otherwise stated)

  2013     2012           Change  
Underlying earnings (b)     10,217        9,269        +10%   
Net earnings/loss (b)     3,665        (3,028  
Cash flows from operations           20,131        16,521        +22%   
Capital expenditure     12,944              17,575        -26%   
Underlying earnings per share – US cents     553.1        501.3        +10%   

Basic earnings/(loss) per share from continuing operations – US cents

    198.4        (163.4  
Ordinary dividends per share – US cents     192.0        167.0        +15%   

The financial results are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) and conform to IFRS as adopted by the European Union (EU IFRS).


(b) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlying business performance of the Group’s operations attributable to the owners of Rio Tinto. Net earnings and underlying earnings relate to profit attributable to owners of Rio Tinto. Underlying earnings is defined and reconciled to net earnings on pages 134 and 135. Comparative information has been restated to reflect a number of new accounting standards. Please see note 46 on page 191.



Rio Tinto is reducing the print run of this document to be more environmentally friendly.

We encourage you to visit: riotinto.com/reportingcentre2013





 Navigating through Rio Tinto’s

 Annual and Strategic report

As of 2013, the UK’s regulatory reporting framework requires companies to produce a strategic report. The intention is to provide investors with the option of receiving a document which is more concise than the full annual report, and which is strategic in its focus.

The first 40 pages of Rio Tinto’s 2013 Annual report constitute its 2013 Strategic report. References to page numbers beyond 40 are references to pages in the full 2013 Annual report. This is available online at riotinto.com/reportingcentre2013 or shareholders may obtain a hard copy free of charge by contacting Rio Tinto’s registrars, whose details are set out on the inside back cover of this document.

In light of the new regulatory requirement to produce a strategic report in lieu of summary financial statements, and the Group’s focus on delivering greater value for shareholders, Rio Tinto is no longer producing an Annual review. Please visit Rio Tinto’s website to learn more about the Group’s performance in 2013.



This Annual report, which includes the Group’s 2013 Strategic report, complies with Australian and UK reporting requirements.

Copies of Rio Tinto’s shareholder documents – the 2013 Annual report and 2013 Strategic report, along with the 2014 Notices of annual general meeting – are available to view on the Group’s website: riotinto.com

Cautionary statement about 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 in this Annual report 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 document that are beyond the Group’s control. 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 Annual report. Except as required by applicable regulations or by law, the 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.




Table of Contents

Group overview


Introduction to Rio Tinto

Rio Tinto is a leading global mining group that focuses on finding, mining and processing the Earth’s mineral resources. Our vision is to be a company that is admired and respected for delivering superior value, as the industry’s most trusted partner.

With a view to sustaining returns to shareholders over time, we take a long-term approach to our activities. This means concentrating on developing Tier 1 orebodies into long-life, low-cost, expandable operations that are capable of providing competitive returns throughout business cycles.

We have a diverse portfolio and a global presence: our 66,000 people work in more than 40 countries. Our five product groups summarised below are supported by our Exploration and Technology & Innovation groups (also see pages 26 to 37). We are committed to creating a culture of high performance – providing challenging work and opportunities to grow, and rewarding those who help deliver superior value.

Sustainable development is integrated into everything we do. Our operations give us the opportunity to bring long-lasting positive change to the communities, regions and countries in which we work, and our metals and minerals are transformed into end products that contribute to higher living standards.

The safety of our people, and our values – accountability, respect, teamwork and integrity – are at the core of our way of working. Our responsible approach to mineral development ensures we gain and maintain our licence to operate. It means we provide confidence to our stakeholders, and improve our access to the mineral resources, people and capital we need.

Aluminium product group

Building on more than a century of experience and expertise, Rio Tinto Alcan is a global leader in the aluminium industry. Our fully-integrated facilities include high-quality bauxite mines, large-scale alumina refineries, and some of the world’s lowest-cost, most technologically-advanced primary aluminium smelters.



Bauxite is the natural ore used to make aluminium. It is refined into alumina which is smelted into aluminium metal. Our wholly-owned and joint venture bauxite mines are located in Australia, Brazil and Guinea.


Alumina (aluminium oxide) is extracted from bauxite via a refining process. Approximately four tonnes of bauxite are required to produce two tonnes of alumina, which in turn makes one tonne of aluminium metal. Our wholly-owned and joint venture alumina refineries are located in Australia, Brazil and Canada.


Aluminium is a unique and versatile modern metal. Light, strong, flexible, non-corrosive and infinitely recyclable, aluminium is one of the most widely-used metals in the world. Its largest markets are transportation, machinery and construction. Our smelters are mainly concentrated in Canada. We also have plants in France, Australia, New Zealand, Cameroon, Iceland, Norway, the UK and Oman.

Strategic advantages


Access to the largest and best-quality bauxite ore reserves in the industry.


Strong hydropower position, which delivers significant cost and other advantages in today’s carbon-constrained world.


Rio Tinto Alcan has a first-quartile cost position for aluminium smelting, with industry-leading smelting technology, and a solid second-quartile cost position for alumina refining.


One of the lowest-cost quartile bauxite producers.
Key production locations   Key sales destinations
– Canada   – Asia
– Europe   – Americas
– Australia   – Europe


Full operating review on page 26.


Copper product group

Rio Tinto’s Copper product group is made up of four operating assets and two key development projects. Our operating assets are world-class and our project pipeline of longer-term opportunities will help ensure we will continue to be well positioned to meet demand for one of the world’s most sought-after resources.



The world uses more than 26 million tonnes of copper every year. It is malleable, durable, resistant to corrosion, hygienic and an excellent conductor of heat and electricity, making it useful in a broad range of building, construction and electrical applications. Copper is a metal at the forefront of green innovation. Hybrid and electric cars rely on it, as do renewable energy sources such as solar power, wind farms, thermal and hydroelectricity. Copper is known for its antibacterial properties and is increasingly used in hospitals and other medical facilities.


Gold’s conductivity and non-corrosive properties make it a vital fabrication material in technology, electronics, jewellery, space exploration and dentistry. We are one of the world’s top 15 gold producers, and the largest among the diversified miners. We have interests in two copper-gold mines that rank among the world’s largest gold resources, at Oyu Tolgoi and Grasberg.


Silver has very good electrical and thermal properties. It is used in many electrical and electronic applications, such as photovoltaic cells, and is the principal ingredient of x-ray film. Silver is also regarded as a precious metal used for investment and in jewellery.


Molybdenum is a metallic element frequently used to produce stainless steel and other metal alloys. It enhances the metal’s toughness, high-temperature strength and corrosion resistance.

Strategic advantages


A phased and structured approach to development investment, while maintaining optionality.


Participation in, and ownership of, large, long-life, low-cost and expandable assets, with the potential to generate substantial and sustainable value.


Industry-leading technology and innovation.


Key production locations   Key sales destinations
– US   – US
– Chile   – China
– Mongolia   – Japan
– Indonesia    


Full operating review on page 28.










Table of Contents

Group overview continued


Diamonds & Minerals product group

The Diamonds & Minerals product group comprises a suite of industry-leading, demand-led businesses, which include mining, refining and marketing operations across four sectors. Rio Tinto Diamonds is one of the world’s leading diamond producers, active in mining, manufacturing, selling, and marketing diamonds. Rio Tinto Minerals is a world leader in borates, with mines, processing plants, and commercial and research facilities. Dampier Salt is one of the world’s largest producers of seaborne salt. Rio Tinto Iron & Titanium is an industry leader in high-grade titanium dioxide feedstocks. The Diamonds & Minerals group also includes the Simandou iron ore project in Guinea, one of the largest known undeveloped high-grade iron ore resources in the world.



Diamonds are an important component in both affordable and higher-end jewellery. We are able to service both established and emerging markets as we produce the full range of diamonds in terms of size, quality and colour distribution.

Titanium dioxide

The minerals ilmenite and rutile, together with titanium dioxide slag, can be transformed into a white titanium dioxide pigment or titanium metal. The white pigment is a key component in paints, plastics, paper, inks, textiles, food, sunscreen and cosmetics. Titanium metal’s key properties of light weight, chemical inertness and high strength make it ideal for use in medical applications and in the aerospace industry.


Refined borates are used in hundreds of products and processes. They are a vital ingredient of many home and automotive applications, and are essential nutrients for crops. They are commonly used in glass and ceramic applications including fibreglass, television screens, floor and wall tiles, and heat-resistant glass.


Salt is one of the basic raw materials for the chemicals industry and is indispensable to a wide array of automotive, construction and electronic products, as well as for water treatment, food and healthcare.

Other products include high purity iron, metal powders and zircon.

Strategic advantages


Portfolio of industry-leading businesses, operating in attractive markets.


Demand-led, integrated operations that are responsive to the changing external environment.


Poised to benefit from mid to late-cycle demand growth as consumption increases in emerging markets.


Key production locations   Key sales destinations
– North America   – North America
– Australia   – South East Asia
– South Africa   – India


Full operating review on page 30.


Energy product group

Rio Tinto’s Energy product group is a leading seaborne supplier of thermal and coking coal to Asian customers and the uranium we produce is used by electricity providers worldwide. We have operations, exploration and development projects in Australia, Namibia, Mozambique and Canada.



Coal is abundant, relatively inexpensive, and safe and easy to transport. We are a large supplier to the seaborne thermal coal market. Thermal coal is used for electricity generation in power stations. We also produce higher-value coking or metallurgical coal which, when mixed in furnaces with iron ore, produces steel.


Uranium is one of the most powerful known natural energy sources, and is used in the production of clean, stable, base-load electricity. After uranium ore is mined, it is milled into uranium oxide – the mine product that is sold for processing into fuel rods for use in nuclear power stations.

Strategic advantages


Strong customer relationships and high-quality assets located in close proximity to growing Asian markets.


Successfully transforming the business by reducing costs, increasing productivity and improving our position on the cost curve.


A large and unique resource base of premium quality thermal and coking coal in Australia, located close to existing infrastructure, which would be difficult to replicate.


Strong product stewardship strategy including investment in technologies to reduce emissions from our products.


Key production locations   Key sales destinations
– Australia   – Japan
– Namibia   – South Korea
    – Europe


Full operating review on page 32.


Iron Ore product group

Rio Tinto’s Iron Ore product group is the second-largest producer supplying the global seaborne iron ore trade. After a decade of rapid expansion in Australia, and more recent growth in Canada, we are well positioned to benefit from the continuing strong demand in China and other Asian markets. We are driving performance through effective project management and value-adding operational efficiencies.


Iron ore

Iron is the key ingredient in the production of steel, one of the most fundamental and durable products for modern-day living, with uses from railways to paperclips. Our iron ore mines are located in Australia and Canada.

Strategic advantages


Proximity of the expanded Pilbara operations in Australia to the world’s largest and fastest-growing customer base.


Success in increasing operational efficiency and controlling costs.


Vast potential for brownfield developments near existing infrastructure.


Proven success in implementing large-scale and complex, value-generating major projects on time and budget without significant impact on operational efficiency.


Key production locations   Key sales destinations
– Australia   – China
– Canada   – Japan
    – South Korea


Full operating review on page 34.







Table of Contents

Chairman’s letter


Dear shareholders,

In 2013 your company was focused on improving the performance of the business, strengthening capital allocation processes and reducing our level of indebtedness – all with a view to ensuring a greater commitment to creating real value for shareholders.

I am pleased to report that substantial progress had been made on meeting these priorities. We achieved underlying earnings of US$10.2 billion and significantly improved cash flow by 22 per cent over 2012. We exceeded our cost reduction targets and set production records. Our net earnings performance of US$3.7 billion takes account of non-cash exchange rate losses and impairments.

We are deeply saddened by the deaths of three of our employees at our managed sites last year and improving safety at all of our operations during the year ahead is of paramount importance.

Our overall performance gave the board the confidence to raise the 2013 full year dividend by 15 per cent. This increased dividend represents an important milestone on the road to improved shareholder value.

Stronger business, creating options

During 2013 greater discipline and accountability was restored throughout the business, particularly in the allocation and management of capital. We simplified and strengthened our systems in this area and improved decision-making capability across the organisation.

Your board regularly evaluates opportunities put forward by the business against all competing uses for cash, striving to achieve the right balance between disciplined investment, strengthening our balance sheet and returning cash to investors.

The reduction in our net debt during 2013 is an indication of our commitment to a stronger balance sheet and provides flexibility in terms of returns and investment. We are building more resilience in our business, which gives your board greater flexibility to respond to macroeconomic developments as they arise.

Strategy development and disciplined delivery

During the year your board supported Sam Walsh on the implementation of his plan to improve performance, strengthen the balance sheet and deliver results. We worked with him on reviewing the company’s strategy and reaffirmed our commitment to invest in and operate long-life, low-cost, expandable mines and businesses. The board also took the time to visit our world-class iron ore operations in the Pilbara in Western Australia to get a deeper understanding of the strategic and operational issues at play.

Sam, his executive team, and all of our 66,000 employees across the world have worked hard during a challenging year and made a large contribution to restore the company to a position of strength. I thank all of our people for their efforts and commend Sam for this leadership during a tough time. But there is more we must do.

Amidst continued market uncertainty, impacts of quantitative easing and austerity programmes still washing through markets around the world, your board has tasked the executive team with ensuring they successfully execute our strategy and make sure the gains delivered are sustained. The discipline of 2013 must be carried forward into the year ahead and beyond, with a specific focus on delivering our growth projects and producing further productivity improvements at all of our sites.

As geopolitical and social risk increase, we remain convinced that businesses which form effective relationships and partnerships around the world will prosper over the longer term. Rio Tinto has always taken its role as a responsible business very seriously and throughout the year ahead we will continue to build our capabilities in stakeholder engagement and sustainable development. We believe earning the trust of our host communities and governments is vital in creating sustainable shareholder value.

Maintaining good governance

Good governance is essential for the long-term success of the Group. In 2013, we have seen a greater level of focus, discipline and accountability throughout the organisation. This continues to be underpinned by your board’s oversight of a robust corporate governance framework to support our business and strategic delivery.

My role as chairman is to lead the board and to ensure it is focused on its oversight of management and the delivery of our strategy. Sam Walsh’s role as chief executive is to focus on sustained operational excellence and growth of the business – and to do so with safety top of mind. Our roles are complementary but distinct. The separation of executive and non-executive accountabilities is essential to good governance: the executives have an operational role, whereas the non-executives have an oversight role, ensuring accountability and exercising strong and deliberate challenge through the board decision-making process to ensure appropriate control mechanisms are in place to safely implement our strategy and plans.

Your board devotes much of its time to reviewing, debating and challenging proposals for investment from management, as well as dealing with a wide range of other issues including safety and the Group’s strategic direction, monitoring business performance, optimising capital allocation and expenditure whilst carefully evaluating the wide range of risks facing the business.


Leadership is critical at all levels – at board level, at executive level, and throughout the business. We are committed to effective succession planning at both the board and executive level. My goal is to make sure your board combines the diverse blend of skills and international experience that is available to it now and to enhance it further for the future. Rio Tinto’s board should have the best blend of appropriately skilled and experienced people from our industry, but also outside of it.

2013 saw a number of changes to the executive team, starting with the appointment of Sam Walsh as chief executive. Following Guy Elliott’s decision to retire at the end of 2013, your board appointed Chris Lynch as chief financial officer with effect from April 2013. The board announced the promotion of Jean-Sébastien Jacques as chief executive, Copper, following Andrew Harding’s move to become chief executive, Iron Ore and appointed Greg Lilleyman as Group executive, Technology & Innovation with effect from 1 January 2014, following the retirement of Preston Chiaro from the Executive Committee at the end of 2013.

Preston retires as an executive on 1 April 2014. I would like to thank Guy and Preston for their significant contributions to Rio Tinto over their many years with the Group and we wish them well in their retirement as executives.

Moving forward, I am very pleased to announce today the appointment of two new non-executive directors. Anne Lauvergeon and Simon Thompson will bring a wealth of experience to your board given their combined experience in a number of leading international businesses. We also announced today that Vivienne Cox will stand down at the end of the annual general meeting in London in April, after nine years on the board. I would like to thank Vivienne for her significant contribution to Rio Tinto over this time and wish her well for the future.

We are a balanced and diverse board, comprising myself as chairman, two executive directors and eight (soon to be nine after the new appointments and Vivienne Cox’s retirement) independent non-executive directors, all of whom are rigorously assessed to ensure they continue to meet strict independence criteria. The directors bring with them truly international experience from a wide range of professional, business and public office backgrounds.










Table of Contents

Chairman’s letter continued


The board committees have always played an important oversight role, freeing your board to focus on strategic matters. The board committees, under the effective leadership of their respective chairs, carry out important and demanding roles on your board’s behalf and facilitate the embedding of effective governance across the organisation. You can read more about the work that they do on pages 61 to 63.

The 2013 board and committee performance is described on page 58. I remain comfortable with the effectiveness of your board and the contribution each member of your board is making.

Looking ahead

I feel very privileged to be the chairman of this wonderful organisation. Rio Tinto had to make some significant changes over the last year. Through our transformation we are a simpler and stronger company. Through our improved earnings and reduced costs we are financially stronger. Through our actions we are reducing risk and increasing discipline. Our strategy and priorities are clear. I see great opportunities ahead as we build a long-term future for our business. The work we do is important, we provide the raw materials used in everyday life and as hundreds of millions of people move from rural to urban areas over the coming decades, there will be increased demand for the metals and minerals we produce.

I look forward to reporting on the further progress of your company in a year’s time.




Jan du Plessis

5 March 2014






Table of Contents

Chief executive’s statement


Rio Tinto’s turnaround on track

Rio Tinto is a truly great business with renewed vigour and purpose, focused on delivering greater shareholder value.


Dear shareholders,

2013 was a challenging and very rewarding year for Rio Tinto. I was proud to be appointed chief executive of your company a year ago at a time when shareholders had lost some confidence in the business. Change was needed. Trust and confidence in management had to be rebuilt. While I was determined that Rio Tinto would not repeat the mistakes of the past, I also recognised the solid foundations of an outstanding company with extremely good people and assets.

Transforming our business to focus on greater value for shareholders

So, while Rio Tinto was in many ways an outstanding business, we needed to refocus on meeting the expectations of the owners of our company. I defined our 2013 goal as delivering greater value for our shareholders and during the year, I personally met with and listened to hundreds of investors and analysts, as well as our employees, customers and suppliers across the world.

They all told me, we want to see Rio Tinto return to a position of strength. Similarly, I too want Rio Tinto to be a company admired and recognised not just for superior performance but for embodying our values in all that we do. In February 2013, I set out my plan to improve and build upon the strong foundations of the company. This included creating a tightly-run, and more disciplined and accountable business. In 2013, we have done just this and forged ahead with a single-minded emphasis on delivering our priorities to improve performance, strengthen the balance sheet and deliver results in every market in which we operate, everywhere around the world.

Our performance in 2013 reflects the efforts of all of our 66,000 employees to turn this business around. I am humbled by the enthusiasm, passion and talent I have seen, and the willingness of all our people to embrace the change required and improve performance. Against a backdrop of continuing market uncertainty, we have improved earnings and cash flows. We have reduced costs, net debt and capital expenditure. We have delivered greater value for you, our shareholders, which is reflected in the 15 per cent increase in our 2013 full year dividend.

In short, last year, we did what we said we would do. But we are restless to improve further. Our 2013 net earnings reflected impairments on some of our assets and we are absolutely focused on making sure we improve project execution and deliver further business improvements. This, together with improving our safety performance, will be our continuing focus in 2014.

Building a safer business

While we can look back with pride at the many successes we delivered in 2013, we failed to meet our critical goal of no fatalities in our business. Three of our colleagues died working at Rio Tinto managed operations last year. Thirty seven people died at non-managed operations, including 33 at the Grasberg mine in Papua, Indonesia. These are terrible tragedies. With regard to Grasberg, we are continuing to work with our joint venture partner to share our safety capabilities and learnings so we can both improve our safety performance, and this process is ongoing.

All of these deaths weigh heavily on me personally and I, and my management team, feel enormous sorrow for the families and friends of these colleagues. I was also deeply saddened by a further fatality at Grasberg and another at the Gove refinery this year. I am determined that we will turn our safety performance around. We have made significant gains over the course of our safety journey but we have more to do. Strong safety leadership, improved management of critical risks, and learning from all significant incidents are of paramount importance.

Delivering our strategy

We are still operating in a volatile macroeconomic environment. Despite more optimistic signs coming through from OECD economies, and growth remaining

relatively strong in developing economies, the underlying structural fragilities remain. With volatility expected to continue over the short term, we will stand by the priorities we set for ourselves a year ago: to improve performance, strengthen the balance sheet and deliver results. These priorities have already proved effective in making us a more robust organisation, and with continuing focus, we will grow stronger still.

1. Improving performance

We exceeded our targets for reducing operating cash costs and exploration and evaluation expenditure in 2013. These results demonstrate the exceptional work being done across the business to address our cost base. These efforts will continue in 2014, in order to reach a US$3 billion improvement in operating cash costs versus 2012. Our aim is to sustain exploration and evaluation spend at around 2013 levels in 2014 and beyond.

Our 2013 performance was further bolstered by increased production. We set new production records in bauxite, thermal coal and iron ore, and across the Group, our total production grew by nine per cent in 2013 on a copper equivalent basis. Our focus on productivity will persist in 2014, in tandem with our keen eye on costs. Our efforts to reduce costs and increase performance, resulted in improved underlying earnings of US$10.2 billion, up ten per cent on 2012.

2. Strengthening our balance sheet

The excellent performance achieved in reducing costs, together with volume growth, is leading to stronger cash flows. Combined with cash inflows from divestments and lower capital expenditure, we were more than able to reverse the increase in net debt we saw in the first half of the year.

In November, we announced our breakthrough pathway for expanding our Pilbara operations towards 360 million tonnes per annum at a US$3 billion lower capital cost than previously planned. This is a clear example of our disciplined approach to capital allocation. I am confident we have stronger, stricter processes in place for how we allocate capital. As we move forward with reinforced systems embedded at the core of our investment approach, you have my absolute commitment that each and every dollar we are investing on your behalf is being rigorously scrutinised.

Our focus for the year ahead will be to continue to pay down debt and further strengthen the balance sheet. Our aim is to provide the board with options for how best to deliver value to you, whether this is through value-accretive growth, or returning cash, or a combination of both.

3. Delivering results

In keeping with our strategy, 2013 saw the completion of five major capital projects that have already started delivering results: the Oyu Tolgoi copper-gold mine; the first phase of our Pilbara iron ore expansion; the Argyle underground diamond mine; the Kestrel coal mine extension; and the AP60 aluminium smelter. We expect to deliver strong returns from these key assets in our portfolio over the coming years.

Ongoing commitment

In 2013 we rose to the challenge and navigated difficult times to emerge as a leaner and much stronger company. 2014 will be about locking in the gains achieved last year and continuing to strengthen the business.

I would like to close by paying tribute to all of our employees across the world. Without their efforts we would not have been able to turn around the performance of the business and I am energised by the effort, enthusiasm and passion for improvement which I have seen first-hand in every part of our organisation. Over the next 12 months and beyond we will remain focused on safety and upholding our values wherever we operate in the world. Above all, we will continue our single-minded focus on delivering greater value for you, our shareholders.




Sam Walsh AO

Chief executive
5 March 2014









Table of Contents

Strategic context


Global economy

The global economy grew by just three per cent in 2013. Yet, there is a strong sense that developed economies are finally on the path to a more robust recovery. Significant growth headwinds remain in the form of continued fiscal contraction and high debt levels, but construction and manufacturing activity is improving and supporting labour markets. This renewed momentum appears strongest in the US with growth in parts of Europe still proving more hesitant. The improved US outlook led the Federal Reserve to start tapering its accommodative Quantitative Easing (QE) programme towards the end of 2013, with indirect implications for emerging markets. Loose monetary policies in the Organisation for Economic Co-operation and Development (OECD) countries are believed to have supported investment and growth in developing economies, putting the short-term growth outlook in these countries at risk from changing money flows. Asian economies risk seeing this effect compounded by a structural, although very gradual, slowdown in China’s economic expansion.

Having firmly established itself over the past year, China’s new leadership set the agenda for a gradual reform process at the Third Plenum meetings in November 2013. After several years of growth dominated by investment, the country’s economic growth model is beginning to rebalance towards consumption. This process poses significant challenges for the new government, with scope for a volatile transition period. While planned reforms should gradually deliver a more sustainable growth model, the pace of growth is expected to continue to slow. More importantly, slowing growth is now acknowledged by the leadership as inevitable and necessary. As demonstrated in 2013, China’s central government is likely to be more considered and cautious in future policy responses to cyclical growth weakness. Fiscal support for investment and associated short-term spikes in commodity demand are expected to be less frequent and smaller in scale.

Financial markets were less volatile in 2013, and the risk of shocks in Europe much less pronounced than the previous year. Nevertheless, several macro risks still simmer under the surface, with the potential to derail the more positive short-term global outlook at any time. The US government shutdown in late 2013 and protracted negotiations over the debt ceiling are a further reflection of the challenges to bringing US sovereign debt back onto a more sustainable path. Similar tensions extend to Europe where, although intervention from the European Central Bank returned bond yields to more manageable levels, the pace of reforms and structural readjustments necessary for a sustainable monetary union remains slow. Meanwhile, the unwinding of QE policies represents uncharted territory with many potential pitfalls including inflation, significant bond market sell-offs and the formation of new asset bubbles. Added to the uncertainty around China’s reform process and geopolitical tensions in the Middle East, the impact of these key US and European macro risks on future market volatility should not be discounted.

Short-term consensus expectations about India’s growth prospects have been revised downward over the past year, reflecting concerns over the pace of reforms, monetary and fiscal policies and lagging infrastructure development. However, looking further into the future, the rising prosperity in Asia and other emerging markets remains the main global economic trend of relevance to the mining industry. We continue to believe that this will ultimately help to support and sustain an elevated level of global economic growth and commodity demand over the next couple of decades.

Drivers of commodity prices

Long-term structural economic trends are important drivers of future commodity prices through their effects on commodity demand. The economic development and urbanisation of emerging countries goes through an initial investment-led growth phase, which is particularly commodity-intensive. This benefits commodities such as steel and copper used in construction and infrastructure applications. The structure of economies evolves through time and, as the capital stock matures, other commodities such as aluminium, energy products and industrial minerals tend to take over as the main enablers of consumption-led growth models.

While the macroeconomic environment provides a common demand context, supply-side factors can result in stark structural differences across commodity sectors. In principle, commodity prices will tend to have a relationship with the cost of developing and extracting metal and mineral resources. However, the exact nature of that relationship will depend on barriers to entry and exit, which are specific to each sector.

Across many commodity sectors, the general supply trends in recent years have pointed towards fewer discoveries, falling ore grades and maturing existing operations as well as greater complexity of projects and of non-developed orebodies. Technology trends are likely to offer some long-term solutions to these supply challenges, but it is also likely that prices above historical levels will be required for markets to balance the structural demand and supply trends.

Commodity markets

After several years of elevated prices and record investment by mining companies, supply for several commodities has finally started to catch up with demand, at least temporarily. Better-supplied commodity markets have resulted in downward pressures on some prices during 2013, for example on thermal and coking coal. Despite strong Chinese imports, prices for both commodities were down 12 per cent and 22 per cent respectively from 2012 levels. Similar trends have been seen for base metals, although price declines in 2013 were more moderate. Mined copper supply is starting to expand at a faster pace than demand after a long period of constrained and disrupted output growth. In the case of aluminium, there are still no signs of inventories falling, as capacity expansions in western China and the Middle East have outweighed the curtailment of higher-cost smelters. In 2013, prices of exchange-traded metals were also influenced by shifting market expectations on QE tapering. This effect was particularly pronounced in the gold market, where some large daily price corrections resulted in an overall 27 per cent decline between the start and end of the year.

Contrary to consensus expectations at the start of 2013, the iron ore market has so far been one of the most resilient to the commissioning of new supply. Major iron ore producers added about 100 million tonnes per annum of new seaborne capacity last year without the market experiencing a significant price correction. In fact, not only did iron ore prices average four per cent above 2012 levels at US$135/t delivered to China, they also displayed much less volatility throughout 2013 compared to the cycles that this market had become accustomed to since the global financial crisis. The steady iron ore price performance reflected sustained elevated steel output levels in China during most of 2013. Chinese steel demand growth of about seven to eight per cent last year highlighted the continued gap in construction and infrastructure needs in second and third tier cities and in western provinces.

The generally softer price environment and stronger supply growth have refocused the mining industry on dealing with margin compression in 2013. Across the industry, mining companies are reprioritising cost improvements and productivity initiatives, and cutting back on capital expenditure plans.


On balance, the short-term economic outlook points to a further consolidation of the global recovery as we start 2014. However, macro risks abound and the potential for continued volatility remains significant. In the mining industry this is likely to drive further prudent investment behaviours while new supply gets absorbed by the market. Looking to the future, our view remains that there will be a high average demand growth setting for our markets and that the complexity of future mining projects will continue to increase.







Table of Contents

Group strategy


External pressures

The mining industry is cyclical and, following a decade-long growth phase, it is now experiencing a period of lower prices and compressed margins. Meanwhile, volatility – a characteristic of the macroeconomic environment since the global financial crisis – has been ongoing and is expected to continue, bringing with it further short-term risk.

Our response to this has been to focus on costs, cash flow and capital discipline. Others in the sector have embarked upon similar paths. Inefficiencies are also being exposed, and so reductions in costs and capital expenditure, productivity improvements, and project deferrals and cancellations have become a prominent part of mining industry strategy.

Despite the uncertain conditions that we currently face, the long-term outlook for our sector remains positive.

The world’s population is forecast to increase by 30 per cent in the next 40 years. Seventy million people enter the middle classes every year. In China alone, around 170 million people are expected to move to an urban environment by 2025. These factors are driving demand for the minerals and metals we produce, as essential ingredients of modern life. They make our business a good and valuable one to be in.

Consistent strategy, sharper focus

Rio Tinto’s vision is to be a company that is admired and respected for delivering superior value as the industry’s most trusted partner.

The world we operate in today, and the future we are preparing for, require us to have a clear and consistent strategy. In 2013, we reaffirmed our direction of

travel and recommitted to the strategy that has worked for us for many years: to invest in and operate long-life, low-cost, expandable operations in the most attractive industry sectors. This strategy will allow us to take advantage of the opportunities ahead, and we are confident that it is the right one for Rio Tinto.

In 2013 we reset our focus on executing the strategy by becoming a leaner, more cash-oriented and tightly-run business. We refocused our Group on improving performance, strengthening our balance sheet, and delivering results – to deliver greater value for shareholders.

We are doing what we said we would: reliably and relentlessly executing our strategy. We are making every dollar count, looking for ways to do things safer, smarter and better, and ensuring that we only invest in activities that add value.

2013 marked our 140th year in business. We have been around this long by being very good at what we do. Looking to the future, disciplined execution of our strategy is vital to building on our recent successes, and our industry-leading capabilities will equip us to do this.

We have world-class people and assets, and have developed pioneering and industry-leading systems and technologies. We pride ourselves on being innovative – finding solutions that help us operate more efficiently, sustainably and responsibly. We are recognised and respected for our exploration and operations expertise, for our values and our commitment to safety, and for creating benefits for our diverse stakeholders.

While these things will not change, our sharpened focus aims to transform us into the highest performer in our sector and will make sure we are fighting fit for the next 140 years and beyond.












Table of Contents

Group strategy continued

Progress against strategy

In 2013, we refocused our business on three clear priorities to deliver greater value for shareholders: to improve performance, strengthen the balance sheet and deliver results.


What we said we would do in 2013   What we did   What we plan to do in 2014 and beyond


Improve performance




Improve our safety performance



–   Regrettably, our Group had three fatalities at managed operations during 2013




–   Target, above all, the elimination of workplace fatalities


–   Achieve a year-on-year improvement in AIFR and lost time injuries


–   Improve how we manage critical risks and learn from serious potential incidents



–   Our all injury frequency rate (AIFR) improved from 0.67 to 0.65


    See pages 18 and 10  


Deliver US$2 billion in operating unit cash cost reductions



–   Achieved US$2.3 billion of operating unit cash cost improvements


–   Exceeded our cost savings target while realising productivity gains across the portfolio and setting new production records


See page 38




–   Target further savings to reach US$3 billion full-year improvement in 2014 versus 2012 in operating unit cash costs


Reduce exploration and evaluation spending by US$750 million pre-tax



–   Reduced exploration and evaluation spending by US$1 billion


See page 36




–   Sustain the reduced exploration and evaluation spend


–   Continue to progress key evaluation projects at a pace that matches our overall view of investment priorities


Achieve targeted reductions of US$1 billion in sustaining capital expenditure



–   Reduced sustaining capital expenditure by US$1.9 billion


See page 11




–   Keep sustaining capital expenditure at around this reduced level


Strengthen the balance sheet




Simplify and strengthen our process for allocating capital



–   Set up “cash generation offices” to strengthen the focus on cash and improve visibility for senior managers in this area


–   Elevated the role of subject matter experts in the economic and technical evaluation phase


–   Reinforced our Investment Committee approvals process


See page 12



–   Continue to apply our enhanced capital allocation systems and controls, to maintain discipline


–   Allocate capital in the following order of priority


–   Essential sustaining capital expenditure


–   Progressive dividends


–   Iterative cycle of compelling growth, debt reduction, and further cash returns to shareholders


–   Pay down debt to a more sustainable level



Review capital expenditure plans across all of our businesses



–   Reduced capital expenditure from US$17.6 billion in 2012 to US$12.9 billion, completing five major capital projects, which enabled us to bring on significant new volumes




–   Reduce capital expenditure further, to less than US$11 billion in 2014, and to around US$8 billion in 2015, while delivering steady growth


–   Completed a ranking process for all our capital projects



See page 12




Invest only in new projects that provide attractive returns, well above cost of capital, and which compare favourably to other uses of capital



–   Outlined a breakthrough pathway to increase Pilbara mine production capacity towards 360 million tonnes per annum (Mt/a), at a US$3 billion lower capital cost than previously planned


–   Funding and development of the phase 2 Oyu Tolgoi underground expansion delayed until discussions with Government of Mongolia are concluded


See page 12




–   Increase Pilbara mine production capacity by 60Mt/a between 2014 and 2017, by focusing predominantly on brownfield expansions and low-cost productivity gains


–   Continue to discuss the pathway forward for Oyu Tolgoi underground expansion


Deliver results




Streamline our portfolio through divestments, targeting significant cash proceeds



–   Announced or completed asset sales of US$3.5 billion


–   Having been unable to divest Pacific Aluminium for sufficient value, the four smelters and Gove bauxite mine have been reintegrated into the Aluminium group


–   After exploring options for the Diamonds business, including potential divestment, it has also been retained – this being the best path to generate maximum value


See page 13




–   Continue our long-standing approach of reshaping our portfolio


–   Curtail the Gove alumina refinery during the first half of 2014


Deliver the first phase expansion of the Pilbara operations to 290Mt/a



–   Completed the first phase expansion four months ahead of schedule and US$400 million under budget, delivering first tonnes on the ship in August


See page 34




–   Ramp up to reach an annual production rate of 290Mt/a before the end of the first half of 2014


Deliver first production of copper concentrate from Oyu Tolgoi



–   First copper-gold concentrate produced in January; first shipment took place in July; and operating at full capacity by the end of 2013


See page 28




–   Increase sales volumes at Oyu Tolgoi






Table of Contents

Business model




How we create value

We create and preserve value by investing in and operating long-life, low-cost, expandable operations in the most attractive industry sectors. From the earliest stages of exploration, during our assets’ productive lives, and throughout the closure and restoration phase beyond, we commit to high standards of sustainable development. Read more on pages 18 to 25.

Explore and evaluate

Our experienced in-house exploration team has a proven track record of discovering Tier 1 orebodies: the highest-value deposits that are profitable throughout the commodity cycle.

We maximise opportunities by exploring for and evaluating deposits in new geographies (such as the La Granja copper project in Peru). We also explore the orbits of our current operations (like the Caliwingina iron ore deposit in the Pilbara), which sustains the value of our existing businesses. We operate the majority of exploration programmes ourselves rather than outsourcing, so we can keep focus on targets that are important to Rio Tinto. We will, however, partner with others if it gives us access to attractive opportunities, or skills, that we do not possess in-house.

Our orebody knowledge allows us to find value-enhancing ways of developing our resources and positioning our products in the market. Our geological expertise gives us the confidence to keep hunting for the most elusive discoveries. And we have a strong tradition of developing and applying innovative technologies to resolve specific exploration challenges.


We develop orebodies for long-term value delivery. We aim to deliver projects on time and on budget – such as commissioning the first major expansion phase of our Pilbara iron ore operations and the Oyu Tolgoi concentrator in 2013. Through our reinforced capital allocation process, we approve investment only in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital.

During this phase, we plan the most efficient configuration for developing the orebody and for getting the products to market. We work closely and strategically with our customers, to create demand for the optimal suite of products, thus maximising value over the deposit’s lifetime. Once the value of the orebody is confirmed, and internal and external approvals are received, the project moves into implementation and construction.

Mine and process

We create value by safely and efficiently operating assets that fit with our Group strategy. Our global operating model allows us to implement standard processes and systems across the Group, for instance in procurement, operations and maintenance. This globally-consistent approach reduces our use of consumables, increases the life of our equipment and optimises the extraction of ore. In turn, we enjoy higher production and reduced costs, and we maximise value.

We use world-class technologies during mining and processing to increase our efficiency and productivity, and to produce material that is tailored to our customers’ needs. Through networked partnering with academia, technology suppliers and other experts, we gain access to knowledge and technical prowess that augment our own capabilities.

Market and deliver

Our diverse portfolio of metals and minerals allows us to respond to demand across the development cycle: we supply basic raw materials and refined products that are the building blocks of added-value goods. Most of our

customers are industrial companies that process our products further and supply numerous sectors – including construction and infrastructure, automotive, machinery, energy and consumer goods.

We innovate and improve our products and services to maximise value to customers. We are constantly adding to our market knowledge, allowing us to improve our investment decision-making process. In many cases, we are responsible for delivering product to our customers, and do so efficiently, reliably and cost-effectively. We have significant in-house logistical capability, including through our own networks of rail, ports and ships.

Close down and rehabilitate

We integrate closure planning throughout an asset’s life cycle, from the earliest stages of project development. When a resource reaches the end of its life, we seek sustainable and beneficial future land uses, to minimise financial, social and environmental risks. By partnering with external conservation organisations, we access expertise that helps us improve our rehabilitation performance. Our approach helps us to maintain a positive reputation for sustainable development and ensures we meet the expectations of our current and future stakeholders.

Delivering value for our stakeholders

Rio Tinto’s primary focus is on the delivery of value for our shareholders. We balance disciplined investment with prudent management of our balance sheet and cash returns to shareholders. We offer a long-term investment opportunity, and commit to sustainable growth in cash returns to shareholders through our progressive dividend policy. As we work, fixed on this core aim, our activities also give us the opportunity to create value for our other stakeholders, in a variety of ways.


We supply our customers with the right products at the right time. They then add further value, by turning them into the end products that society needs to make modern life work.


Our operations create employment and career development opportunities for our local communities, as well as business opportunities for local suppliers. Communities often benefit from the infrastructure we put in place to serve our facilities and, once our operations are closed, we restore the sites – often for community use, new industry, or back to native vegetation.

Our people

We invest in our people throughout their careers, offering diverse employment prospects, opportunities for development, and competitive rewards and benefits that have a clear link to performance. As employees spend their wages, the value we share with them is spread more widely.


We are often a major economic contributor to the local, state and national jurisdictions in which we operate. Our tax and sovereign equity contributions enable governments to develop and maintain public works, services and institutions. We work together to facilitate growth of diverse and sustainable economies that endure far beyond the active life of our operations.


By seeking a balance of global, national and local supply capability we drive value for our shareholders and deliver economic benefits for the communities in which we operate.










Table of Contents

Key performance indicators

Our key performance indicators (KPIs) enable us to measure our financial and sustainable development performance.

Their relevance to our strategy, and our performance against these measures in 2013, are explained below.

Some KPIs are used as a measure in the long-term incentive arrangements for remuneration of executives. These are identified with this symbol: LOGO






All injury frequency rate (AIFR)  LOGO



Underlying earnings (a) (b)  LOGO



Operating cash flow (a)  LOGO


Per 200,000 hours worked


   US$ millions    US$ millions

¢ Dividends from equity accounted units



¢ Cash flow from consolidated operations



Relevance to strategy



The safety of our people is core to everything we do. Our goal is zero harm, including, above all, the elimination of workplace fatalities. We are committed to reinforcing our strong safety culture, and improving safety leadership.




This is the key financial performance indicator used across the Group. It gives insight to cost management, production growth and performance efficiency. We are focused on reducing our costs and increasing productivity to improve earnings and deliver greater value for shareholders.




Operating cash flow is a complementary measure to underlying earnings. It also provides insight to how we are managing costs and increasing efficiency and productivity across the business.






     Our AIFR has improved by 20 per cent over the last five years. We reduced our AIFR by three per cent in 2013.   

Underlying earnings have increased by US$948 million compared with 2012. This reflects operating cash cost improvements, favourable exchange rates and strong volumes offsetting the impact of lower average market prices for the Group’s commodities (other than Iron Ore) and industry-wide cost inflation pressures.


   Operating cash flows of US$20,131 million, which include US$600 million of dividends from equity accounted units, are 22 per cent higher than in 2012, primarily as the result of higher volumes and cost reduction initiatives.





AIFR is calculated based on the number of injuries per 200,000 hours worked. This includes medical treatment cases, and restricted work-day and lost-day injuries for employees and contractors.




Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the 2013 financial statements.



Operating cash flow represents the cash generated by the Group’s consolidated operations, before payment of interest, taxes, capital expenditure and cash flows relating to financing activities.



More information




page 20



page 197



page 113


(a) The accounting information in these charts is drawn up in accordance with IFRS.


(b) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here as a measure of earnings to provide greater understanding of the underlying business performance of the Group’s operations. Items excluded from net earnings to arrive at underlying earnings are
  explained in note 2 to the 2013 financial statements. Both net earnings and underlying earnings deal with amounts attributable to the owners of Rio Tinto. However, IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries.






Table of Contents

KPI trend data

The Group’s performance against each KPI is covered in more detail in later sections of this Annual report. Explanations of the actions taken by management to maintain and improve performance against each KPI support the data.


See the Remuneration Report on page 68




Total shareholder return (TSR)  LOGO




Net debt (a)

US$ millions



Capital expenditure (a) (c)

US$ millions



Greenhouse gas (GHG) emissions intensity

Indexed relative to 2008 (2008 being equivalent to 100)


The aim of our strategy is to maximise total shareholder return. This KPI measures performance in terms of shareholder wealth generation. We also monitor our relative TSR performance against peers.   Net debt is a measure of how we are managing our balance sheet and capital structure. We constantly evaluate and balance the alternative uses for our cash between disciplined investment, strengthening our balance sheet, and returning cash to investors.  

We are prioritising investment in the highest-returning projects in the most attractive sectors. We are committed to a disciplined and rigorous investment process – investing capital only in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital.



Our GHG performance is important in upholding and extending our licence to operate. We are focusing on reducing the energy intensity of our operations as well as the carbon intensity of our energy, including through the development and implementation of innovative technologies.




Rio Tinto’s TSR performance over the five-year period from 2009 to 2013 was characterised by continued volatility in global equity markets and commodity prices. Total dividends paid in calendar year 2013 were 178 US cents per share, a nine per cent increase on 2012. Global investor sentiment improved in the last quarter of the year and both the Rio Tinto plc and Rio Tinto Limited share prices ended the year close to their opening levels. These factors resulted in Rio Tinto registering a TSR of 2.1 per cent in 2013.


  Net debt decreased from US$19,192 million at 31 December 2012 to US$18,055 million at 31 December 2013 as operating cash inflows and divestment proceeds fully offset the outflows relating to capital expenditure and the increase in the dividend payment.  

Capital expenditure of US$12,944 million was US$4,631 million lower than in 2012. This was mainly due to the completion of five major capital projects during the year: the Pilbara iron ore infrastructure expansion to 290Mt/a; Oyu Tolgoi copper-gold mine and concentrator; Kestrel coking coal underground mine; the Argyle underground diamond mine; and the AP60 aluminium smelter in Quebec.


  We have reduced our total GHG emission intensity by 17.3 per cent between 2008 and 2013. This is largely a result of the Ningxia aluminium smelter divestment in 2009, the closure of the Lynemouth smelter in 2012, divestment of the Sebree smelter in 2013 and improved measurement methodology for coal seam gas at our Australian coal mines.
TSR combines share price appreciation and dividends paid to show the total return to the shareholder.  

Net debt is calculated as: the net borrowings after adjusting for amounts due to equity accounted units originally funded by Rio Tinto, cash and cash equivalents, other liquid resources and derivatives related to net debt. This is further explained in note 24 “Consolidated net debt” to the 2013 financial statements.


  Capital expenditure comprises the net cash outflow on purchases less disposals of property, plant and equipment, capitalised evaluation costs and purchases less disposals of other intangible assets.  

Our GHG emissions intensity measure is the change in total GHG emissions per unit of commodity production relative to a base year. Total GHG emissions are direct emissions, plus emissions from imports of electricity and steam, minus electricity and steam exports and net carbon credits purchased from, or sold to, recognised sources.



Page 96



page 153



page 199




page 22



(c) Amounts include 100 per cent of subsidiaries’ capital expenditures.









Table of Contents

Capital allocation

The aim of Rio Tinto’s capital allocation process is to invest in a sustainable way through the cycle, having consideration of shareholders’ expectations of returns, and the robustness of our balance sheet. This is achieved through an evaluation and prioritisation of the Group’s portfolio of investment opportunities over a number of years to determine what will be the best use of capital.

In 2013, Rio Tinto enhanced the systems and controls in place to ensure that capital expenditure is kept at a suitable level, while continuing to invest in the best projects. Key considerations in determining the best use of capital include the progressive dividend policy, and the strength of the balance sheet. This, together with financial policies, existing capital commitments and operating cash flow forecasts set the boundaries for how much capital is available for investment.

In today’s capital-constrained environment, only the highest-returning investments will be approved. The Group analyses each investment based on net present value but also considers a number of further factors, including internal rate of return, payback period and risk profile. This suite of ranking criteria, together with the application of strategic judgment, ensures that capital is deployed to the best opportunities.

Rio Tinto’s capital expenditure reduced by 26 per cent to US$12.9 billion in 2013, compared to the peak level in 2012 of US$17.6 billion. It is expected to be reduced further to around US$11 billion in 2014.



Major capital projects (>US$1bn)


(Rio Tinto 100% owned unless otherwise stated)  

Total approved

capital cost



First production in 2013           
Copper – construction of phase one of Oyu Tolgoi copper and gold mine in Mongolia.   $6.2bn      First copper-gold concentrate was produced in January 2013 with first shipment on 9 July 2013.
Iron ore – expansion of the Pilbara mines, ports and railways from 237Mt/a to 290Mt/a. (Rio Tinto share US$8.4bn).   $9.8bn      The expansion was delivered in August 2013. The elements related to fuel, accommodation, and the Nammuldi mine expansion are not yet fully complete. Ramp-up to nameplate capacity is scheduled to take place before the end of the first half of 2014.
Iron ore – development of the Hope Downs 4 mine in the Pilbara (Rio Tinto 50%, US$1.3bn) to sustain production at 237Mt/a.   $2.1bn      First production occurred in the first half of 2013. The new mine is anticipated to have a capacity of 15Mt/a.
Iron ore – Marandoo mine expansion in the Pilbara to sustain production at 237Mt/a.   $1.1bn      The expansion is expected to sustain Marandoo at 15Mt/a for 16 further years to 2030.
Coking coal – 20 year extension and expansion at Kestrel (Rio Tinto 80%), Queensland, Australia.   $2.0bn      Production came on stream in July 2013. It is expected to expand production from 4.3Mt/a to 5.7Mt/a.
Diamonds – Argyle underground mine, extending the mine life to at least 2020.   $2.2bn      Production commenced in the first half of 2013 and is ramping up to full capacity.
Aluminium – AP60 plant (60kt per annum (ktpa)) in Quebec, Canada.   $1.1bn      First hot metal was produced in September 2013 and full capacity was reached at the end of the year.
Ongoing and approved           
Iron ore – expansion of the Pilbara port, rail and power supply capacity to 360Mt/a. (Rio Tinto share, US$3.5bn).   $5.9bn      The port, rail and power supply elements include investment in autonomous trains.
Iron ore – investment to extend the life of the Yandicoogina mine in the Pilbara to 2021.   $1.7bn      The investment includes a wet processing plant to maintain product specification levels.
Aluminium – modernisation and expansion of Kitimat smelter in British Columbia, Canada to increase capacity from 280ktpa to 420ktpa.   $3.3bn      First production is now expected in the first half of 2015, subject to any additional capital required to complete the project receiving board approval.
Copper – development of Organic Growth Project 1 (OGP1) and the Oxide Leach Area Project (OLAP) at Escondida (Rio Tinto 30%), Chile.  


  (Rio Tinto share)

     Replacement of the Los Colorados concentrator with a 152kt per day plant, accessing higher-grade ore. Initial production is expected in the first half of 2015. OLAP maintains oxide leaching capacity.
Copper – construction of a desalination facility to ensure continued water supply and sustain operations at Escondida (Rio Tinto 30%), Chile.  


(Rio Tinto share)

     The project will provide a sustainable supply of water for the new OGP1 copper concentrator. Commissioning is scheduled for 2017.






Table of Contents

Cash returns to shareholders

The aim of Rio Tinto’s progressive dividend policy is to increase the US dollar value of ordinary dividends per share over time. The rate of the total dividend, in US dollars per share, is determined annually, taking into account the results for the past year and the outlook for the Group. Under our progressive dividend policy, the total dividend for each year should be equal to or greater than the total dividend for the previous year. The interim dividend is set at one half of the total dividend for the previous year.

The full year dividend in respect of 2013 was increased by 15 per cent, to 192 US cents per share, reflecting the board’s confidence in the business and its attractive prospects. This follows a 15 per cent increase in the 2012 full year dividend, and a 34 per cent increase for 2011.

In 2011 and 2012, Rio Tinto bought back US$7 billion of shares. US$5.5 billion of shares were repurchased in 2011 and the remaining US$1.5 billion were repurchased in 2012.

Divestments and acquisitions

During 2013, Rio Tinto announced or completed US$3.5 billion of divestments, including a binding agreement for the sale of the Clermont thermal coal mine in Queensland for just over US$1 billion, due to complete in the first half of 2014.





Divested in 2013               
Northparkes mine     820         Sold to China Molybdenum Co. Ltd.
Constellium     671         Shares sold to general public.
Palabora Mining Company Limited     373         Sold to a consortium led by Industrial Development Corporation of South Africa and Hebei Iron & Steel Group.
Eagle nickel-copper project     315         Sold to Lundin Mining Corporation.
Altynalmas Gold     235         Sold to Sumeru Gold B.V.
Inova Resources Limited     81         Sold to Shanxi Donghui Coal Coking & Chemicals Group Co.
Sebree     48         Sold to Century Aluminum Co.
Divested in 2012               
Alcan Cable     229         Sold to General Cable Corporation.
Specialty Alumina businesses     Undisclosed         Sold to H.I.G.
Lynemouth Power Station     Undisclosed         Sold to RWE.
Energy – Extract Resources Ltd/Kalahari Minerals plc     429         Equity investment sold to Taurus Mineral Limited.
Divested in 2011               
Alcan Engineered Products     Undisclosed         Sold 61 per cent to investment funds affiliated with Apollo Global Management, LLC (Apollo) and the Fonds Stratégique d’Investissement (FSI).
Minerals – talc     340 (a)       Sold to Imerys SA.
Energy – Colowyo     Undisclosed         Sold to Western Fuels-Colorado LLC.
Exploration – sundry assets     52         Sale of projects including Altai Nuurs coking coal deposit and Sari Gunay gold deposit.
Acquired in 2012               
Copper – Turquoise Hill Resources Ltd. (formerly Ivanhoe Mines Limited)     307         Purchase of additional shares increasing the Group’s holdings to 51 per cent.
Minerals – Richards Bay Mining Proprietary Limited     1,700         Acquisition of BHP Billiton Group’s entire interests in Richards Bay Minerals, doubling the Group’s holding to 74 per cent.
Acquired in 2011               
Copper – Ivanhoe Mines Limited     1,860         Participation in the strategic rights offering, exercise of outstanding share warrants, exercise of subscription rights granted in 2010 and purchase of additional shares, in aggregate increasing the Group’s holding to 49 per cent.
Energy – Riversdale Mining Limited     4,168         Staged acquisition of shares in Riversdale Mining Limited; acquisition of a controlling interest of 52.6 per cent on 8 April 2011, increasing to 100 per cent by 1 August 2011, and renamed as Rio Tinto Coal Mozambique.
Energy – Hathor Exploration Limited     550         Purchase of shares in Hathor Exploration Limited resulting in an aggregate of a 70.2 per cent controlling interest being reached on 30 November 2011, increasing to 88 per cent by 31 December 2011 and completed on 12 January 2012.


(a) Enterprise value

There were no material acquisitions during 2013.









Table of Contents

Risk factors

Overview of Rio Tinto’s risk management framework




Principal risks and uncertainties

Rio Tinto’s business units and functions assess the potential economic and non-economic consequences of their respective risks using the framework defined by the Group’s Risk policy and standard. Principal risks and uncertainties are identified when the Risk Management Committee, business unit or function determines that the potential consequences are material at a Group level or where the risk is connected and may trigger a succession of events that, in aggregate, become material to the Group. Once identified, each principal risk or uncertainty is reviewed by the relevant internal experts and by the Risk Management Committee.

The following describes all currently-known principal risks and uncertainties that could materially affect Rio Tinto. There may be additional risks unknown to Rio Tinto and other risks, currently believed to be immaterial, which could turn out to be material. The risk factors outlined do not include the management detail on how each is managed and mitigated, which is discussed in more detail on page 66.

Risks may materialise individually, simultaneously or in combination and could significantly affect the Group’s:


short, medium and long-term business and prospects;


earnings, cash flow and financial position;


overall financial results and product demand;


current asset values;


future asset values and growth potential;


safety record and the long, medium and short-term health of its employees;


environmental effects; or


Group or business unit reputation.

The principal risks and uncertainties should be considered in connection with any forward-looking statements in this document and the cautionary statement on the inside front cover.







Table of Contents

External risks


Factor    Nature
Commodity prices and global demand for the Group’s products are expected to remain uncertain   

Commodity prices and demand are volatile and strongly influenced by world economic conditions. The Group’s normal policy is to sell its products at prices that reflect the value of our products in the market and not to enter into price hedging arrangements. Recent volatility in commodity prices and demand may continue, which could adversely affect the Group’s earnings, cash flow and ore reserves. The basis on which the Group prices iron ore in Asia is evolving and to the extent this results in prices or pricing mechanisms that are less favourable to the Group, its earnings and cash flow could be adversely affected. Furthermore, iron ore prices are typically determined on a landed in China basis, and increases in the freight market would adversely impact Group earnings.


Past strong demand for the Group’s products in China could be affected by future developments in that country



The Group is heavily reliant on the Chinese market. A micro-economic slowdown, sudden economic disruption (whether caused by sharp curtailment of bank credit or otherwise) or the significant shift from infrastructure-led to consumer spending-focused growth could substantially decrease China’s demands for the Group’s commodities, adversely affecting the Group’s profitability and cash position.


Rio Tinto is exposed to fluctuations in exchange rates    The great majority of the Group’s sales are denominated in US dollars, which is also the currency used for holding surplus cash, financing operations, and presenting external and internal results. Although many costs are incurred in US dollars, a significant portion are incurred in or influenced by the local currencies of the countries where the Group operates, principally the Australian dollar and Canadian dollar. The Group’s normal policy is to avoid hedging of foreign exchange rates and so the Group may be adversely affected by appreciation in the value of other currencies against the US dollar, or to prolonged periods of exchange rate volatility. Currency fluctuations may negatively impact the Group’s profitability and dividend payments as well as rating agency metrics and asset carrying values.
Political, legal and commercial changes in the places where the Group operates   

The Group has operations in jurisdictions where governments and communities are seeking a greater share of mineral wealth. Some operations are conducted under specific agreements with respective governments and associated acts of relevant legislative bodies. In several countries, land title and rights to land and resources (including Indigenous title) may be unclear. Political and administrative change, policy reform, and changes in law or government regulation can result in expropriation or nationalisation of the Group’s rights or assets. In some jurisdictions, commercial instability can arise from a culture of bribery and corruption.


In its operations and development projects, Rio Tinto is exposed to:


–  difficulty in obtaining agreements, leases or permits for new activities;


–  renegotiation, unilateral variation or nullification of existing agreements, leases and permits;


–  changes in government ownership of operations;


–  significant restoration and environmental clean-up costs;


–  currency and foreign investment restrictions;


–  changes in taxation rates, regimes or international tax agreements;


–  limitations to power, water, energy and infrastructure access; and


–  general increases in regulation, including compliance costs.


Political instability and uncertainty or government changes to terms applicable to the Group’s operations may result in increased costs for the Group, may curtail or negatively impact existing operations and prevent the Group from making future investments.

Community disputes in the countries and territories in which the Group operates    Some of the Group’s current and potential operations are located in or near communities that may regard these operations as being detrimental to them. Community expectations are typically complex with the potential for multiple inconsistent stakeholder views that may be difficult to resolve. Stakeholder opinion and community acceptance can be subject to many influences, for example, related industries, operations of other groups, or local, regional or national events in other places where we operate. These disputes can disrupt our operations and may increase our costs, thereby potentially impacting our revenue and profitability. In the extreme, our operations may be a focus for civil unrest or criminal activity, which can impact our operational and financial performance, as well as our reputation.
Increased regulation of greenhouse gas emissions could adversely affect the Group’s cost of operations   

Rio Tinto’s operations are energy-intensive and depend on fossil fuels. Worldwide, there is increasing regulation of greenhouse gas emissions, tighter emission reduction targets and progressive introduction of carbon pricing mechanisms. These are likely to raise significantly worldwide energy, production and transport costs over the medium to long term, which will increase the Group’s cost base and potentially negatively impact the Group’s profitability.


Regulations, standards and stakeholder expectations regarding health, safety, environment and community evolve over time and unforeseen changes could have an adverse effect on the Group’s business and reputation    The resources sector is subject to extensive health, safety and environmental laws, regulations and standards alongside community and stakeholder expectations. Evolving regulation, standards and stakeholder expectations could result in increased costs, regulatory action, litigation or, in extreme cases, threaten the viability of an operation.









Table of Contents

Risk factors continued

Strategic risks


Factor    Nature
The Group’s exploration and development of new projects might be unsuccessful    Rio Tinto identifies new orebodies and mining properties through its exploration programme, and develops or expands other operations as a means of generating shareholder value. Exploration is not always successful and there is a high degree of competition to develop world-class orebodies. The Group may also not be able to source or maintain adequate project financing, or may be unable to find willing and suitable joint venture partners to share the cost of developing large projects. Furthermore, project execution may not proceed as planned and project budgets and schedules may prove inaccurate, all of which may negatively impact the Group’s profitability.
Rio Tinto may fail to successfully execute divestments and acquisitions    The Group may not be able to successfully divest non-core assets resulting in unforeseen pressure on its cash position. In addition, potential acquisitions may not succeed, reducing the Group’s ability to expand operations as a means of generating shareholder value. All business combinations or acquisitions entail a number of risks including the cost of effectively integrating acquisitions to realise synergies, significant write-offs or restructuring charges, and unanticipated costs and liabilities. The Group may also be liable for the past acts, omissions or liabilities it has acquired that are unforeseen or greater than anticipated. The Group may also face liabilities for divested entities if the buyer fails to honour all commitments or the Group agrees to retain certain liabilities.

Financial risks


Factor    Nature

The Group’s reported results

could be adversely affected by the impairment of assets and goodwill

   The Group may be required to record impairment charges as a result of adverse developments in the recoverable values of its assets (including goodwill). Significant assumptions in the determination of recoverable value include, but are not limited to: pricing of the Group’s commodities and products, ore reserves, infrastructure availability, discount and exchange rates, operating and development cost projections, and timing of expenditure and revenues related to major projects. In addition, the occurrence of unexpected events, or events beyond the Group’s control that adversely impact its business, may have an impact on the assumptions underlying the recoverable value of its assets. The foregoing items are not exhaustive and impairments may be caused by factors currently unknown to the Group. To the extent that the recoverable value of an asset is impaired, such impairment may negatively impact the Group’s profitability during the relevant period.
The Group’s liquidity and cash flow expectations may not be realised, inhibiting planned expenditure    The Group’s ability to fund planned expenditure such as capital growth, mergers and acquisitions, innovation and other obligations may be hindered if its cash position proves inadequate. Our ability to weather a major economic shock could be compromised by insufficient cash reserves, a reduction in the value of existing cash reserves, or restricted access to these and other sources of cash, including bank financing or international capital markets.

Failure to reduce costs both in

operations and projects may result in reduced margins and threaten the viability of our capital projects

   Input costs in the resources sector can increase at a disproportionate rate, adversely affecting the economics of current operations and increasing the cost of our capital expansion projects. Many of these input costs are linked to commodity prices and, in the case of capital expansion projects, the time lag between incurring project costs and receiving revenue can result in additional exposure to commodity markets. Failure to reduce these costs may have an adverse impact on our operating margins and the viability of our capital expansion projects.

Operational risks


Factor    Nature
Estimates of ore reserves are based on uncertain assumptions that, if changed, could result in the need to restate ore reserves    There are numerous uncertainties inherent in estimating ore reserves, including subjective judgments and determinations that are based on available geological, technical, contract and economic information. Previously valid assumptions may change significantly with new information, which may result in changes to the economic viability of some ore reserves and the need for them to be restated.
Labour disputes could lead to lost production and/or increased costs    Some of the Group’s employees, including employees in non-managed operations, are represented by labour unions under various collective labour agreements. The Group may not be able to renegotiate agreements satisfactorily when they expire and may face difficult negotiations, higher wage demands or industrial action. In addition, labour agreements may not prevent a strike or work stoppage.
Some of the Group’s technologies are unproven and failures could adversely impact costs and/or productivity    The Group has invested in and implemented new technologies both in information systems and in operational initiatives, some of which are unproven and their eventual viability cannot be assessed with certainty. The actual benefits of these technologies may differ materially from expectations.

The Group may be exposed to

major failures in the supply chain for specialist equipment and materials

   Rio Tinto operates within a complex supply chain depending on suppliers of materials, services, equipment, and infrastructure, and on providers of logistics. Supply chain failures, or significantly increased costs within the supply chain, for whatever reason, could have an adverse effect on the Group’s business.






Table of Contents


Factor    Nature
Joint ventures, strategic partnerships or non-managed operations may not be successful and may not comply with the Group’s standards   

The Group participates in several joint venture and partnership arrangements, and it may enter into others, all of which necessarily involve risk. Whether or not the Group holds majority interests or maintains operational control in its joint ventures,

its partners may:


–  have economic or business interests or goals that are inconsistent with, or opposed to, those of the Group;


–  exercise veto rights to block actions that the Group believes are in its or the joint venture’s best interests; or


–  be unable or unwilling to fulfil their obligations under the joint venture or other agreements, such as contributing capital to expansion or maintenance projects.


Where these joint ventures are controlled and managed by others, the Group may provide expertise and advice but has limited control over compliance with its standards and objectives, such that partners may take action contrary to the Group’s interests or policies with respect to its investment.

The Group’s operations are vulnerable to a range of interruptions, not all of which are covered fully by insurance   

1. Natural disasters and events


Mining, smelting, refining and infrastructure installations are vulnerable to natural events including earthquakes, subsidence, drought, flood, fire, storm and the possible effects of climate change.


2. Sustained operational difficulties


Operating difficulties are many and various, ranging from geological variations that could result in significant ground or containment failure to breakdown of key capital equipment.


Reliable roads, rail networks, ports, power generation and transmission, and water supplies are required to access and conduct our operations.


Limitations, or interruptions in transport infrastructure, including as a result of third parties gaining access to our integrated facilities, could impede our ability to deliver products.


3. Information technology and cyber security


The Group relies heavily on information technology and process control systems to support our business. In common with most large global companies, the Group has experienced cyber attacks and is faced with ongoing threats to the confidentiality, integrity and availability of such systems. Whilst no material losses related to cyber security breaches have been discovered, given the increasing sophistication and evolving nature of this threat, we cannot rule out the possibility of them occurring in the future. An extended failure of critical system components, caused by accidental or malicious actions, including those resulting from a cyber security attack, could result in a significant environmental, health or safety incident, commercial loss or interruption to operations.


4. Major operational failure


The Group’s operations involve chemicals and other substances stored under high temperature and pressure, with the potential for fire, explosion or other loss of control of the process, leading to a release of hazardous materials. This could occur by accident or a breach of operating standards, and could result in a significant environmental, health or safety incident. The Group’s insurance does not cover every potential loss associated with its operations and adequate coverage at reasonable rates is not always obtainable. In addition, insurance provision may not fully cover its liability or the consequences of any business interruption. Any occurrence not fully covered by insurance could have an adverse effect on the Group’s business.

The Group depends on the continued services of key personnel    The Group’s ability to maintain its competitive position is dependent on the services of a wide range of highly-skilled and experienced personnel available in the locations where they are needed. Failure to recruit and retain key staff, and the inability to deploy staff worldwide, where they are most needed, could affect the Group’s business. Similar constraints may be felt by the Group’s key consultants, contractors and suppliers, thereby impacting the Group’s operations, expansion plans or business more generally.
The Group’s costs of
close-down, reclamation, and rehabilitation could be higher than expected
   Close-down and reclamation works to return operating sites to the community can be extensive and costly. Estimated costs are provided for, and updated annually, over the life of each operation but the provisions might prove to be inadequate due to changes in legislation, standards and the emergence of new reclamation techniques. In addition, the expected timing of expenditure could change significantly due to changes in the business environment that might vary the life of an operation.









Table of Contents

Sustainable development


Performance data

Our sustainable development performance data are reported for calendar years and, unless stated otherwise, represent 100 per cent basis at each managed operation, even though Rio Tinto may have only partial ownership.

Data reported in previous years may be modified if verification processes detect material errors, or if changes are required to ensure comparability over time.

Wherever possible, data for operations acquired prior to 1 October of the reporting period are included. Divested operations are included in data collection processes up until the transfer of management control.

We have incorporated the requirements of the ten sustainable development principles of the International Council on Mining and Metals (ICMM) and the mandatory requirements set out in ICMM Position statements into our own policies, strategies and standards, and report in line with the Global Reporting Initiative (GRI) G3 guidelines at Application level A+.

Greenhouse gas emissions

We recognise the need to understand and adapt to the physical impacts of climate change, which will affect our operations, particularly through the availability of water and the occurrence of extreme weather events. We believe the global energy and climate challenges are best met by companies, governments and society working together. Our strategy is to maximise shareholder returns by making our assets more resilient against uncertain carbon and energy market risks.

Rio Tinto both produces and consumes energy. Our smelting and mineral processing operations are energy intensive and depend on electricity, coal, oil, diesel and gas to keep them running. The majority of our electricity use is from greenhouse gas-friendly hydro and nuclear power.

We met our five-year target for a six per cent reduction in total greenhouse gas emissions intensity and are on track to achieve our 2015 target of a ten per cent reduction. We had reduced our total greenhouse gas (GHG) emissions intensity by 17.3 per cent at the end of 2013 compared with 2008. Our total GHG emissions were 37.2 million tonnes of carbon dioxide equivalent (CO2-e) in 2013, 3.4 million tonnes lower than in 2012.

There are also significant GHG emissions associated with the transportation, processing and use of our products. In 2013, the three most significant sources of indirect emissions associated with our products were:


Approximately 5.3 million tonnes of CO2-e associated with third party transport of our products and raw materials.


An estimated 139.4 million tonnes of CO2-e associated with customers using our coal in electricity generation and steel production.


Approximately 395 million tonnes of CO2-e associated with customers using our iron ore to produce steel (these emissions are not all in addition to the coal-use emissions above, as some customers use both our iron ore and our coal to produce steel).

Despite the lack of progress towards a global agreement on climate change, legislation that puts a price on greenhouse gas emissions is in place in Europe, Australia, New Zealand, various US states and Canadian provinces. As a result, over two-thirds of our emissions from our operations are covered by market-based carbon regulation.


Our goal is zero harm, including, above all, the elimination of workplace fatalities. We strive to create a positive safety culture in all parts of our organisation, where everyone is committed to their own safety and the safety of their workmates. Our safety performance is underpinned by a set of global standards that is fully integrated with Rio Tinto’s Health, Safety, Environment and Quality management system.

Our integrated safety approach combines a focus on injury reduction, elimination of fatalities and catastrophic risk management. Central to our approach is that passionate and effective safety leaders engage with their teams to build a zero harm culture. During 2013, all product groups have continued to strengthen safety leadership.

We continued to reduce injury rates across the Group in 2013. Our performance is measured by the all injury frequency rate (AIFR), which includes data for employees and contractors. At the end of 2013 our AIFR was 0.65. Over the last five years we have reduced our AIFR by 20 per cent. This improvement is being driven by the successful zero harm programmes within each of our businesses.

Our lost time injury frequency rate (LTIFR), was 0.42 per 200,000 hours worked in 2013. While our LTIFR compares favourably within the industry and across sectors, we are committed to making further improvements as we strive for our zero harm goal.

Regrettably, we did not meet our goal of zero fatalities in 2013. Three people lost their lives while working at Rio Tinto managed operations. The fatalities were caused by a mobile equipment incident during road maintenance at the La Granja project in Peru, a crush incident at Rio Tinto Alcan’s Alma smelter in Canada, and a crush incident at Richards Bay Minerals in South Africa.

We provided support and counselling to the families and workmates affected by these tragic events and we have shared the lessons from these incidents across the Group. It is essential that we learn from these events if we are to achieve our target of zero fatalities. We are also placing significant focus on the effective investigation of incidents that have the potential to cause fatalities, so that we learn from them.

This focus on investigation and sharing lessons learned extends to our non-managed operations.

During 2013, we continued with our rigorous risk assessment processes and the deployment of critical control monitoring plans to drive effective risk management at an operational level. We also continued to improve specific risk management processes for catastrophic risks such as process and aviation safety.

Non-managed operations and joint ventures

Rio Tinto holds interests in companies and joint ventures that it does not manage, including the Escondida copper mine in Chile and the Grasberg copper-gold mine in Indonesia. We actively engage with our partners around sustainable development through formal governance structures and technical exchanges. In this way we endeavour to ensure that the principles in The way we work are respected at all times.


Rio Tinto has a 30 per cent interest in Escondida, which is managed by BHP Billiton. Our seats on the Owners’ Council allow us regular input on strategic and policy matters. In 2013, Escondida successfully negotiated a four-year contract with their union employees, which allows Escondida to continue to be focused on safety and the environment. Also during the year, the Escondida Water Supply project to construct a new 2,500 litre per second seawater desalination facility was approved. This project will ensure a continued water supply to sustain operations while minimising Escondida’s need to use groundwater.


PT Freeport Indonesia (PTFI), a subsidiary of Freeport-McMoRan Copper & Gold, Inc., owns and operates the Grasberg mine in Papua, Indonesia. We have a joint venture interest attributable to the 1995 mine expansion, which entitles us to a 40 per cent share of production above specified levels until the end of 2021 and 40 per cent of all production after 2021. We have the ability to engage and influence through our representation on the Operating, Technical & Sustainable Development Committees.

Tragically, there were 33 industrial fatalities at PTFI in 2013; 31 underground and two at the surface involving light vehicles. Twenty-eight people lost their lives in the catastrophic underground tunnel collapse incident in May. We have worked closely with, and continue to support, the PTFI leadership team both in the investigation and in the post-investigation lesson implementation to develop practices to avoid catastrophic failures in the future. PTFI manages complex social, community and environmental issues. There have also been instances of violence in areas near the operation, including a series of shooting incidents that resulted in one injury in 2013. PTFI continues to implement prudent measures of security for personnel and material transport. Both Rio Tinto and Freeport-McMoRan support the Voluntary Principles on Security and Human Rights (VPSHR) and work together to ensure practice is consistent with these principles. Rio Tinto continues to monitor the situation.

Rio Tinto is required to disclose mine safety violations or other regulatory matters in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act that are included in Exhibit 99.1 to this filing.







Table of Contents



Financial performance


US$ million
US$ million


     12,463         12,170   

Operating cash flow

     1,364         571   

Underlying earnings

     557         54   

Capital expenditure

     2,226         2,755   

Net operating assets

     18,814         20,461   

Following the conclusion of a comprehensive review in August 2013, the Group determined that the divestment of Pacific Aluminium for value was not possible in the current economic conditions. On 29 November 2013, Rio Tinto announced that it intended to suspend alumina production at Gove, Australia and focus on its bauxite operations after determining the refinery was no longer a viable business in the current market conditions. The four Pacific Aluminium smelters and the Gove bauxite mine were therefore reintegrated into Rio Tinto Alcan during the second half of 2013. The Gove alumina refinery continues to be reported in Other Operations. Comparative numbers have been reclassified accordingly.

Strategy and strategic priorities

The Aluminium product group’s ultimate objective is to be the most profitable primary aluminium producer in the world. In today’s challenging environment, this is only achievable by continuing to drive the transformation of the business, focusing on top-tier assets and continuing to improve cost structure in a sustainable way.

The second wave of a comprehensive transformation strategy launched in 2011 is committed to continuing improvement by:


Improving performance through significant, widespread cost reductions and productivity gains.


Focusing on top-tier assets by curtailing high-cost capacity and divesting non-core assets.


Delivering key brownfield and modernisation projects that will enable Rio Tinto Alcan to leverage its leading bauxite and unrivalled renewable power positions, as well as its industry-leading proprietary AP technology.


In 2013, the Aluminium group’s all injury frequency rate showed incremental improvement to 0.66 versus its target of 0.68(1). Sadly, however, there was one fatality in April, which resulted from an accident at the Alma smelter in Quebec, Canada.

Rio Tinto Alcan’s ongoing priority is to press ahead with implementing the Zero Harm by Choice leadership development programme, while continuing to learn from significant potential incidents and improving the effectiveness of critical control monitoring plans, in order to reach the ultimate goal of zero injuries. Vehicle and pedestrian safety, working at height and lifting loads remain the most important personal safety risks to manage.

Greenhouse gas emissions

Rio Tinto Alcan reduced its greenhouse gas intensity by 29 per cent since 2008, making a substantial contribution to Rio Tinto’s overall GHG intensity improvements(2). This significant reduction came from the divestment or closure of outdated or higher-carbon energy plants, as well as ongoing operational improvements that have combined to give Rio Tinto Alcan one of the lowest carbon footprints in the aluminium industry.

Following the recent reintegration of Pacific Aluminium into Rio Tinto Alcan, 78 per cent of Rio Tinto Alcan’s power supply is carbon-free. Seventy two per cent comes from hydroelectricity, one of the cleanest forms of electricity production, and the remaining six per cent comes from nuclear power sources.

Rio Tinto Alcan works closely with stakeholders to address sustainability concerns and help identify ways to foster greater transparency and sustainability throughout the aluminium industry. In 2013 the results of the Quebec Government-led assessment of the carbon footprint of Rio Tinto Alcan ingot made in Quebec, relative to the industry average, showed a 50 per cent lower global warming potential than the industry average (excluding China).

Review of operations

Rio Tinto Alcan’s ongoing transformation is strengthening its position as the world’s leading aluminium business in terms of quality of assets, productivity and profitability.

The Aluminium group delivered underlying earnings of US$557 million – US$503 million higher than 2012, including increased EBITDA margins, despite a nine per cent decline in average London Metal Exchange (LME) prices period-over-period and the negative impact of severe weather in Australia in the first half of 2013.

The average aluminium market price in 2013 was US$1,845 per tonne, which compares to an average of US$2,018 per tonne in 2012. Rio Tinto Alcan’s average realised price, which includes market and product premiums, for primary metal products in 2013 was US$2,268 per tonne, compared with US$2,383 per tonne in 2012. The growing momentum from the cost reduction initiatives combined with increased volumes and a rise in market premia were the main drivers of the positive change in earnings.

Rio Tinto Alcan pursued more than 500 cost reduction initiatives and in 2013 these improvements lifted underlying earnings by US$392 million (US$574 million pre-tax). The savings included greater production efficiencies and lower prices of raw materials, lower functional costs and increased production from Yarwun and Alma. The impact of the heavy rainfalls in Queensland impacted cost reduction efforts by US$58 million pre-tax.

Higher volumes were boosted by record operational performances at the bauxite operations, notably at the Weipa and Gove mines in Australia, taking advantage of higher demand and the steady ramp-up of production at the expanded Yarwun alumina refinery. Aluminium volumes realised a return to full production at the Alma, Quebec smelter, and completion of the leading-edge AP60 smelter which were in part offset by the curtailment of the Shawinigan smelter and the divestment of the Saint-Jean-de-Maurienne smelter and Castelsarrasin casting facility in France.

The Aluminium group continued to strengthen its portfolio during 2013, building on the momentum of the past five years. To date, it has curtailed or closed 600,000 tonnes of high-cost aluminium smelting capacity, including 100,000 tonnes curtailed at the Shawinigan smelter in Quebec in December 2013. The group is in the process of curtailing 2.6 million tonnes of alumina capacity at Gove. Major divestments during 2013 included the sale of Rio Tinto Alcan’s 50 per cent stake in the Vigelands Metal Refinery and associated power station in Norway, the sale of the St. Jean-de-Maurienne smelter and Castelsarrasin business in France, and the sale of the Sebree smelter in the US.

The group is continuing to review appropriate future pathways for other non-Tier 1 assets.

An impairment charge of US$1,293 million was recognised relating to the Group’s aluminium business, primarily for Gove alumina refinery (US$555 million)(3), following the 29 November announcement to curtail production, and for the Kitimat assets (US$696 million) where a significant project cost overrun has been identified which diminished the value of the associated intangible assets.


(1) The figure excludes Pacific Aluminium and Gove. Pacific Aluminium had an all injury frequency rate of 0.88 in 2013. Gove had an all injury frequency rate of 0.93.


(2) The figure excludes Pacific Aluminium and Gove. Pacific Aluminium accounted for 26 per cent of Rio Tinto’s total GHG emissions in 2013, and Gove accounted for five per cent of total GHG emissions.


(3) The Gove refinery is reported as part of Other Operations.






Table of Contents


Development projects

Rio Tinto Alcan’s primary focus is on delivering key existing brownfield and modernisation projects – investments that will enable it to leverage the group’s strong bauxite and low-cost hydropower positions.

The new Arvida Smelter and AP60 Technology Centre in Quebec’s Saguenay–Lac-Saint-Jean region is complete and has ramped up successfully. With an initial capacity of 60,000 tonnes per year, the smelter provides an industrial-scale research and development platform for commercialising Rio Tinto Alcan’s latest-generation AP Technology™. AP60 is designed to deliver significantly lower full economic costs of production once at full capacity, including 40 per cent higher metal output per pot and 15 per cent higher labour productivity. This new facility, which will eventually replace the existing Arvida smelter, has the potential for two additional phases that would boost annual capacity of the new facility from 60,000 to 450,000 tonnes.

In British Columbia, the modernisation of the Kitimat smelter will enable the Aluminium group to fully leverage its wholly-owned Kemano hydropower resource. A project cost overrun has been identified, and a process to validate the extent of the overrun is currently under way. Any additional capital required to complete the project will be subject to board approval. Subject to that approval, the Kitimat Modernisation Project is now expected to be commissioned and produce first metal during the first half of 2015. This project will increase Kitimat’s annual capacity by some 48 per cent to approximately 420,000 tonnes, while moving production into the first decile of the cost curve and achieving a reduction of more than 50 per cent in the smelter’s emissions intensity.

Ramp-up at the expanded Yarwun alumina refinery in Australia, a project known as Yarwun 2, is now complete and contributing to reduced alumina operating costs. Production capacity at Yarwun has more than doubled, to 3.4 million tonnes per year: an initiative that strengthens Rio Tinto Alcan’s second-quartile position on the industry cost curve for alumina production.

Bauxite growth projects include the South of the Embley expansion project in Queensland, which, subject to approval, will extend the life of the Weipa bauxite mine by about 40 years (depending on production rates). This will ensure continuity of supply for Rio Tinto Alcan’s Gladstone refineries, while also facilitating exports to meet rapidly increasing demand from China and the developing Middle East market. This project can be developed at the appropriate time.

Due to current market conditions, it is unlikely that Rio Tinto Alcan will make further significant investments in aluminium and alumina growth projects for the foreseeable future.


Looking to the near term, bauxite should continue to be the healthiest segment of the industry, driven largely by strong demand in China. Rio Tinto Alcan is well positioned to take advantage of this strong demand through its industry-leading bauxite assets, especially against the backdrop of the supply uncertainty created by Indonesia’s export ban, which was implemented in January 2014. Global demand for alumina and aluminium is also strong, however these segments face continued challenges going forward.

At the end of 2013, the aluminium market was nearly balanced following recent curtailments and production disruptions. Aluminium inventories are likely to remain high as warehouse deals are driven by the attractiveness of low interest rates and a strong contango (ie indicative of expected higher prices).

The market for alumina, currently trading at or around the marginal cost of production, is expected to remain near balanced for the near term.

Metal prices remain under pressure – as do many marginal producers. Nonetheless, market premiums have reached unprecedented levels. Despite markedly-increasing premiums, a good portion of the industry remains in a loss-making position. This could intensify pressure for more curtailments, which over the longer term could put upward pressure on the LME base price.

Recent proposals by the LME regarding warehousing rules could soften regional premiums from their recent record levels to a more historic range, but this will take time to unfold.

Despite the short-term challenges, the longer-term outlook for aluminium remains robust and Rio Tinto Alcan believes that strong margins will be available for the well-positioned, low-cost operator. Medium to long-term compound annual demand growth rates (from a 2013 base) are forecast to average five per cent until 2020 and to be near four per cent until 2030. Transportation will be the stand-out growth end-use sector supported by substitution of other materials by aluminium.










Table of Contents



Financial performance


US$ million
US$ million


     5,916         6,661   

Operating cash flow

     672         469   

Underlying earnings

     821         1,059   

Capital expenditure

     2,813         4,455   

Net operating assets

     12,070         12,321   

Strategy and strategic priorities

The Copper product group’s 4+2 strategy aims to create substantial and sustainable value for shareholders. It is focused on building a core portfolio of four operating assets (Kennecott Utah Copper, Oyu Tolgoi, Escondida and Grasberg) and two world-class greenfield projects (La Granja and Resolution Copper) that are or are expected to be large, long-life, low-cost and expandable operations. The Copper group will deliver this strategy through:


Relentlessly focusing on health, safety, environmental responsibility and community engagement, and sustainable partnerships with governments and communities.


Improving productivity via safer, better and smarter practices and selected investments in technologies that generate long-term value.


Driving maximum value out of the products the group mines and optimising the entire supply chain.


Developing strong leadership, matching the group’s employees and skills to its current and future requirements, and creating a culture that establishes accountability for delivery of business objectives.


In 2013, the Copper group’s all injury frequency rate was 0.49, compared to 0.50 in 2012. The group regrettably had a fatality at La Granja, one of its managed projects, in 2013. Tragically, there were 33 fatalities at the non-managed Grasberg mine, of which 28 were related to a devastating underground accident. There was also a fatality at the SouthGobi Resources non-managed infrastructure project.

Rio Tinto Copper’s safety programmes are focused on four facets:


Eliminating fatality risks and catastrophic events, and developing sound mitigation plans.


Helping employees at all levels understand safety risks and how to manage them. The group’s new Underground performance safety standards are believed to be the most thorough and inclusive in the mining industry.


Strong focus on reducing injuries.


Safe design and engineering standards.

Greenhouse gas emissions

The Copper group’s 2013 greenhouse gas emissions were 8.34 tonnes of carbon dioxide equivalent per tonne of copper cathode produced, compared with 10.66 tonnes in 2012. The increase in efficiency resulted from an incremental improvement at Kennecott Utah Copper and from the divestment of the Palabora smelter in mid-2013.

Review of operations

The Copper portfolio is made up of large, long-life, low-cost and expandable operations that are capable of creating substantial and sustainable value for shareholders. In 2013, the group produced 631 thousand tonnes of mined copper (Rio Tinto share), making Rio Tinto the world’s sixth largest supplier. The group also produced 340 thousand ounces of mined gold, 4,765 thousand ounces of mined silver and 5.7 thousand tonnes of molybdenum as by-products of its copper operations.

The group’s underlying earnings of US$821 million were 22 per cent lower than 2012. Excluding the impact of the US$131 million write-down of the investment in Northern Dynasty Minerals, which owns 100 per cent of the Pebble Project in the Bristol Bay region of western Alaska, underlying earnings were ten per cent lower than 2012. This reflected lower prices, the impact of the pit wall slide at Bingham Canyon and decreased gold and molybdenum volumes at Kennecott Utah Copper from lower grades. These were partly offset by US$352 million of cash cost savings (US$514 million pre-tax) achieved across the Copper group, notably at Kennecott Utah Copper. A post-tax and non-controlling interest impairment charge of US$1,655 million has been recognised as an exclusion from underlying earnings. This includes US$1,565 million related to the impairment of previous non-cash accounting uplifts on first consolidation of certain assets of Turquoise Hill (including Oyu Tolgoi). In addition, charges of US$283 million have been excluded from underlying earnings related to the Kennecott Utah Copper slide.

In 2013, the group repositioned its portfolio and delivered significant improvements in productivity and costs, with a 15 per cent increase in mined copper despite challenges at Kennecott and Oyu Tolgoi, a 12 per cent reduction in costs at managed operations – including a 23 per cent reduction in service and support costs. It also completed US$1.8 billion of divestments.

Core operating assets

Kennecott Utah Copper (Rio Tinto: 100 per cent)

As the second largest copper producer in the US, Kennecott accounts for nearly 25 per cent of the country’s copper production. In 2013, Kennecott produced 194 thousand tonnes of refined copper, 192 thousand ounces of refined gold, and 5.7 thousand tonnes of molybdenum. On 10 April 2013, the Bingham Canyon Mine experienced a 135 million tonne landslide on the north-east wall. As a result of Kennecott’s sophisticated monitoring systems and advanced planning, no one was injured. Recovery work will continue until the end of 2015, with production in the near and medium term constrained by the slide. In 2013, Kennecott’s underground project was paused until further value-engineering work is completed to assess the most profitable path forward for the project.

Oyu Tolgoi (Rio Tinto: 51 per cent interest in Turquoise Hill Resources)

Located in Mongolia’s South Gobi Desert, Oyu Tolgoi is the largest new copper-gold operation in the world. Commercial operations began in mid-2013 and Oyu Tolgoi’s open pit is now operating at full capacity. In 2013, Oyu Tolgoi produced 77 thousand tonnes of copper and 157 thousand ounces of gold. Customers began collecting concentrate from the Chinese warehouse during the fourth quarter of 2013, and had withdrawn approximately 26,400 tonnes of concentrate by year end.

Escondida (Rio Tinto: 30 per cent)

Located in Chile’s Atacama Desert, Escondida is the world’s largest copper mine in terms of copper production. In 2013, Escondida produced 1.1 million tonnes of copper (100 per cent basis).

Grasberg (a joint venture that gives Rio Tinto a 40 per cent share of production above specified levels until the end of 2021 and 40 per cent of all production after 2021)

Grasberg is owned and operated by PT Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Copper & Gold Inc. Located in the province of Papua in Indonesia, it is one of the world’s largest copper mines. Rio Tinto’s share of mined copper production at Grasberg was six thousand tonnes in 2013.

Divested operations

In 2013, Rio Tinto Copper made solid progress in repositioning its portfolio to focus on a core portfolio of Tier 1 assets, with US$1.8 billion of divestments completed, including Northparkes, Palabora, Eagle, Altynalmas Gold and Inova. The group has also committed to reviewing the strategic fit of its minority interest in Northern Dynasty Minerals, which owns 100 per cent of the Pebble Project in Alaska.







Table of Contents


Northparkes (formerly Rio Tinto: 80 per cent)

Located in New South Wales, Australia, Northparkes was a joint venture with the Sumitomo Group. Northparkes produced 51 thousand tonnes of copper and 62 thousand ounces of gold up to December 2013 (100 per cent basis). In July 2013, Rio Tinto announced an agreement to sell its 80 per cent interest in Northparkes to China Molybdenum Co., Ltd. (CMOC) for US$820 million. The transaction closed on 1 December 2013.

Palabora (formerly Rio Tinto: 57.7 per cent)

Palabora Mining Company is a South African company formerly listed on the Johannesburg Stock Exchange. The mine produced 26 thousand tonnes of refined copper up to July 2013 (100 per cent basis). In December 2012, Rio Tinto announced an agreement to sell its interest in Palabora for consideration totalling US$373 million. The transaction closed on 31 July 2013.

Development projects

The Copper group’s investment focus is on improving productivity and mine life at key operating assets and retaining development optionality on high quality projects, with production to come online when the market dictates. It employs a phased approach to development to maximise the value of a project to shareholders and to manage project risks and capital exposure.

Productivity and mine life extension


Rio Tinto is investing US$660 million to extend the life of Kennecott’s Bingham Canyon Mine from 2018 to 2030. The project, known as Cornerstone, involves pushing back the south wall of Bingham Canyon to gain access to 515 million tonnes of 0.79 per cent copper equivalent ore, with first ore expected to be accessed in 2017.


At Escondida, production was approximately seven per cent higher in 2013, primarily as a result of higher ore grades and improved throughout rates. In addition, Escondida will construct a new dynamic leach pad to maintain current levels of oxide leaching. The project should be complete in mid-2014, when the existing heap leach is exhausted.


PT Freeport Indonesia continues to develop the large-scale, high-grade underground orebodies located beneath and nearby the Grasberg open pit. In aggregate, these underground orebodies are expected to ramp up over several years to approximately 240,000 tonnes of ore per day following the anticipated transition from the Grasberg open pit in 2017.

Oyu Tolgoi

On 29 July 2013, Rio Tinto announced that all funding and work on underground development of Oyu Tolgoi would be delayed. Since then, Rio Tinto has continued to engage with the Government of Mongolia with the aim of resolving a number of outstanding shareholder issues and to progress project finance. An option to restart underground development, subject to certain conditions being met, has been proposed, but further delays may occur if these conditions are not met before lender commitments on existing project finance arrangements expire. Such delays could lead to further impairments.

Greenfield projects

La Granja (Rio Tinto: 100 per cent)

The La Granja project, located in northern Peru, has the potential to be a Tier 1 asset and one of Rio Tinto’s highest-value opportunities.

The project strategy is focused on delivering a risk-managed and staged entry to a world-class mining district. The mine development strategy is designed to manage social, environmental and technical challenges by starting at a small scale and preserving options to grow the project over time.

Resolution Copper (Rio Tinto: 55 per cent)

The Resolution Copper project, located in Arizona, US, is among the top ten largest undeveloped copper assets in the world, and could eventually become the largest copper producer in North America.

In November 2013, the company submitted a Mine Plan of Operations to initiate Federal permitting on the project. Approval of the plan would allow mining to occur on lands where the company currently holds mineral title. Resolution is also seeking approval in the US Congress to acquire full legal title to 671 hectares of public land held under its mineral claim and to revoke a mineral withdrawal on 307 hectares of adjacent land. In exchange, the project would give the public more than 2,400 hectares of high-quality Arizona conservation lands. While exchange legislation faces opposition from special-interest groups, it is moving through the US Congress with bi-partisan support.

Technology and innovation

The Copper group recently established a Growth and Innovation organisation responsible for developing a focused, attractive portfolio of value-producing growth and innovation opportunities. The group invests in value-creating, leading-edge technology to drive the efficiency and safety of its mining processes and reduce environmental impact, above and below ground.

Taking in real-time data, the new Excellence Centre uses the latest in modelling and simulation tools to significantly improve copper processing performance across the globe.

Rio Tinto is evaluating a range of incremental and step-change technologies to improve the safety and productivity of current mines and expansions, with a particular focus on mineral processing and block cave mining. This has included large-scale copper sulphide leach testwork on the La Granja mineralisation and a successful pilot sulphide leach facility using ore at Kennecott.


While Rio Tinto expects volatility in the near term, long-term fundamentals for the copper industry remain positive. The continued urbanisation, industrialisation and electrification of China and other large markets such as India and South East Asia, combined with greater energy-efficiency requirements and the move toward more renewable energy sources, will continue to drive long-term copper demand. Against those demand dynamics, the supply picture will remain constrained, with continued cost escalation in some jurisdictions, falling grades, technical challenges from increasing depth at existing operations and new discoveries, water and power constraints, and continued political and social risks, especially for new projects.

Rio Tinto Copper is well positioned to benefit from of these strong market dynamics. It is currently the industry’s sixth largest copper producer, with existing Tier 1 assets. In addition, the group is pursuing high-value growth opportunities, using a phased and structured approach to development investment while maintaining optionality. The group is carefully managing costs and capital exposure, and its leadership in technological innovations allows it to safely and efficiently access lower grade ores and deposits, at greater depths. This strategy will generate significant and sustainable value for shareholders and all partners, as it is expected to reposition the group from the third quartile of the copper cost curve into a low-cost, first quartile producer.










Table of Contents

Diamonds & Minerals


Financial performance


US$ million
US$ million


     4,193         4,056   

Operating cash flow

     909         267   

Underlying earnings

     350         149   

Underlying earnings excluding Simandou

     393         411   

Capital expenditure

     1,009         1,814   

Net operating assets

     7,900         8,061   

Strategy and strategic priorities

The Diamonds & Minerals product group has an attractive portfolio of businesses that connect customers and consumers all around the world with products that enhance the quality of life. Demand growth for diamonds and industrial minerals typically follows peak requirements for commodities such as iron ore and copper as mid-to-late economic development cycle minerals. The group’s strategy is focused on operating safe, low-cost, demand-led businesses. Through its integrated marketing strategies, the group can create and grow global markets for its products that produce value for Rio Tinto and its shareholders.

The product group’s strategy is focused on:


Creating demand-led, integrated operations that can respond quickly to the changing external environment.


Generating and exploiting proprietary market insights.


Growing global markets through business-focused research and market development.


Strengthening its position in traditional segments and entering attractive new markets.


Improving operating performance by cutting costs, driving productivity and delayering the organisation.


Diamonds & Minerals continues to focus on fostering a culture of accountability and awareness among employees and improving contractor safety in our pursuit of zero harm. The product group’s all injury frequency rate (AIFR) increased to 0.75 in 2013 from 0.57 in 2012. Regrettably, there was one fatality in November 2013 at Richards Bay Minerals in South Africa.

The product group faces some unique challenges in health and safety. The workforce spans multiple nationalities, ethnicities, languages and cultures in developing countries. In response, management is employing innovative strategies and visible safety leadership to train the workforce.

Diamonds & Minerals is focused on eliminating fatality risks by placing an emphasis on critical controls and robust process safety.

Greenhouse gas emissions

Overall greenhouse gas (GHG) emissions intensity increased slightly in 2013. This was largely due to lower production at Rio Tinto Iron & Titanium (RTIT); the reduction in capacity utilisation of its smelters led to an increase in GHG emissions per tonne of product – reflected in a four per cent increase in emissions intensity for RTIT compared to 2012. GHG emissions per tonne of product were marginally higher at Rio Tinto Minerals, but improved across Rio Tinto Diamonds operations. The product group continues to invest in the implementation of more efficient equipment and technology, such as the wind farm at Diavik.

Review of operations

The group’s underlying earnings of US$350 million include evaluation costs in respect of Simandou of US$43 million. Excluding Simandou expenditure, underlying earnings of US$393 million were four per cent lower than in 2012. Prices were lower for titanium dioxide feedstocks, zircon, metallics and borates,

while titanium dioxide sales volumes were also lower. This was offset by higher diamond prices, favourable exchange rate movements and lower evaluation study costs. The acquisition of BHP Billiton’s interests in Richards Bay Minerals in September 2012 also contributed an increase in earnings.

On a like-for-like basis, cash operating costs of production in 2013 were US$358 million lower than in 2012, reflecting the impact of targeted cost reduction initiatives and favourable exchange rate movements. A large number of initiatives were launched to remove significant structural costs from the business, including delayering the organisation, driving productivity initiatives and removing costs. In parallel, temporary plant closures in response to market conditions generated significant savings in variable costs during the year.

Rio Tinto Diamonds (RTD)

RTD is a leading producer of rough diamonds with a product portfolio that provides a presence in all major markets. Rio Tinto’s diamonds assets comprise the Argyle Diamond Mine in Australia (Rio Tinto: 100 per cent), the Diavik Diamond Mine in Canada (60 per cent), Murowa Diamonds in Zimbabwe (78 per cent) and the Bunder diamond project in India (100 per cent). RTD sells its share of production through its centralised marketing office in Belgium and has a niche cutting and polishing factory in Australia for its high-end pink diamonds from the Argyle mine, and sells them to an international customer base.

In June 2013, Rio Tinto announced its intention to retain its diamonds businesses after concluding a strategic review which considered a range of options, including potential divestment. The medium to long-term market fundamentals for diamonds remain robust, and the high quality diamonds business is well positioned to capitalise on the positive market outlook.

RTD produced 16.0 million carats in 2013, a 22 per cent increase from 2012 that reflected higher tonnes processed and higher grades at Argyle following the commissioning of the underground mine in April 2013. Revenue in 2013 was 15 per cent higher than in 2012, reflecting higher volumes and increased prices. RTD reported earnings of US$53 million in 2013, compared to a loss of US$25 million in 2012, reflecting higher revenues and cost savings.

The ramp-up of the Argyle underground mine to full operation is on schedule to be completed by 2015, extending the life of mine until at least 2020.

Production from Diavik’s underground mine commenced in early 2010 in parallel with open pit operations. Diavik has now completed the transition to a fully underground mine, with all three pipes now at full production.

Rio Tinto Iron & Titanium (RTIT)

RTIT is the largest producer of high-grade titanium dioxide feedstocks. It mines ilmenite at its wholly-owned Rio Tinto Fer et Titane (RTFT) operation in Canada; its managed operation Richards Bay Minerals (RBM) in South Africa (Rio Tinto: 74 per cent); and its QIT Madagascar Minerals (QMM) operation (80 per cent). RTIT produces high-grade titanium dioxide feedstocks at its world-class metallurgical complexes at RTFT and RBM as well as valuable co-products including high purity iron, steel, metal powders, zircon and rutile.

In 2013, titanium dioxide feedstock production increased by two per cent year-on-year to 1.6 million tonnes (Rio Tinto share). This includes an increase in attributable volumes at RBM resulting from Rio Tinto doubling its stake in September 2012. Due to challenging market conditions for high grade titanium dioxide feedstock, RTFT brought forward a planned shutdown of one of nine furnaces in Canada and deferred the rebuild until market conditions improve. The RTFT upgraded slag (UGS) production was also taken offline for part of the year, together with zircon and rutile production at RBM.

RTIT’s revenues increased by one per cent as the impact of the RBM transaction was largely offset by lower prices for titanium dioxide feedstocks, zircon and metallics and lower sales volumes of titanium dioxide feedstocks. Earnings fell by 35 per cent to US$264 million, despite the benefit of the RBM transaction, which increased Rio Tinto’s share of earnings with effect from September 2012.







Table of Contents


Rio Tinto Minerals (RTM)

RTM (Rio Tinto: 100 per cent) supplies over 30 per cent of the world’s refined borates from its world-class deposit in Boron, California. RTM also has borates refineries and shipping facilities in China, France, Malaysia, the Netherlands, Spain and the US.

Borates production of 495,000 tonnes boric oxide equivalent was seven per cent higher than in 2012, following cuts to production in 2012 in response to market conditions. Global demand for RTM refined borates improved slightly with revenue remaining flat on lower prices. Earnings of US$131 million were six per cent lower than 2012 due to the decrease in product prices.

Rio Tinto Minerals is delivering the modified direct dissolving of kernite (MDDK) project, which allows for more efficient orebody utilisation. The project is on track for completion in 2014.

Dampier Salt (DSL)

Dampier Salt Limited, the world’s largest solar salt exporter, produces industrial salt by solar evaporation of seawater at Dampier and Port Hedland, and from underground brine at Lake MacLeod, all in Western Australia. Salt is sold principally to the base chemical industry markets in Asia. Salt production of 6.7 million tonnes (Rio Tinto share) was two per cent lower than 2012. During 2013, gypsum mining operations and sales were resumed.

Development projects

In 2011, Diamonds & Minerals re-entered the potash business through an exploration joint venture with North Atlantic Potash Inc., a subsidiary of JSC Acron. Acron is a world leader in fertiliser production and holds multiple potash exploration permits in Saskatchewan, Canada. Drilling results indicate encouraging potash grade and thickness. Higher nutritional standards, population growth and limited arable land make potash a critical factor in maintaining global food security, and a natural complement to RTM’s existing borate fertiliser business.

Progress continued at the group’s Jadar lithium-borate deposit in Serbia. A pilot plant for processing Jadar material was commissioned at Boron and core samples processed at the plant yielded encouraging and positive results. If developed, the deposit has the potential to supply a significant proportion of global lithium demand. Lithium carbonate’s fastest-growing application is in batteries that provide clean power to industrial systems and electric and hybrid vehicles.

In January 2013, against a backdrop of weaker market conditions for its products and the need to manage and reduce its costs, RTIT reviewed the economic viability of the TiO4 project and cancelled prefeasibility studies for the project in Canada and Madagascar. The Zulti South mine expansion at RBM, the mineral sands exploration programme in Mozambique and other brownfield studies at the group’s operations continue.

The Bunder diamond project is progressing its prefeasibility study, which began in July 2010. These studies have confirmed the economic potential of the orebody and work is under way to define the best development option. Mine plan approval was received during the year and environmental approvals are under way.

The Simandou iron ore project in Guinea is one of the largest-known undeveloped high-grade iron ore resources in the world. The concession will enable the development of the largest mine and infrastructure project ever undertaken in Africa. This will include the progressive development of a 100 million tonne per annum mine, a 650-kilometre trans-Guinean railway and a new deep-water port.

The project is adopting a “stage gate” approach for investment to be made in line with Government of Guinea approvals and funding processes.

In February 2013, the Government of Guinea approved the Social and Environmental Impact Assessment (SEIA) conducted on the Simandou project. The SEIA is the result of a consultation programme involving more than 10,000 members of the local communities and ensures the project is developed in a way that maximises long-term benefits for the people of Guinea and minimises impact on the communities and the environment. Also during the year, the project sponsors – the Government of Guinea, Rio Tinto, Chinalco and the International Finance Corporation signed a letter of mutual intent setting out the key principles that will serve as the basis of the Investment Framework that the partners intend to finalise in the first half of 2014. The Investment Framework is instrumental in governing the Simandou project successfully, and in setting a stable and durable operating model and environment for all partners and investors.

In parallel, the partners are seeking funding for the project infrastructure. This may include outsourcing to a third-party consortium in a strategy to embed a broad partnership approach to developing the multi-user infrastructure, and to reduce the risk and capital commitments of the Simandou project sponsors.


The group serves a range of different industries, but are linked through their track record of creating and defining new and profitable markets for their products. Demand softened in these markets in 2013 in response to broader economic trends, and the outlook for 2014 remains uncertain, although there is some sense that developed economies are on the path to a more robust recovery, which is a driver for industrial mineral demand. However, the medium to long-term outlook continues to be positive across all products as urbanisation and rising standards of living drive higher levels of demand.

RTM will continue to seek to capture profitable growth in emerging economies and maintain its position in its established markets. Ongoing supply chain improvements will facilitate speed and flexibility in shifting supply to promising sectors and regions. Demand for borates is expected to remain stable in the near term, and the long-term industry fundamentals remain attractive. RTM will focus on increasing refined borates capacity to meet higher-than-GDP demand growth while achieving world-class safety performance and improving its cost position.

Demand for titanium dioxide feedstock is expected to continue to grow in the medium to long term, in line with improving global economic conditions, urbanisation and demand growth in emerging markets supported by rising per capita incomes. In response to weak demand and excess inventory in the feedstock supply chain, and in order to reduce operating costs and inventory, RTIT has taken action at a number of its operations, including temporary closures of the UGS plant and deferral of a planned furnace rebuild at RTFT.

Pigment inventory has returned to historical levels and it is expected that feedstock inventories within the supply chain will return to historical levels over the course of 2014.

The medium to long-term fundamentals for the diamond industry are positive and expected to support sustainable future price growth. The global resource base is steadily declining, compounded by limited exploration investment and success, and expected reductions in supply over the medium to longer term. Demand in India and China is expected to continue to grow, and to represent nearly 50 per cent of global diamond consumption by 2020. Demand in mature markets is expected to continue to grow in line with GDP.










Table of Contents



Financial performance


US$ million
US$ million


     5,454         6,062   

Operating cash flow

     999         641   

Underlying earnings

     33         309   

Capital expenditure

     732         1,877   

Net operating assets

     4,872         7,169   

Strategy and strategic priorities

The Energy product group aims to sustainably extract full value from its assets to serve growing global energy demand. It will achieve this by transforming the business to deliver sector-leading performance in all of its large, option-rich orebodies.

The group is focused on:


Maximising productivity and significantly reducing cost.


Optimising the portfolio and deriving maximum value from mine to market.


Embedding innovative and value-adding technology.


Building trust and partnering to earn the right to operate.


In 2013, the Energy product group’s all injury frequency rate was 0.67 compared to 0.66 in the previous year. In a challenging year of transformation there were no fatalities recorded at any operations.

In 2013, Kestrel Mine’s strong commitment to health and safety was recognised with the mine winning the Chief Executive Safety Award for most improved operation. The Kestrel team has consistently improved its safety performance over recent years through increasing employee engagement on safety, and embedding the leadership commitment to ensure everyone returns home safely after every work shift.

The Energy product group’s safety efforts are focused on:


Understanding and eliminating critical safety risks.


Fostering a culture of shared and personal accountability for safety.


Reducing injuries as well as achieving zero fatalities.

Greenhouse gas emissions

Over the past 15 years, Rio Tinto has spent more than US$100 million on research and development into technologies that will reduce emissions from coal-fired power plants. This investment has been targeted at ensuring coal retains a significant role in the global energy mix in an increasingly carbon-constrained environment. In 2013, the Energy product group continued its A$6 million sponsorship of The Otway Project, Australia’s first industrial-scale demonstration of geological carbon dioxide capture and storage.

The Energy product group’s greenhouse gas emissions decreased to approximately 3.5 million tonnes of carbon dioxide equivalent in 2013, compared with 4.0 million tonnes in 2012. This reduction was mainly due to the implementation of a new industry methodology applicable only at the Energy product group’s New South Wales sites, which more accurately estimates fugitive emissions of carbon dioxide and methane. These gases naturally occur in coal seams and are released during the mining process.

In 2013, Energy’s Australian coal and uranium operations completed energy-use assessments in accordance with requirements under the Energy Efficiency Opportunities Act. More than 40 opportunities were identified relating to fuel usage, coal handling and processing, and process control. The opportunities identified will now undergo detailed evaluation.

Review of operations

The profitability of the uranium and Australian coal industries continues to be significantly impacted by lower commodity prices and high input costs. However, the long-term fundamentals for the Energy product group remain strong. The group has large option-rich assets and a programme of more than 1,500 cost saving initiatives aimed at transforming the business to ensure it remains competitive throughout the cycle.

In 2013 the Energy product group delivered underlying earnings of US$33 million compared with 2012 earnings of US$309 million. The decline in earnings was primarily due to significantly lower prices and the absence of gains on divestment of exploration properties, which amounted to US$258 million in 2012. This was partly offset by a weaker Australian dollar, lower operating costs and record production across a number of sites. A transformation programme of aggressive cost and productivity improvements continued to deliver results during the year, boosting earnings by US$442 million (US$646 million pre-tax) compared with 2012. An impairment charge of US$470 million post-tax was also recognised relating to Rio Tinto Coal Mozambique.

Rio Tinto Coal Australia (Rio Tinto: 100 per cent)

In Queensland, Rio Tinto Coal Australia (RTCA) manages the Hail Creek (Rio Tinto: 82 per cent), Kestrel (80 per cent) and Clermont (50.1 per cent) coal mines.

In New South Wales, RTCA manages Coal & Allied’s coal mines which include the Hunter Valley Operations (80 per cent), Bengalla (32 per cent), Mount Thorley (64 per cent) and Warkworth (44.5 per cent).

RTCA is taking action across a wide front to improve the competitiveness of its operations during challenging conditions for the Australian coal industry. A transformation programme of business improvement initiatives has reduced operating costs significantly and increased productivity. Reduced expenditure on capital projects and improved management of working capital has further contributed to reducing costs.

Australian coal production increased by eight per cent (Rio Tinto share) in 2013 compared to 2012, with four mines (Hunter Valley Operations, Mount Thorley Warkworth, Bengalla and Clermont) achieving annual records. This substantial production increase was delivered through operational improvements, the completion of brownfield mine developments and the ramp-up of Clermont Mine. Net earnings of US$367 million represent a nine per cent decrease from 2012, due to significantly lower prices for all types of coal.

On 15 October 2013, the US$2 billion Kestrel Mine Extension in central Queensland was officially opened. The extension is expected to add 20 years to the life of the mine. Also in October, a binding agreement was signed to sell Clermont Mine for just over US$1 billion and a conditional sale and purchase agreement for Blair Athol Mine was reached.

RTCA is working to secure a long-term future for the Mount Thorley Warkworth mine, following the NSW Land and Environment Court’s decision to overturn government planning approvals. Rio Tinto has also appealed against the Court’s decision, with support from the NSW Government. In early 2014, a short-term planning approval was granted that will enable the mine to resume normal operations for around two years.

Energy Resources of Australia (Rio Tinto: 68.39 per cent)

Energy Resources of Australia (ERA) is a publicly-listed company. Following the completion of open pit mining at its Ranger mine in December 2012, ERA continued production in 2013 by processing stockpiled ore. The majority of high-grade stockpiled ore was processed during the first half of 2013. In the second half of 2013, the mill was primarily fed with lower-grade stockpiled material and as a result uranium oxide production was reduced.

On 7 December 2013, ERA voluntarily suspended ore processing operations following the failure of a leach tank in its processing plant. No one was injured in the incident which was fully contained by the mine’s containment system,







Table of Contents


and there was no impact to the surrounding environment or to Kakadu National Park. The incident is being fully investigated.

In September 2013, ERA’s A$220 million brine concentrator was officially opened. Managing water is central to ERA’s operations and the brine concentrator will help improve its ability to treat water and progressively rehabilitate the site.

Since 2011 ERA has achieved total cumulative cash savings of A$127 million of its A$150 million in targeted reductions. This has been delivered through a number of initiatives, including merging management roles, reducing the use of contractors, reducing support and services roles, improvement in procurement and maintenance practices, and rationalisation of corporate costs.

Rio Tinto Coal Mozambique (Rio Tinto: 100 per cent)

Rio Tinto Coal Mozambique (RTCM) manages the Zambeze Project (100 per cent), Tete East Project (100 per cent), and Benga Mine (65 per cent) in Mozambique, and the Zululand Anthracite Colliery (74 per cent) in South Africa.

The Energy product group is working to secure a new pathway for its coal business in Mozambique. Its Benga mine has established itself as a hard coking coal producer and has been working to improve performance by reducing operating costs and increasing productivity.

A post-tax impairment charge of US$470 million relating to RTCM was recognised. This impairment follows a review of RTCM’s development plan, discount rate and associated country risk premium and brings the total impairments relating to RTCM to US$3.3 billion.

In 2013, RTCM delivered an operating cost reduction of US$20 per tonne, a 129 per cent increase in total coal production to 1.6 million tonnes (100 per cent basis) compared with 2012, a hard coking coal yield increase of five per cent and a reduction in overall headcount in excess of 25 per cent.

Notwithstanding these improvements, challenges remain due to infrastructure constraints and difficult market conditions combined with instances of civil unrest and ongoing political tensions. While the families of expatriate workers were temporarily moved home in November, business operations were not impacted. Separate to this, from mid-December 2013 to mid-January 2014, RTCM suspended mining operations at the Benga mine to reduce stockpiled coal. Customer commitments continued to be met during the suspension.

Rössing Uranium (Rio Tinto: 68.58 per cent)

Rössing Uranium Mine is located near Arandis in Namibia’s Erongo region. Like the rest of the Energy product group, in 2013 Rössing focused on business improvement strategies to reduce unit costs and achieved its target of US$30 million in savings for 2013. Rössing’s overall strip ratios dropped from almost 4:1 in 2011 to 2:1 during 2013. Uranium production in 2013 was 5,312 thousand pounds (100 per cent basis) compared with 5,950 thousand pounds in 2012. Production was impacted by lower-than-planned throughput and a leach tank failure in December which halted production. Some processing operations were restarted on 11 January 2014 and operations will continue to be progressively restored during the first quarter.

Rio Tinto acquired its interest in Namibia-based Rössing Uranium Limited (Rössing) in 1970. The Iranian Foreign Investments Company (IFIC) acquired its original minority shareholding in Rössing in 1975. IFIC’s interest predates the establishment of the Islamic Republic of Iran and the U.S. economic sanctions targeting Iran’s nuclear, energy and ballistic missile programs. IFIC acquired and continues to own a minority shareholding in Rössing in accordance with Namibian law.

Rössing is neither a business partnership nor joint venture between Rio Tinto and IFIC. Rössing is a Namibian limited liability company with a large number of shareholders, including Rio Tinto with 68.7 per cent, IFIC with 15.3 per cent, the Industrial Development Corporation of South Africa with 10 per cent, local individual shareholders with a combined interest of 3 per cent and the Government of the Republic of Namibia with 3 per cent but with an additional 51 per cent vote at a general meeting of Rössing on matters of national interest.

As a shareholder in Rössing, Rio Tinto has no power or authority to divest IFIC’s holding in Rössing. However, Rössing and the Namibian Government have taken several recent steps to limit IFIC’s future involvement in Rössing.

On 1 October 2010, Namibia reported to the United Nations, pursuant to Article 31 of the United Nations Security Council Resolution 1929 (UN SCR 1929), that it had reached an agreement with the Islamic Republic of Iran that IFIC will not participate in any future investments nor will it acquire any further shares in Rössing. It was also agreed that the Government of Iran will not acquire interests in any commercial activity in Namibia involving uranium mining, production, or use of nuclear materials and technology, as required under UN SCR1929, until such time as the United Nations Security Council determines that the objectives of the Resolution have been met.

The Rössing board also took steps in 2012 to terminate IFIC’s involvement in the governance of Rössing. As a shareholder in Rössing, IFIC was entitled under Namibian law to attend general meetings of Rössing. IFIC was previously represented on the board of Rössing by two directors. While this level of board representation did not provide IFIC with the ability to influence the conduct of Rössing’s business on its own, the Rössing board nonetheless determined that, in light of international economic sanctions, it would be in the best interest of Rössing to terminate IFIC’s involvement in board activity. Therefore, on 4 June 2012, at the annual general meeting of Rössing, the shareholders of the company, including Rio Tinto, voted not to re-elect the two IFIC board members. This ended IFIC’s participation in Rössing board activities. IFIC accordingly is not represented on the Rössing board, nor does it have the right to attend board meetings or receive any board information


While IFIC is entitled to its pro rata share of any dividend that the majority of the board may declare for all shareholders in Rössing, IFIC has not received such monies since early 2008. Simply by

maintaining its own shareholding in Rössing, Rio Tinto is not engaging in any activity intended or designed to confer any direct or indirect financial support for IFIC. Further, the Rössing board determined no dividends will be paid for the year 2013.

Uranium off-take and technology:

Rössing is the world’s third largest uranium mine. It sells approximately 40 percent of its uranium to U.S. power companies and most of the remainder to Canada and other key U.S. trading partners in Europe and Asia. As a minority shareholder, IFIC has no uranium product off-take rights. Neither IFIC nor other Government of Iran entities have any supply contracts in place with Rössing and receive no uranium from Rössing. IFIC also does not have access to any technology through its investment in Rössing or rights to such technology.

While Rio Tinto does not view itself as actively transacting or entering into business dealings with an instrumentality of the Government of Iran, this information has been provided to ensure transparency regarding the passive, minority shareholding in Rössing currently held by the IFIC. Rio Tinto has disclosed the IFIC shareholding matter to the United States Government and has periodically updated the U.S. Department of State as to the same.

Rio Tinto Canada Uranium (Rio Tinto: 100 per cent)

Rio Tinto Canada Uranium’s Roughrider project is an exploration site located in North-Eastern Saskatchewan’s Athabasca Basin, which supplies approximately 20 per cent of the world’s uranium. An exploration programme is under way that is focused on obtaining orebody knowledge and a better appreciation of geotechnical, hydrological and hydrogeological conditions. Roughrider is near competitor deposits and existing uranium mills in the same geological terrain as all of Canada’s currently-producing uranium mines.

In 2013, the Canadian Government agreed to enter into an Agreement in Principle with the European Union on the Comprehensive Economic Trade Agreement. The Agreement provides an exemption to eligible companies from the Non-Resident Ownership Policy as it applies to foreign ownership of uranium mines. Once enacted, this change means Rio Tinto could, if economical to do so, develop a uranium operation without the requirement of first finding a Canadian majority partner.

Development projects

The Energy product group continues to review the optimal growth profile for all business units in light of market conditions for coal and uranium, the high-cost operating environment in Queensland and New South Wales, and infrastructure constraints in Mozambique. The Energy product group’s resource base in Australia’s Hunter Valley is unique due to its premium quality coal, and proximity to existing infrastructure. The resources based in this region are large, adjacent and option-rich orebodies that have the potential to support substantial open cut or underground mines for many decades to come and are difficult to replicate. With Energy’s ability to operate its New South Wales operations as a network, and a range of development options not yet realised, there is further potential for these assets to deliver material, long-term value to shareholders.

Work continues to determine the optimum pathway for the potential development of the Mount Pleasant project, a greenfield coal site in the Hunter Valley. In Queensland, the Energy product group is progressing a pre-feasibility study and government approvals to provide options for ongoing open-cut operations as well as underground development at Hail Creek Mine.

Evaluation and exploration of the Ranger 3 Deeps uranium deposit in ERA, which is estimated to contain over 33,000 tonnes of uranium oxide, progressed in 2013. Construction of an exploration decline, to conduct underground close-spaced drilling to further define and evaluate the deposit, began in May 2012 and underground drilling commenced a year later. In addition, ERA began a pre-feasibility study on the proposed Ranger 3 Deeps underground mine in July 2012. The study is on schedule and a decision on the viability and design of an operational mine is expected by 2015. ERA has also formally commenced the statutory approval process for the proposed underground mine with the Northern Territory and Commonwealth Governments.


In the short term, the coal and uranium mining industries are expected to continue to suffer from increased costs, and weak commodity prices. The medium and long-term outlook, though, is positive. Energy demand continues to rise steadily driven by economic growth in emerging markets and further urbanisation and industrialisation in China and India. Much of this new demand is expected to be met by coal as it is the most secure, affordable, and readily-available source of energy, particularly in the Asia Pacific region.

After two decades of remarkable development and transformation, China is only now reaching world average levels of electricity and energy consumption. Previously a major net exporter of coal, China is now the world’s largest net importer of both thermal and coking coal. It is estimated that China will have imported over 300 million tonnes of coal in 2013. China will also need to import uranium to meet the requirements of its fourth-generation nuclear power programme. India, with low per capita electricity consumption and 300 million people still without access to electricity, requires substantial investment in energy infrastructure to sustain the country’s growth and development.

Asia remains the dominant market for Australian seaborne coal. Japan, South Korea and Taiwan remain important customers for Rio Tinto and growth from other South East Asian countries is expected. Coking coal is experiencing downward pricing pressure in the current market. However, fundamentals for this product remain strong over the long term, due to continued steel demand growth in China, India and other emerging Asian economies, as well as underlying global resource scarcity of premium coking coal. Rio Tinto’s Australian coal, due to its quality, supply reliability and location, is well positioned to supply the growth in demand in these Asian countries. Uranium production will need to grow in the long term to meet China’s large future requirements, but in the medium term the market remains under considerable price pressure.










Table of Contents

Iron Ore


Financial performance


US$ million
US$ million


     25,994         24,279   

Operating cash flow

     17,880         15,830   

Underlying earnings

     9,858         9,247   

Capital expenditure

     6,814         7,152   

Net operating assets

     21,062         21,057   

Strategy and strategic priorities

The Iron Ore product group’s strategy is based around three strategic pillars:


Producing at the right cost, through the utilisation of unrivalled technology and high-performing teams.


Focusing on value-driven growth through disciplined phasing and low-cost growth options.


Maximising portfolio value by leveraging growth options, product strategy, and sales and supply chain capabilities.


Iron Ore’s safety performance improved in 2013, attaining an all injury frequency rate of 0.70, compared to 0.74 in 2012. The group achieved this improved level of performance despite facing the safety challenges of commissioning the 290 million tonne per annum (Mt/a) expansion in the Pilbara, and preparation for, and recovery from, four tropical cyclones. All of these challenges were accomplished without a fatality or serious injury.

The group did experience an increase in significant potential incidents in 2013, particularly those involving light vehicles. There was also a trend of more severe injuries leading to an increase in lost time at work. This led to the introduction of programmes to address the root causes of such incidents, covering management systems, procedures and training.

Throughout 2013, Iron Ore continued to embed a number of safety improvement programmes and initiatives with a particular emphasis on critical risk management, safety leadership, training and hazard awareness, and on simplifying the way safety is managed and achieved within the organisation.

Initiatives designed to recognise and reward a positive safety culture were also a feature of the group’s safety commitment for 2013, with more than 1,500 employee-led safety improvements recognised and shared through the Make a Difference programme. New safety interaction training and a pre-start safety pilot project were also introduced. The Lifesaving Commitments hazard awareness programme, which began in 2012, continued roll-out in 2013.

Iron Ore maintained a major focus on health issues, particularly emerging issues impacting on the mental health of employees. A number of programmes providing support for mental health and depression, rail safety education, and fly-in fly-out (FIFO) support networks for workers and their families were implemented and developed further throughout the year.

Greenhouse gas emissions

Iron Ore implemented a number of measures during the year to ensure full compliance with its environmental performance obligations. In accordance with the Australian Energy Efficiency Opportunities Act 2006, the group conducted energy assessments across 15 operations in the Pilbara region of Western Australia.

More than 80 efficiency opportunities were identified, which have the potential to reduce energy consumption of the entire Pilbara operations by ten per cent. This includes energy-intensive areas such as rail and utilities and at larger mining operations in the east Pilbara.

The decommissioning of the existing Cape Lambert power station – to make way for a new combined-cycle power station – led to improvement in the efficiency of Rio Tinto’s power generation network. Energy efficiency continued

to be a focus for future mine expansions, with energy reviews being conducted at the project design stage. Modifications to mine planning and fixed plant will deliver significant savings when these projects move into the operational phase. For instance, the electric motor replacement programme that began in 2012 is now replacing failed motors with more energy-efficient alternatives.

Iron Ore Company of Canada (IOC) operations delivered and contributed significantly to the group’s reduction in greenhouse gas emissions (GHG) intensity in 2013, primarily due to an increase in the proportion of saleable product produced as concentrate versus pellets. Concentrate is the less GHG-intensive form of IOC’s product.

Iron Ore met all Australian Federal Government requirements for the National Greenhouse and Energy Reporting Scheme, Clean Energy Act and Energy Efficiency Opportunities Act in 2013. Since 2008, the group’s total greenhouse gas emissions intensity has improved by 7.4 per cent.

Review of operations

Rio Tinto is the second largest supplier to the world’s seaborne iron ore trade. Operations in the Pilbara region of Western Australia comprise 15 mines, four ports, the largest privately-owned heavy freight railway in Australia, and supporting infrastructure including the Operations Centre in Perth. IOC operates a mine, concentrator and pelletising plant in the province of Newfoundland and Labrador, together with port facilities in Sept-Îles, Quebec. Rio Tinto Marine delivers shipping services to the Group, including Iron Ore.

In 2013 the Iron Ore business achieved underlying earnings of US$9,858 million, seven per cent higher than 2012, attributable to record sales volumes in the Pilbara, a weaker Australian dollar, marginally higher prices, and cost savings initiatives which enhanced earnings by US$240 million (US$351 million pre-tax). This was partly offset by a royalty claim and higher taxes following the introduction of Mineral Resources Rent Tax in July 2012. The five per cent decline in capital expenditure reflects the early completion of the port and rail element of the 290Mt/a Pilbara expansion in August 2013.

The Iron Ore group’s production levels exceeded previous records in 2013, despite volatile weather and a fast-tracked expansion schedule, to produce 266 million tonnes of iron ore globally. Rio Tinto’s share of production was 209 million tonnes, an increase of five per cent on 2012.

Iron ore prices were marginally higher in 2013, predominantly due to strong demand in China. According to China’s National Bureau of Statistics, the country’s apparent consumption of finished steel rose by 7.2 per cent in 2013 to 692 million tonnes. This reflected strong construction activity supported by favourable credit conditions in the first half of the year. Iron Ore’s total global shipments in 2013 were 259 million tonnes.

Quarter-on-quarter production records were achieved, despite interruptions caused by conveyor belt breakage, cyclone activity and significant flooding in the Pilbara following unseasonal weather in the second quarter of 2013. Heavy tropical cyclone activity closed the ports in January and December 2013, the latter impacting the first weeks of January 2014 and causing the closure of all coastal operations and all inland mine sites. Throughout these events, the Operations Centre in Perth was fundamental to ensuring optimal supply chain performance, including minimising any impacts to production.

The challenge of operating in remote locations remained in 2013 and Iron Ore will continue to manage this closely in 2014. During the year, the group ran improvement initiatives that focused heavily on reducing costs and driving productivity gains. This included reducing the use of contractors, reviewing the supplier base, challenging the tactics used for equipment maintenance, and optimising support functions.

The integration of next-generation technology via the Mine of the Future™ programme improved efficiencies further in 2013, across production, health, safety and environmental performance. For example, the autonomous haulage system (AHS) has delivered significant improvements in truck cycle times and real-time data generation, has extended tyre life, and reduced fuel usage and maintenance costs. This has been reported through the fleet of







Table of Contents


30 operational AHS trucks driving 2.4 million kilometres and moving more than 130 million tonnes of material at three mine sites – West Angelas, Yandicoogina and Nammuldi.

Hope Downs 4, Iron Ore’s newest mine site, successfully and safely delivered its one millionth tonne of ore in the third quarter – an important milestone leading to the ramp-up of mining operations in 2014.

Iron Ore’s automated train programme, AutoHaul™, made progress during the year with the upgrade of numerous level crossings, hardware and software development of the system. The Iron Ore group purchased 1,100 ore cars and commissioned ten new fully-fitted locomotives in 2013. Ore cars and existing locomotives were also fitted with Electronically Controlled Pneumatic (ECP) brakes, which has resulted in a decrease in train cycle times.

Iron Ore progressed key participation agreements with Traditional Owners in the Pilbara, allowing the group to secure land access for the life of mining operations. New agreements with the Yinhawangka and Yindjibarndi people were finalised during the year. Aligned with previous agreements, these recognise a strong commitment to regional standards, and incorporate mutual obligations to deliver outcomes relating to employment, financial compensation, education and training, heritage surveys and practices, environmental care and land use.

In 2013, the group continued to be one of the largest private employers of Indigenous people in Western Australia employing over 1,700 employees and contractors. Over A$1.8 billion in contracts for Pilbara expansion were awarded to Aboriginal businesses both individually and through joint ventures between January 2010 and end of 2013. Rio Tinto Iron Ore continues to be an industry leader in regional FIFO programmes across Australia, with eight regional FIFO centres in Western Australia alone. A three-year memorandum of understanding was signed with the Shire of Broome in 2013 and a new regional office was opened in Busselton. Community initiatives stemming from the programme focused on education, skills development and support for regional families, including workshops and online support resources.

The Wickham town expansion continued to support the growing Cape Lambert rail and port operations workforce. Developments in 2013 included the opening of Cajuput Village, a 155 room FIFO accommodation and community facility, and the completion of phase one of the Wickham South sub-division, comprising of 212 new residential homes. The Wickham project also delivered upgrades to town services and local park redevelopments to accompany the recreational precinct finalised in 2012.

In 2013, Rio Tinto Marine shipped 191 million tonnes of dry bulk cargo, an increase of 7.7 per cent on 2012. The final vessel in the current new build programme was delivered during December and completed the suite of eight new vessels for the year. Average freight rates rose year-on-year in 2013 and forward markets suggest stronger freight market conditions in the future, given slower growth in the industry’s fleet and increased cargo tonnages of bulk commodities entering the market from mine expansions.

IOC (Rio Tinto share 58.7 per cent) made good progress in 2013. The company capitalised on the benefits derived from commissioning the first stage of the Concentrate Expansion Project (CEP1), and produced 8.6 million tonnes of pellets and 6.8 million tonnes of concentrate for sale, which is an annual production record for concentrate. Despite severe weather disruptions, the final commissioning of CEP1 during the first half of the year provided the capacity to deliver a step change in production performance, efficiency gains and overall operational improvement.

Development projects

The Iron Ore group reached a major milestone in the second half of 2013, with the commissioning of the 290Mt/a port and rail capacity expansion. With this achievement, Iron Ore has delivered the first phase of the major expansion of its integrated iron ore operations in the Pilbara.

The successful commissioning of this expansion at a capital intensity of less than US$140 per tonne (100 per cent) added an extra annual capacity of

70 million tonnes to the 220Mt/a Pilbara nameplate capacity. The port and rail project was constructed four months ahead of the original schedule, and delivered US$400 million below the approved budget. In addition to the new port, all major coastal and rail infrastructure for the 290Mt/a capacity is now constructed and includes:


installation of a new 55Mt/a ship loader at Cape Lambert;


commissioning of the new car dumper 5 at Cape Lambert and associated stockyards; and


construction of new fuel distribution facilities at Cape Lambert (tug fuel facility), the 10KP rail yard and the West Angelas fuel hub.

Development of mining operations at Hope Downs 4, Marandoo and Western Turner Syncline (stage 1), which includes an overland conveyor to the Tom Price processing plant, are currently in the commissioning and ramp-up phase. Construction of the Nammuldi Below Water Table Project continues on schedule for commissioning later this year, and the West Angelas Power Station is currently in commissioning.

While completing the 290Mt/a port and rail expansion, the group made significant progress with the infrastructure to support further expansion towards 360Mt/a capacity. All marine piling activity for 360Mt/a was completed at the start of the third quarter. Two major structural, mechanical and piping packages, valued at approximately US$390 million, were awarded for the same project during August.

In December 2013, the US$310 million Bungaroo water facility and associated 87 kilometre pipeline was commissioned, providing water for Pilbara coastal operations and domestic requirements in the towns of Dampier and Wickham.

In November, the business unveiled a breakthrough pathway to match the upgraded port and rail capacity, which will see mine production capacity increase towards 360Mt/a through a series of low-cost brownfield expansions at a targeted all-in capital intensity of US$120-130 per tonne. Combined with low-cost productivity gains, the expansion is now forecast to be delivered at US$3 billion below previous expectations.

In conjunction with the announcement, US$400 million of capital expenditure was approved for plant equipment and modification, and additional heavy machinery for use at various mine sites in the Pilbara. This will enable a targeted production of more than 330Mt/a in 2015 and support the expected delivery of over 350Mt/a in 2017. Iron Ore’s Pilbara expansion programme remains the largest integrated mining project in Australian history and has a proven record of delivering project stages on time and budget.

The ramp-up of CEP stage two at IOC in the second half of the year delivered an additional 700,000 tonnes of spiral capacity, allowing the operation to increase volumes of Concentrate For Sinter (CFS) processed by gravity separation. The project remains on track to commission an additional ball mill and mining equipment, and to make upgrades to power distribution infrastructure during the second quarter of 2014.


In line with the overall global economic outlook, the long-term fundamentals for iron ore remain sound, with demand growth tightly linked to rapid urbanisation and rising incomes in China and the developing world. However, iron ore prices are expected to moderate over the coming years as growth in low-cost seaborne supply outpaces growth in demand. Seaborne suppliers are estimated to have added more than 100Mt/a of iron ore supply capacity in 2013, and exports are expected to continue gaining momentum in the short to medium term. The majority of seaborne supply growth is expected to go into China, and supply-side exits from Chinese domestic suppliers and some high-cost seaborne suppliers are likely. With its low-cost position and proximity to China, Rio Tinto is well placed to take advantage of demand growth for seaborne iron ore through its expansions.










Table of Contents



Rio Tinto has had a sustained commitment to exploration since 1946 and an exceptional track record in mineral discovery success. Mature operations, such as Weipa, the Pilbara and Rössing, were Tier 1 greenfield discoveries by Rio Tinto where value is still being realised after more than 40 years of production. In March 2013, restructuring resulted in the Exploration group reporting to the chief financial officer.


The goal of Exploration is to create value for Rio Tinto through discovery or acquisition of Tier 1 resources that are well located and high grade, to supplement the Group’s existing high-quality resource base. The Exploration group performs both greenfield and brownfield exploration programmes and undertakes focused research and development to aid the exploration effort. Greenfield exploration aims to establish completely new operating business units, involving, among other objectives, geographic or commodity diversification. Brownfield exploration is directed at sustaining or growing existing Group businesses in the orbit of existing operations and provides significant value to the product groups.

Additionally, Exploration supports the product groups with orebody knowledge expertise, and supports the business development groups in evaluating merger and acquisition opportunities. It also supports the Economics team with supply forecasts. To pass community, sustainability and investment hurdles, the exploration process can take ten to 20 years to progress from target generation to development decisions. Enhancing and reaffirming the core exploration strategy, linked to the application of a rigorous global prioritisation process, has accelerated in Tier 1 discoveries since 2000. Tier 1 discoveries over the past decade are:


Year    Discovery    Commodity    Location
2004    Simandou    Iron ore    Guinea
2005    La Granja    Copper    Peru
2005    Caliwingina    Iron ore    Australia
2008    Sulawesi    Nickel    Indonesia
2008    Mutamba    Titanium    Mozambique
2009    Jadar    Lithium/borates    Serbia
2011    Amargosa    Bauxite    Brazil


   KP405    Potash    Canada

At the end of 2013, the Exploration group was active in 20 countries, and assessing opportunities in others, for a range of commodities including iron ore, copper, bauxite, coking coal, nickel, potash, uranium, diamonds and mineral sands. Exploration activities in China were conducted through CRTX, the joint venture between Chinalco (51 per cent) and Rio Tinto (49 per cent). Diamond exploration was transitioned from the Diamonds & Minerals group back to Exploration during 2013, and features an active project in India.

The Exploration group is organised into regional multi-commodity teams, headquartered in Singapore, London, Salt Lake City, Brisbane and Beijing, and supported by a team of technical and commodity professionals. This structure provides a global reach and a local presence that allows for effective community engagement and development of the Group’s social licence to operate.


The Exploration group’s all injury frequency rate improved significantly from 1.41 at the end of 2012 to 0.49 at the end of 2013. The improvement, across all regions, coincided with the Exploration group implementing the Improving Project Performance initiative. This also produced results in operational performance.


The Order of Magnitude study was completed on the Saskatchewan potash project in Canada (a joint venture with North Atlantic Potash Inc., a subsidiary of JS Acron) in early 2013, and the project handed over to Rio Tinto Minerals.

A drilling programme at the Tamarack project in Minnesota, US has continued to further extend the nickel-copper-precious metal deposit. Additional drilling is planned in 2014 to follow up extensions to the known mineralisation. Drilling at the Roughrider uranium project in Saskatchewan has increased the understanding of the mineralisation and indicated further extensions to the known mineralisation. Regional exploration across Rio Tinto’s Saskatchewan tenure has generated numerous targets for follow-up drilling in 2014. In Laos, orebody knowledge at the Sanxai bauxite project advanced through auger drilling across the prospective areas. The Amargosa bauxite project in Brazil has also progressed through an Order of Magnitude study with drilling and mapping advancing a number of brownfield areas in the Amargosa orbit.

Brownfield projects generated good drilling results at the Yandi Braid and Munjina iron ore projects in the Pilbara and coking coal projects at Winchester South, Mt Robert, Hillalong and Valeria in the Bowen Basin, Australia. Drilling out of the Z20 uranium deposit on the Rössing mine lease in Namibia was completed and the project handed over to the Energy product group.

Effective data and information management lies at the heart of the Exploration group. Significant efficiency improvements have been achieved by organising data in structured, managed systems accessible via intuitive user interfaces. Progress continued on the development of the VK1 airborne gravity gradiometer, with further test flying undertaken in 2013. In addition to Exploration’s projects, the Group’s major evaluation projects in 2013 were:


Project    Commodity    Country
La Granja    Copper    Peru
Resolution    Copper    US
Pilbara    Iron ore    Australia
Bowen Basin    Coking coal    Australia


   Iron ore    Guinea

In 2013, the Group reduced its exploration and evaluation expenditure to US$948 million, exceeding the reduction target of US$750 million by more than a third. This represented a 52 per cent decrease compared to 2012 expenditure of US$1,971 million. In addition to gross expenditure, the Group wrote down US$159 million of exploration assets. Of the 2013 spend, US$178 million relates to global Exploration group activity. In total, Rio Tinto’s exploration and evaluation activity covered ten commodities in 2013, across a range of greenfield and brownfield environments.


The Exploration group will continue to work on a prioritised portfolio of greenfield and brownfield projects in 2014. Maintaining a robust exploration pipeline by identifying and securing access to the best quality opportunities will be a key enabler of long-term success. Continuing challenges are expected to include the decreasing grade and quality for most commodities and exploring in more difficult jurisdictions and at depth. The Exploration group will focus on project generation in a number of key environments, as well as testing of targets within the portfolio. For 2014, the projects at a more advanced stage include:


Project    Commodity    Country    Type    Stage
Tamarack    Nickel    US    GF    Project of Merit
Roughrider    Uranium    Canada    GF    Order of Magnitude
Sanxai    Bauxite    Laos    GF    Project of Merit
Amargosa orbit    Bauxite    Brazil    GF    Order of Magnitude
Bowen Basin    Coking coal    Australia    BF    Project of Merit


   Iron ore    Australia    BF    Project of Merit

GF: Greenfield project

BF: Brownfield project







Table of Contents

Technology & Innovation


Rio Tinto’s Technology & Innovation group (T&I) collectively seeks to maximise total shareholder returns by partnering with, supporting, and constructively challenging product groups and functions in productivity improvement, technical assurance, project delivery, and innovation. T&I focuses on creating sustainable value and competitive advantage by making improvements to the way Rio Tinto operates. T&I also provides technical insights and support to review and mitigate critical risk factors across Rio Tinto.

T&I’s gross costs in 2013 were US$370 million, compared with US$415 million in 2012 and US$343 million in 2011. 2013 costs decreased compared with 2012 due to reductions in headcount, innovation spend and travel.

The total number of employees in T&I decreased from 1,031 at year-end 2012 to 730 at year-end 2013.

Strategy and strategic priorities

T&I is focused on four strategic pillars of work to support the broader Rio Tinto Group: Productivity Improvement, Innovation, Technical Assurance and Project Development and Implementation. Each of these four pillars is underpinned by a centralised team of industry experts and professionals, leveraging their collective technical capability across Rio Tinto’s businesses to deliver enhanced value for shareholders.


T&I is committed to the safe operation of its facilities and to the safe deployment of its personnel. The all injury frequency rate for T&I in 2013 was 0.63 compared to 1.57 in 2012. The improvement of this measure was primarily attributed to a tighter focus on existing safety efforts, particularly across Rio Tinto’s capital projects.



Innovation is the research and development group within T&I. Its focus is on developing step-change technologies, including the Mine of the FutureTM programme, which addresses the significant challenges facing the mining industry. In 2013, Innovation continued to support the Iron Ore product group in its drive to capture safety and productivity benefits, by way of ongoing deployment of what will be amongst the world’s largest fleet of autonomous haulage vehicles, in its Pilbara mining operations. The Rio Tinto Mine Automation System and advanced visualisation technology were deployed to selected Group operations with further deployments scheduled.

Encouraging progress continues in the area of advanced mineral recovery. Innovation’s copper recovery technology, Peak Air Recovery, progressed through initial trials and is now undergoing final trials prior to commercial deployment. Building upon experience gained from the Iron Ore Operations Centre in Perth, Australia, a new range of systems for remote production process monitoring and optimisation have been commissioned. This next generation “Excellence Centre” (EC) technology platform allows for near real-time monitoring and optimisation of remote operating facilities. It utilises advanced data management, integrated with human systems. The EC provides Rio Tinto with the capability for continuous global coverage of managed business unit production facilities. The first processing EC was successfully operated throughout 2013, delivering technical support and measurable value to operating business units. Connections to remote copper concentrators and, most recently, coal washing facilities have been successfully established. The EC platform will be further deployed across the Group and will encompass the next generation of advanced remote technical support to operations.

Innovation uses a network of partnerships with organisations and institutions around the world, which provides a vast and interconnected group of world-class experts to generate solutions. The University of Nottingham, UK was added to this network in 2013, with the Rio Tinto Centre for Emergent Technologies inaugurated on 3 December. Also in 2013, Rio Tinto and Chinalco agreed to explore a partnership to bring forward the next era of mining technology aimed at delivering significant value and re-shaping industry best practice.

Productivity Improvement

With the organisational focus on improving productivity across Rio Tinto, the Mineral Technology Services and the Mining and Asset Management Centre were combined to form Productivity Improvement. The focus of this team is to help the business identify and implement significant productivity improvements by aligning performance with clear productivity metrics; improving productivity diagnostics; establishing internal and external benchmarking; and by constructively challenging and testing proposed plans for productivity improvements. This team also provides technical insights into risk mitigation, with expertise in the areas of geology, geotechnics, mining, mineral processing, dams and tailings, process control and hydrogeology.

T&I also includes a Strategic Production Planning (SPP) team that works with business units to develop comprehensive plans and valuations of strategic development options. Results from SPP provide a logical resource development framework for detailed studies and investment decision-making.

Project Development & Implementation

During 2013, Project Development & Implementation (PDI) reshaped its operating structure to align with the completion of existing capital projects, the general streamlining of organisational hierarchies, and the reduction in capital spending across Rio Tinto over the next few years. Under the revised structure, Rio Tinto is committed to an independent project management office (PMO) and two regionally-based Project Delivery Hubs, one for Australasia and the other for the Americas & Africa.

In line with Rio Tinto’s commitment to pursue greater value for shareholders, PDI is now delivering capital projects within a recently-developed Capital Projects framework. The framework provides Rio Tinto with a disciplined approach to managing its projects, and provides processes and tools, governance, reporting, and assurance to those who are responsible for capital.

Throughout this past year of change, PDI remained focused on the safe transition and handover of US$7 billion of capital projects, including: Kestrel Mine Extension, Argyle Underground Project, Energy Resources of Australia’s brine concentrator, Port Waratah Kooragang, Kemano Power Stage 1, and the AP60 aluminium smelter.

Technical Assurance

Technical Assurance is a team of internal professionals responsible for rigorously reviewing all major project proposals. Their role is to ensure that Rio Tinto’s Investment Committee and board are provided with independent technical assessments to support their decision-making. Throughout 2013, Technical Assurance focused its attention on strengthening the Group’s due diligence and Investment Committee processes. Technical Assurance also provides support to the business for a range of other technical compliance and governance activities such as post-investment reviews, due diligence, management of the Group’s reserves and mineralised material, and general technical reviews.


T&I will continue to add value to the Group by working with the business units on productivity improvements. In addition, T&I will look for alternative approaches for funding of Innovation projects to react to changes in the Group’s cash position and capital spend constraints. Despite these changes and challenges, T&I will continue to maintain a culture that places a high priority on safety and safety improvement. In 2014, T&I will focus on four main areas: partnering with product groups and functions on productivity improvement; the safe and efficient development and implementation of capital projects; the pursuit of the Mine of the Future™ programme as well as the development of innovative alliances and relationships; and technical assurance. All of these will create competitive advantage for the Group. This will position T&I to support the business where commercial and technical expertise and external networks will have the largest benefit to Rio Tinto and its shareholders.










Table of Contents

Financial review


Group Finance

Overview of the Group Finance functions

The chief financial officer leads a multidisciplinary team tasked with delivering and implementing Group financial strategy, in addition to providing decision-making support and guidance to the Group’s key management and its operating business units. Separate specialist functions are established with responsibility for: financial reporting, management reporting, economic analysis, investor relations, taxation, treasury, assurance, business development, and project evaluation. Specialists in tax, financial reporting and treasury monitor regulatory compliance and financial developments, frequently engaging with industry-wide discussion groups and regulatory bodies. These specialists work across the disciplines to evaluate the impact of changes in regulatory, fiscal, economic, and other business conditions on planning and forecasting, financial reporting, key decision-making within the organisation, and on external stakeholders. The Exploration group also reports to the chief financial officer.

The Group’s operating model also includes the use of shared services for supporting the business in process delivery. Shared services are focused on efficient and effective delivery of transactional, professional or specialised services to our entire business. Shared services work relates to business processes which are not unique to Rio Tinto, allowing value improvements through outsourcing. These support services report to the Group executive, Organisational Resources and have responsibility for transactional aspects of financial management and reporting, human resources, information systems and technology, procurement and group property.

Role of the Group Finance function in 2013

With market conditions remaining volatile, the Finance function has played a key role in helping the business to reduce costs, improve capital allocation, and strengthen the balance sheet. During 2013, the Group raised a total of US$3 billion of fixed and floating rate bonds.

The Finance function was closely involved with supporting the implementation and monitoring of cost reduction initiatives. The Group achieved a US$2.3 billion improvement in operating cash costs for 2013, exceeding the target of US$2 billion. This, in conjunction with a US$1,023 million reduction in exploration and evaluation costs (exceeding the reduction target of US$750 million), demonstrates that the Group has made strong progress to sustainably reduce its operating cost base and realise productivity gains across its portfolio. These initiatives were supported by the expanded use of the shared services operating model to streamline process delivery.

Furthermore, the function has been instrumental in enhancing the Group’s capital allocation process. It has provided strategic support and guidance to senior management, with evaluation and analysis that allows decision makers to prioritise only the highest-returning projects. Capital expenditure is expected to almost halve from a peak of US$17.6 billion in 2012 to around US$8.0 billion in 2015, in the pursuit of maximising returns to shareholders whilst strengthening the balance sheet.

In further support of the Group’s 2013 priorities, the Finance team worked on reshaping the portfolio by selling non-core assets. Divestments totalling US$3.5 billion were announced or completed in 2013, with proceeds of US$2.5 billion received during the year.

In addition, in 2013 the Group published its third comprehensive Taxes Paid report, which covered the year ended 31 December 2012. The report provided detailed analysis of Rio Tinto’s US$11.6 billion contribution in global tax payments.

During 2014, Rio Tinto’s Finance function will continue its focus on supporting senior management and product groups to achieve the target of US$3 billion in operating cash cost improvements compared with 2012, and leveraging opportunities to re-shape the portfolio. The Finance function will remain focused on providing high-quality financial strategy and decision-making support, together with compliant and informative reporting, whilst pursuing

capital management and development opportunities that are consistent with the Group’s strategy.

2013 performance highlights

The key metrics for Group financial management and planning are summarised below. More detailed information, including reconciliation to the appropriate statutory financial statement measures, is included in the additional financial information section of the Directors’ report on pages 47 to 52.


US$ million
US$ million
US$ million

Underlying earnings (a)

    10,217        9,269        15,572   

Net earnings/(loss) (a)

    3,665        (3,028     5,835   

Cash flows from operations

    20,131        16,521        27,609   

Net debt

    18,055        19,192        8,342   

Total capital

    71,557        76,932        67,226   


(a) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here as a measure of earnings to provide greater understanding of the underlying business performance of the Group. Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the financial statements. Both net earnings and underlying earnings deal with amounts attributable to the owners of Rio Tinto. However, IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries. Comparative information has been restated to reflect a number of new accounting standards; see note 2 to the financial statements.

Increased underlying earnings reflect the favourable impact of operating cash cost improvements (including exploration and evaluation savings), improved sales volumes and overall strengthening of the US dollar against local currencies. This was offset by lower prices in all of the Group’s main commodities other than iron ore, inflation, and increased tax charges (primarily attributable to utilisation of Minerals Resource Rent Tax (MRRT) deferred tax assets).

Net earnings of US$3.7 billion reflect non-cash exchange losses of US$2.9 billion and impairments of US$3.4 billion, including impairment of previous years’ non-cash accounting uplifts on initial consolidation of certain Turquoise Hill assets (including Oyu Tolgoi), a significant project cost overrun at Kitimat and of the Gove alumina refinery following an announcement to curtail production.

Cash flows from operations, which include dividends from equity accounted units, at 22 per cent above 2012, reflect the positive impact of higher volumes and cost reduction initiatives.

Net debt decreased from US$19.2 billion at 31 December 2012 to US$18.1 billion at 31 December 2013 as operating cash inflows and divestment proceeds fully offset the outflows relating to capital expenditure and the increased dividend payment. Net debt to total capital was 25 per cent at 31 December 2013 and interest cover was 13 times, both unchanged from the prior year. The board’s objective when managing capital is to safeguard the business as a going concern whilst maximising returns for the Group’s shareholders. In practice, this involves regular reviews by the board and senior management. These reviews take into account the Group’s strategic priorities, economic and business conditions, and opportunities that are identified to invest across all points of the commodities cycle. The resulting capital structure provides the Group with a high degree of financial flexibility at a low cost of capital.







Table of Contents

Five year review

Selected financial data

The selected consolidated financial information below has been derived from the historical audited consolidated financial statements of the Rio Tinto Group. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the 2013 financial statements and notes thereto. The financial statements as included on pages 111 to 193 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) and conform to IFRS as adopted by the European Union (EU IFRS).

Rio Tinto Group

Income statement data



For the years ending 31 December

Amounts in accordance with IFRS





































Consolidated sales revenue

     51,171         50,942         60,529         55,171         40,262   

Group operating (loss)/profit (a)

     7,430         (1,925      14,037         19,608         7,506   

Profit/(loss) for the year from continuing operations

     1,079         (3,020      6,800         15,195         5,784   

Loss after tax from discontinued operations

             (7      (10      (97      (449

Profit/(loss) for the year

     1,079         (3,027      6,790         15,098         5,335   

Basic (losses)/earnings per share


(Loss)/profit from continuing operations (US cents)

     198.4         (163.4      303.9         731.0         301.7   

Loss after tax from discontinued operations (US cents)

             (0.4      (0.5      (4.9      (25.5

(Loss)/profit for the year per share (US cents)

     198.4         (163.8      303.4         726.1         276.2   

Diluted (losses)/earnings per share


(Loss)/profit from continuing operations
(US cents)

     197.3         (163.4      302.0         726.7         300.7   

Loss after tax from discontinued operations (US cents)

             (0.4      (0.5      (4.9      (25.4

(Loss)/profit for the year per share (US cents)

     197.3         (163.8      301.5         721.8         275.3   
Dividends per share    2013      2012      2011      2010      2009  

Dividends declared during the year


US cents


– interim

     83.5         72.5         54.0         45.0           

– final

     108.5         94.5         91.0         63.0         45.0   

UK pence


– interim

     54.3         46.4         33.1         28.2           

– final

     65.8         60.3         57.3         39.1         28.8   

Australian cents


– interim

     93.0         68.5         49.8         49.3           

– final

     120.14         91. 7         84.2         61.9         51.6   

Dividends paid during the year (US cents) (b)


– ordinary

     178.0         163.5         117.0         90.0         55.6   

Weighted average number of shares – basic (millions) (b)

     1,847.3         1,849.1         1,923.1         1,961.0         1,763.6   

Weighted average number of shares – diluted (millions) (b)

     1,857.7         1,849.1         1,935.5         1,972.6         1,769.6   
Statement of financial position data               

at 31 December

Amounts in accordance with IFRS





































Total assets

     111,025         118,437         120,152         112,773         97,236   

Share capital/premium

     9,410         10,189         10,024         10,105         9,344   

Total equity/Net assets

     53,502         57,740         58,884         64,512         45,925   

Equity attributable to owners of Rio Tinto

     45,886         46,553         52,199         58,247         43,831   


(a) Group operating loss or profit under IFRS includes the effects of charges and reversals resulting from impairments (other than impairments of equity accounted units) and profit and loss on disposals of interests in businesses. Group operating loss or profit amounts shown above exclude equity accounted operations, finance items, tax and discontinued operations.


(b) In accordance with IAS 33 “Earnings per share”, the effects of anti-dilutive potential have not been included when calculating diluted loss per share for the year ended 31 December 2012.


(c) The financial statements for the years ended 31 December 2012 and 31 December 2011 have been restated for the impact of IFRS 11 Joint Arrangements, IAS 19R (revised 2011) Employee benefits and IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. Additional detail on the restatements is given in note 46 to the financial statements on page 191. IAS 19R is the only standard for which restatement is required for earlier years. The impact of IAS 19R on the Income statement and Other comprehensive income for 2010 and 2009 is immaterial, being less than US$0.1 billion in both years, and therefore the Income statement for 2010 and 2009 and the Statement of financial position for those years have not been restated.









Table of Contents

Directors’ approval statement

This Strategic report is delivered in accordance with a resolution of the board, and has been signed on behalf of the board by:




Jan du Plessis
5 March 2014






Table of Contents



Directors’ report   

Dual listed structure and constitutional documents


Operating and financial review


Risk identification, assessment and management


Share capital




Substantial shareholders






Corporate governance


Indemnities and insurance


Employment policies and communication


Political donations


Government regulations


Environmental regulation


Exploration, research and development




Fees for audit and non-audit services


Financial instruments


Greenhouse gas emissions


Additional financial information


Board of directors


Executive committee


Corporate governance


Remuneration Report










Table of Contents

Directors’ report


The directors present their report and audited consolidated financial statements for the year ended 31 December 2013.

Dual listed structure and constitutional documents

An explanation of the dual listed companies structure (DLC) of Rio Tinto plc and Rio Tinto Limited, and of the Companies’ constitutional documents can be found on pages 234 to 243. This section also provides a description of voting rights under the DLC arrangements, including restrictions which may apply in respect of the shares of either Company under specified circumstances.

Operating and financial review

The Strategic report set out on pages 1 to 40 provides a comprehensive review of Rio Tinto’s operations, its financial position and its business strategies and prospects, and is incorporated by reference into, and forms part of, this directors’ report.

Rio Tinto’s principal activities during 2013 were minerals and metals exploration, development, production and processing.

Pages 1 to 37 of the Strategic report provides a comprehensive review of the development and performance of Rio Tinto’s operations for the year ended 31 December 2013 and the potential future developments and expected results of those operations.

The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in notes 33 to 36 to the financial statements.

Significant changes and events affecting the Group during 2013 and until the date of this report have been:


On 14 January 2013, Rio Tinto entered into an agreement with Chinalco Mining Corporation International Limited (CMCI), a subsidiary of Chinalco, to participate as a cornerstone investor in CMCI’s initial public offering (IPO) in Hong Kong on 31 January 2013. Pursuant to the agreement, Rio Tinto acquired approximately one per cent of CMCI’s issued share capital post IPO for a total consideration of US$30 million. Under the UK Listing Authority listing rules, CMCI is considered a related party of Rio Tinto plc.


On 17 January 2013, the Group announced that it expected to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results. The Group also announced that Tom Albanese had stepped down as chief executive and that Iron Ore chief executive Sam Walsh had been appointed chief executive. Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets in his previous role as Energy chief executive, also stepped down.


On 11 February 2013, the Group announced that the Australian Competition Tribunal had ruled that its Hamersley and Robe rail lines should not be opened up to other users.


On 14 February 2013, the Group announced the appointment of Andrew Harding and Jean-Sébastien Jacques as chief executive, Iron Ore, and chief executive, Copper, respectively.


On 28 February 2013, the Group announced the appointment of non-executive director, Chris Lynch as chief financial officer to succeed Guy Elliott, with effect from 18 April 2013. The Group also announced that Bret Clayton’s role of Group executive, Business Support & Operations, would be restructured and its responsibilities will be transferred to other Executive Committee members.


On 10 April 2013, Kennecott Utah Copper’s Bingham Canyon Mine experienced a slide along a geotechnical fault line of its north-eastern wall which suspended operations. The slide has subsequently been estimated at 135 million tonnes of material.


On 13 June 2013, the Group announced it had reached a binding agreement to sell its Eagle project to Lundin Mining Corporation. The transaction closed on 17 July 2013 for US$315 million in cash.
On 17 June 2013, the Group announced that it had priced US$3.0 billion of fixed and floating rate bonds, comprising US$1.0 billion of three-year and US$1.25 billion of five and a half-year fixed rate, and US$250 million two-year and US$500 million three-year floating rate, SEC-registered debt securities.


On 24 June 2013, the Group announced that it had decided to retain its diamonds businesses after concluding a strategic review.


On 28 June 2013, Rio Tinto entered into a bridge funding agreement with Turquoise Hill Resources Ltd. (Turquoise Hill) under which it agreed to make available to Turquoise Hill a short-term convertible credit facility of US$225 million to enable it to meet its short-term funding obligations with respect to the Oyu Tolgoi copper-gold mine in Mongolia.


On 9 July 2013, the Group announced that Oyu Tolgoi had started shipping copper concentrate to customers from its copper and gold mine in Mongolia.


On 26 July 2013, the Group announced that it had approved US$1.03 billion (Rio Tinto share) for the construction of a new 2,500 litre per second seawater desalination facility to ensure continued water supply and sustain operations at the Escondida mine in Chile.


On 29 July 2013, the Group announced that following an auction process, it had reached a binding agreement for the sale of its 80 per cent interest in Northparkes to China Molybdenum Co., Ltd. (CMOC) for US$820 million. Under the UK Listing Authority listing rules, CMOC is considered to be a related party of Rio Tinto plc. The sale was completed on 1 December 2013.


On 29 July 2013, the Group announced that all funding and work on underground development of Oyu Tolgoi would be delayed.


On 8 August 2013, the Group announced that it had signed an agreement with Turquoise Hill under which Rio Tinto would provide Turquoise Hill with a financing package to refinance existing short-term funding (see above) to enable it to continue development of the Oyu Tolgoi open pit mine in Mongolia and to commit to providing support, if necessary, to enable Turquoise Hill to repay its accumulated indebtedness to the Group.


On 8 August 2013, the Group announced that following a comprehensive review, it had concluded that the divestment of Pacific Aluminium for value was not possible in the current environment and that it would be reintegrated into the Rio Tinto Alcan group.


On 2 September 2013, the Group announced that it had achieved the significant milestone of loading the first shipment of iron ore from its expanded port, rail and mine operations in Australia.


On 25 October 2013, the Group announced that it had reached a binding agreement for the sale of its 50.1 per cent interest in the Clermont joint venture to GS Coal Pty Ltd, a company jointly owned by Glencore Xstrata plc and Sumitomo Corporation, for US$1.015 billion.


On 28 November 2013, the Group announced that it had set out a plan to optimise the growth of its world-class iron ore business in Western Australia. Mine production capacity is now expected to rapidly increase towards 360 million tonnes a year at a significantly lower capital cost per tonne than originally planned.


On 29 November 2013, the Group announced that it would move to suspend alumina production at Gove and focus on its bauxite operations after determining the refinery was no longer a viable business in the current market environment.


On 23 December 2013, the Group announced that it had advised the management of Northern Dynasty Minerals Ltd (Northern Dynasty), which owns 100 per cent of the Pebble Project, that it intended to undertake a strategic review of its shareholding in Northern Dynasty of approximately 19.1 per cent.


On 13 January 2014, the Group announced that it had acquired 510,983,220 common shares of Turquoise Hill under Turquoise Hill’s rights offering at a total cost of C$1,292,787,546.60 or C$2.53 per share thereby maintaining its existing shareholding in Turquoise Hill of approximately 50.8 per cent. Following the completion of the rights offering, the Group owned 1,021,966,440 common shares. The Group also acquired 74,247,460 Anti-Dilution Series D Warrants of Turquoise Hill in connection with the






Table of Contents


  rights offering. A portion of the funds received by Turquoise Hill under the rights offering were used to repay amounts outstanding under a US$1.8 billion interim funding facility and a US$600 million bridge funding facility, each previously provided by the Group to Turquoise Hill.


On 28 January 2014, Rio Tinto announced that Rio Tinto Mining and Exploration Limited (Rio Tinto) has received 44,126,780 common shares of Minera IRL Limited (IRL), representing approximately 19.44% of the issued and outstanding common shares of IRL. The shares form part of the consideration agreed to in a 2006 option agreement on the Ollachea Gold Project between the Group and IRL.


On 12 February 2014, the Group announced that it had entered into an option agreement for LNG Canada to acquire or lease a wharf and associated land at the Group’s port facility at Kitimat, British Columbia, Canada.


On 18 February 2014, Rio Tinto entered into an agreement with China Beijing Equity Exchange Co., Ltd (CBEX), China Iron and Steel Association (CISA) and other founder investors to take an equity position in a new joint venture to be incorporated (subject to Chinese regulatory approvals), the Beijing Iron Ore Trading Centre Corporation (JVCO), which proposes to purchase an iron ore trading platform and other associated assets of China Beijing International Mining Exchange. It is envisaged that the Group will continue to make some of its iron ore spot market sales through the JVCO trading platform. Pursuant to the agreement, Rio Tinto will subscribe for 6.25 per cent of JVCO’s issued share capital for a total consideration of the equivalent of approximately US$0.825 million. Under the UK Listing Authority listing rules, CBEX, CISA and some other founder investors including Chinese state-owned steel mills and iron ore traders are considered related parties of Rio Tinto plc.

Details of events after the statement of financial position date are further described in note 43 to the financial statements.

Risk identification, assessment and management

The Group’s risk factors are set out on pages 14 to 17.

Share capital

Details of the Group’s share capital as at 31 December 2013 can be found at notes 27 and 28 to the financial statements. Details of the rights and obligations

attached to each class of shares can be found on pages 234 and 235 under the heading “Voting rights”.

Where under an employee share plan operated by the Company, participants are the beneficial owners of the shares, but not the registered owners, the voting rights are normally exercised by the registered owner at the direction of the participant.

Details of certain consequences triggered on a change of control can be found on page 234 under the heading “Dual listed companies structure”.

Details of certain restrictions on holding shares in Rio Tinto are described on page 235 under the heading “Limitations on ownership of shares and merger obligations”. There are no other restrictions on the transfer of ordinary Rio Tinto shares save for:


restrictions that may from time-to-time be imposed by laws, regulations or Rio Tinto policy (for example, those relating to market abuse or insider dealing or share trading and, in Australia, including these relating to foreign investment);


restrictions on the transfer of shares that may be imposed following a failure to supply information required to be disclosed, or in relation to unmarketable parcels of shares;


restrictions on the transfer of shares held under certain employee share plans while they remain subject to the plan.

At the annual general meetings held in 2013, shareholders authorised:


the purchase by Rio Tinto Limited and its subsidiaries, and the on-market repurchase by Rio Tinto plc of up to 141,200,784 Rio Tinto plc shares (representing approximately ten per cent of Rio Tinto plc’s issued share capital at that time);


the off-market purchase by Rio Tinto plc of up to 141,200,784 Rio Tinto plc shares acquired by Rio Tinto Limited or its subsidiaries under the above authority; and


the off-market or on-market buy-back by Rio Tinto Limited of up to 43.5 million Rio Tinto Limited shares (representing approximately ten per cent of Rio Tinto Limited’s issued share capital at the time).









Table of Contents

Directors’ report continued



    Rio Tinto plc     Rio Tinto Limited        



Total number

of shares








Average price

paid per share










Total number of

shares purchased

as part of publicly

announced plans

or programmes









Total number

of shares








Average price

paid per share










Total number of

shares purchased

as part of publicly

announced plans

or programmes













Rio Tinto Group

Approximate dollar

value of shares that

may yet be purchased

under the plans or












1 Jan to 31 Jan

                         506,239        70.29                 

1 Feb to 28 Feb

                         376,786        70.19                 

1 Mar to 31 Mar

                         69,546        64.77                 

1 Apr to 30 Apr

    527,591        48.25               926,251        60.39                 

1 May to 31 May

                         75,132        53.94                 

1 Jun to 30 Jun

    75,000        43.03               304,121        49.42                 

1 Jul to 31 Jul

                         5,059        47.91                 

1 Aug to 31 Aug


1 Sep to 30 Sep

    1,336,598        50.73               1,180,372        60.13                 

1 Oct to 31 Oct


1 Nov to 30 Nov


1 Dec to 31 Dec



    1,939,189 (d)      49.76               3,443,506        61.79                 



1 Jan to 31 Jan

                         10,436        60.62                 

1 Feb to 17 Feb

                         579,000        62.46                 



(a) Rio Tinto plc ordinary shares of 10p each; Rio Tinto plc ADRs; Rio Tinto Limited shares.


(b) The average prices paid have been translated into US dollars at the exchange rate on the day of settlement.


(c) Shares purchased by the Companies’ registrars in connection with the dividend reinvestment plans and employee share plans are not deemed to form part of any publicly announced plan or programme.


(d) This figure represents 0.136 per cent of Rio Tinto plc issued share capital at 31 December 2013.


During 2013, in order to satisfy obligations under employee share plans, Rio Tinto plc issued 1,436,542 shares from treasury and allotted 951 newly issued shares. The trustees of Rio Tinto plc’s employee share trusts purchased on-market 842,000 shares and 8,000 ADRs. Rio Tinto Limited’s registrar purchased 1,082,393 shares on-market and the trustee of Rio Tinto Limited’s employee share trusts purchased 562,000 shares on-market. In total, 2,395,966 Rio Tinto plc shares, 3,816 ADRs, and 1,279,136 Rio Tinto Limited shares were delivered to plan participants.

Also during the year, the Companies’ registrar purchased 1,089,189 Rio Tinto plc shares and 1,799,113 Rio Tinto Limited shares on-market to satisfy obligations to shareholders under the dividend reinvestment plans.

For the period 1 January 2014 to 17 February 2014, Rio Tinto plc issued 171,940 shares from treasury in connection with employee share plans and allotted 258 newly issued shares, and the trustee of Rio Tinto Limited’s employee share trusts purchased 589,436 shares on-market. During this period, 696,664 Rio Tinto plc shares, 361 ADRs, and 445,695 Rio Tinto Limited shares were delivered to plan participants.

Awards over 1,945,779 Rio Tinto plc shares and 1,571,246 Rio Tinto Limited shares were granted under employee share plans during 2013. As at 17 February 2014, awards were outstanding over 7,247,153 Rio Tinto plc shares, 66,207 ADRs and 5,139,108 Rio Tinto Limited shares. Upon vesting, awards may be satisfied by the issue of new shares, the purchase of shares on-market, or, in the case of Rio Tinto plc, by issuing treasury shares.

Substantial shareholders

Details of substantial shareholders can be found on page 237.


Details of dividends paid and the dividend policy can be found on page 239.


The names of the directors who served during the year, together with their biographical details and other information, are shown on pages 53 to 55.

All directors will stand for re-election at the 2014 annual general meetings with the exception of Vivienne Cox who will retire at the conclusion of the Rio Tinto plc annual general meeting to be held on 15 April 2014.

A table of directors’ attendance at board and committee meetings during 2013 is on page 59.


Details of the company secretary of Rio Tinto plc and the joint company secretaries of Rio Tinto Limited together with their qualifications and experience are set out on page 55.

Corporate governance

A full report on corporate governance can be found on pages 57 to 67 and forms part of this Directors’ report.







Table of Contents


Indemnities and insurance

The Articles of Association and Constitution of the Companies provide for them to indemnify, to the extent permitted by law, officers of the Companies, including officers of wholly owned subsidiaries, against liabilities arising from the conduct of the Group’s business. The directors and the company secretary of Rio Tinto plc and the joint company secretaries of the Companies, and certain employees serving as directors of subsidiaries at the Group’s request have been indemnified in accordance with these provisions. No amount has been paid under any of these indemnities during the year.

The Group has purchased directors’ and officers’ insurance during the year. In broad terms, the insurance cover indemnifies individual directors’ and officers’ personal legal liability and legal defence costs for claims arising out of actions taken in connection with Group business. It is a condition of the insurance policy that detailed terms and premiums paid cannot be disclosed.

Employment policies and communication

Information about the Group’s employment policies and our employees is available on page 21.

Rio Tinto focuses on working with our employees and their unions in good faith, seeking fair solutions while maintaining the competitiveness of each of our operations. At present we do not anticipate any union activity which would have a material adverse effect on the Group’s operations as a whole.

Political donations

No donations were made during 2013 for political purposes in the EU, Australia or elsewhere, as defined by the UK Companies Act 2006.

Government regulations

Rio Tinto is subject to extensive government regulations affecting all aspects of its operations. Our product diversity and geographical spread reduces the likelihood of any single government regulation having a material effect on the Group’s business. Rio Tinto consistently seeks to apply best practice in all of its activities, which also mitigates against the impact of regulation.

In each of the countries in which we operate, Rio Tinto is subject to local, state, provincial and federal regulations governing mining and processing, land tenure and use, environmental requirements, workplace health and safety, data privacy, trade and export, corporations, competition, intellectual property, access to infrastructure, foreign investment, securities and taxation. Some operations are conducted under specific agreements with the respective governments and associated acts of parliament.

In Canada, our hydroelectric power generation assets are regulated by the Quebec and British Columbia provincial agencies covering issues of water rights, power sales and purchases.

In Australia and Namibia, Rio Tinto’s uranium operations are subject to specific regulations covering the mining and export of uranium.

In South Africa, our operations are subject to black economic empowerment legislation which includes the requirement to transfer (for fair value) 26 per cent of the Group’s South African mining assets to historically disadvantaged South Africans by 2014. In 2009, Rio Tinto successfully concluded a 26 per cent empowerment transaction. Rio Tinto also complies with the mining legislation’s transformation imperatives which includes empowerment of South Africa’s Historically Disadvantaged Employees and Communities.

Environmental regulation

Rio Tinto measures its performance against environmental regulation to which its operations are subject, by rating incidents according to their environmental impact potential. Issues of Group-level importance are reported to the Executive Committee and the Sustainability Committee. Prosecutions and other breaches are also used to gauge Rio Tinto’s performance.

Rio Tinto is subject to various environmental regulations including regulations that cover air, land, water and noise pollution in the countries where it has operations. In 2013, there were 15 environmental incidents reported to the Executive Committee with the potential to impact the environment or to concern local communities, several of which were minor. Five resulted from

air discharges, four from water discharges, five were spills and one related to exceeding noise limits.

The incidents were:


Air emissions exceeded limits due to scrubber maintenance issues at an aluminium smelter in the Quebec, Canada.


Dust was emitted on a number of occasions from a carbon cathode production facility in France.


Air emissions exceeded criteria at a coal mine in New South Wales, Australia.


Air emissions exceeded limits on a number of occasions at an aluminium smelter in France.


Para aromatic hydrocarbon emissions exceeded limits at an aluminium smelter in British Columbia, Canada.


Noise levels exceeded limits on a number of occasions at a coal mine in New South Wales, Australia.


Various water quality discharge parameters were exceeded during heavy rain at an alumina refinery in Queensland, Australia.


Mine-affected water was discharged to the environment at a coal mine in Queensland, Australia.


Water quality discharges exceeded seawater discharge limits at an alumina refinery in Queensland, Australia.


Sediment in run-off entered a fish habitat at an aluminium smelter site in British Columbia, Canada.


Two leach tanks ruptured at uranium processing plants: one in the Northern Territory, Australia and the other in Namibia.


Tailings overflowed from a pipe into a neighbouring property at a copper facility in Utah, US.


Diesel spilled from an open pump at a coal mine in Queensland, Australia.


Water run-off occurred at a hazardous substances storage area at an aluminium smelter site in Canada.

During 2013, 16 operations incurred fines amounting to US$190,279 (2012: US$47,102).

In addition, Australian corporations that exceed specific greenhouse gas emissions or energy use thresholds have obligations under the Australian National Greenhouse and Energy Reporting Act 2007, the Australian Energy Efficiency Opportunities Act 2006 (EEO), and the Australian Clean Energy Act 2011 which establishes the carbon pricing mechanism.

Three main Rio Tinto entities, Rio Tinto Limited, Alcan Gove Pty Limited and Pechiney Consolidated Australia Limited, are covered under each of these Acts. Each submitted their National Greenhouse and Energy reports by the required 31 October 2013 deadline and completed the required EEO public reporting. Twenty-eight EEO assessments for the second five-year assessment cycle have now been completed. One remaining assessment is scheduled in 2014. All compliance obligations under the carbon pricing mechanism, including reporting and surrender of carbon units by liable entities, were completed in the required timeframes. Liability information is publicly available on the Clean Energy Regulator’s website (as per legislative requirements).

Further information on the Group’s environmental performance is included in the sustainable development section of this Annual report, on pages 18 to 24, and on the website.

Exploration, research and development

The Group carries out exploration as well as research and development in support of its activities as described more fully under Exploration and Technology & Innovation on pages 36 to 37. Amounts charged for the year, net of any gains on disposal, generated a net loss before tax for exploration and evaluation of US$1,109 million (2012 restated: US$1,477 million). Research and development costs were US$231 million (2012 restated: US$246 million).










Table of Contents

Directors’ report continued



PricewaterhouseCoopers LLP and PricewaterhouseCoopers (together, PwC) are the auditors of Rio Tinto plc and Rio Tinto Limited respectively. PricewaterhouseCoopers LLP have indicated their willingness to continue in office as auditors of Rio Tinto plc and a resolution to reappoint them as auditors of Rio Tinto plc will be proposed at the 2014 annual general meetings. A separate resolution will seek authority for the Audit Committee to determine their remuneration. PricewaterhouseCoopers will continue in office as auditors of Rio Tinto Limited.

A copy of the declaration given by PricewaterhouseCoopers as the Group’s external auditors to the directors in relation to the auditors’ compliance with the independence requirements of the Australian Corporations Act 2001 and the professional code of conduct for external auditors is set out on page 203 in the financial statements.

No person who was an officer of Rio Tinto during 2013 was a director or partner of the auditors at a time when they conducted an audit of the Group.

Each person who held the office of director at the date the board resolved to approve this report makes the following statements:


so far as the directors are aware, there is no relevant audit information of which the auditors are unaware; and


each director has taken all steps that he or she ought to have taken as a director to make him or herself aware of any relevant audit information and to establish that the auditors are aware of that information.

Fees for audit and non-audit services

The amounts payable to the Group’s auditors, PwC, were:









Audit fees (a)

     15.3         17.2   

Assurance services (b)

     4.2         5.3   

Taxation services

     0.9         0.7   

All other fees (c)

     1.3         1.4   
       21.7         24.6   


(a) Audit fees relating to statutory audits.


(b) Assurance services are mainly related to half year review procedures, carve-out financial statements, sustainability assurance and limited assurance over the 2013 Taxes Paid report.


(c) All other fees include services in connection with the divestment programme and similar corporate projects.

Further information on auditor’s remuneration see note 39 to the financial statements.

During the year, the Audit Committee reviewed the effectiveness of PwC for Group audit and local, statutory audit work. The evaluation took the form of a survey comprising a range of questions covering objectivity, quality and efficiency and was completed by individual Rio Tinto business units. In addition, in the current year a further review was completed in October 2013 of the overall relationship with the auditors. The results of this survey and review were presented to the Audit Committee which concluded that PwC continued to provide a high-quality audit and an effective and independent challenge to management. The Audit Committee was satisfied with the external audit process and the independence of the external auditors.

PwC have been the external auditors since before the formation of the dual listed companies structure in 1995. For the reasons noted on page 62 the Audit Committee does not consider it necessary at the present time to undertake a tender process for the Group’s external audit. Since 2002, PwC have followed the requirements of the Sarbanes-Oxley Act 2002 and APB Ethical Standards and rotated both the lead UK and Australian audit partners at least every five years. In the UK, the audit engagement partner was appointed in 2011, and in Australia the audit engagement partner was appointed in 2012. They are due to transition after 2015 and 2016 respectively. This continued refreshing of the

team brings new perspectives to the audit and promotes healthy debate between auditors and management as well as the Committee.

Based on advice provided by the Audit Committee as set out in the report of the Audit Committee on pages 61 and 62, the directors are satisfied that the provision of non-audit services by PwC is compatible with the general standard of independence for auditors and the standards imposed by Australian, UK and US legislation.

Financial instruments

Details of the Group’s financial risk management objectives and policies and exposure to risk are described in note 30 to the 2013 financial statements.

Greenhouse gas emissions

Greenhouse gas emissions (in million tCO2e) (a) (b)


      2013      2012  

Scope 1 (c)

     23.4         26.5   

Scope 2 (d)

     14.4         16.4   

Total emissions (e)

     37.2         40.7   



GH intensity index (f)

     82.7         94.1   

GH intensity (tCO2e/t of product)

     0.095         0.111   


(a) Rio Tinto’s greenhouse gas emissions for managed operations are reported in accordance with requirements under Part 7 of The UK Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. Our approach and methodology used for the determination of these emissions are available at: riotinto.com/sustainabledevelopment2013/environment/climate_change.html and riotinto.com/sustainabledevelopment2013/glossary.html.


(b) Rio Tinto’s greenhouse gas emission inventory is based on definitions provided by The World Resource Institute / World Business Council for Sustainable Development Greenhouse Gas Protocol: A Carbon Reporting and Accounting Standard, March 2004.


(c) Scope 1 emissions include “emissions from combustion of fuel and operation of managed facilities”. It includes emissions from land management and livestock management at those facilities.


(d) Scope 2 emissions include “emissions from the purchase of electricity, heat, steam or cooling”.


(e) Total emissions is the sum of scope 1 and scope 2 emissions minus emissions that are associated with the generation of electricity, heat, steam or cooling supplied to others. These emissions exclude indirect emissions associated with transportation and use of our products reported on page 22.


(f) Rio Tinto greenhouse gas intensity index is the weighted emissions intensity for each of Rio Tinto’s main commodities relative to the commodity intensities in the 2008 base year (set to 100). This index incorporates approximately 95 per cent of Rio Tinto’s emissions from managed operations.






Table of Contents

Additional financial information


Underlying earnings

Financial performance compared with previous years

In order to provide additional insight into the performance of our business, Rio Tinto presents underlying earnings, which is defined in note 2 to the financial statements on pages 134 to 135.

2013 underlying earnings of US$10,217 million (2012: US$9,269 million) and net earnings of US$3,665 million (2012: losses of US$3,028 million) were US$948 million above (2012: US$6,303 million below) and US$6,693 million above (2012: US$8,863 million below) the comparable measures for the previous year. Both net earnings and underlying earnings represent amounts attributable to the owners of Rio Tinto. IFRS requires that the profit for the period reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries. Underlying earnings is reconciled to net earnings in the table below, which also lists the principal factors driving the movement in underlying earnings between periods.


    2013 vs 2012        


2012 vs 2011

     US$m     US$m          US$m     US$m  
net earnings (restated)
      (3,028         5,835   
Items excluded from underlying earnings (b)       12,297            9,737   
underlying earnings
      9,269            15,572   
Prices     (1,289         (5,315  
Exchange rates     1,008            154     
Volumes     538            (309  
General inflation and energy     (368         (270  
Operating cash costs     1,559            (304  
Exploration and evaluation costs     557            (262  
Disposal/write-down of exploration properties     (477         342     
Non cash/interest/tax/other     (580               (339        
Total changes in underlying earnings (b)       948            (6,303
2013/2012 underlying earnings       10,217            9,269   
Impairment charges net of reversal       (3,428         (14,360
Net gains and losses on consolidation and disposal of interests in businesses       847            827   
Exchange differences and movements on derivatives       (2,731         550   
Restructuring costs from global headcount reductions       (367         (77
Impact of pit wall slide at Kennecott Utah Copper       (283           
Adjustments to Clermont/Blair Athol on reclassification to disposal groups held for sale       (173           
Deferred tax asset write-off       (114         (134
Recognition of deferred tax asset following introduction of MRRT in 2012                  1,130   
Other exclusions             (303               (233
Total excluded in arriving at underlying earnings             (6,552                 (12,297
2013/2012 net earnings/(loss)             3,665                    (3,028

– attributable to non-controlling interests

            (2,586                 1   
Profit/(loss) for the year             1,079                    (3,027


(a) Comparative information has been restated to reflect a number of new accounting standards, as described in note 1 to the financial statements on pages 118 to 119.


(b) Earnings contributions from Group businesses and business segments are based on underlying earnings. Amounts excluded from net earnings in arriving at underlying earnings are described in notes 2(c) and (d) to the financial statements on pages 134 to 135.


2013 vs 2012

The effect of price movements on all major commodities was to decrease underlying earnings by US$1,289 million compared with 2012. The average Platts price for 62 per cent iron Pilbara fines was three per cent higher on average compared with 2012, while hard coking coal benchmark prices were 24 per cent lower, and thermal coal spot prices averaged 14 per cent lower. Copper prices were down eight per cent and LME prices for gold and aluminium averaged 16 and nine per cent lower respectively.

2012 vs 2011

The effect of price movements on all major commodities in 2012 was to decrease underlying earnings by US$5,315 million compared with 2011. Average prices declined from record highs experienced in 2011 for nearly all of Rio Tinto’s major commodities, with the exception of gold which was up six per cent on 2011, and minerals (mainly borates and titanium dioxide feedstocks). The average Platts price for 62 per cent Pilbara fines declined by 24 per cent compared with 2011. Copper prices were down ten per cent, aluminium prices averaged 16 per cent lower and molybdenum was 17 per cent lower.

Commodity prices and other drivers of sales revenue are discussed further on pages 49 to 50.

Exchange rates

2013 vs 2012

The US dollar strengthened significantly during 2013, in particular in the second half of the year. Compared with 2012, the US dollar, on average, rose by six per cent against the Australian dollar, by three per cent against the Canadian dollar, and by 15 per cent against the South African Rand. The effect of all currency movements was to increase underlying earnings relative to 2012 by US$1,008 million.

2012 vs 2011

Compared with 2011, on average, the US dollar depreciated by one per cent against the Australian dollar but strengthened by one per cent against the Canadian dollar, by seven per cent against the Euro and by 14 per cent against the South African Rand. The effect of all currency movements was to increase underlying earnings relative to 2011 by US$154 million.


2013 vs 2012

Volume increases enhanced earnings by US$538 million compared with 2012. These were achieved primarily in Iron Ore, where a new annual sales volume record was achieved, due to increased capacity at the Pilbara ports, and productivity improvements. Volumes also rose in copper, from Escondida in line with higher ore grades and increased throughput, in bauxite from record production volumes, and in aluminium following the return of the Alma smelter to full production. These additional tonnes more than offset the impact of lower gold production at Kennecott Utah Copper and lower demand for titanium dioxide feedstocks.

2012 vs 2011

Volume increases enhanced earnings by US$634 million compared with 2011. These were achieved primarily in iron ore, where sales volumes rose three per cent due to increased capacity at the Pilbara ports, and at Escondida in line with higher ore grades. Volume declines lowered earnings by US$943 million compared with 2011, reflecting lower mill throughput and gold grades at Kennecott Utah Copper and no metal share from Grasberg.










Table of Contents

Additional financial information continued


Cash costs, exploration and evaluation

2013 vs 2012

Rio Tinto made strong progress on its cost reduction programme and exceeded its 2013 targets. In 2013, the Group realised US$2,279 million pre-tax (US$1,559 million post-tax) in operating cash cost savings which exceeded the target of US$2 billion. Operating cash costs savings is a financial performance indicator used by management to assess the progress the Group is making on cost efficiency. Operating cash cost savings represent improvements in unit cost of goods sold for operating assets and improvements in operating costs for central functions.

Exploration and evaluation spend was reduced by US$1,023 million (on a consolidated, pre-tax basis) which exceeded the target reduction of US$750 million. Evaluation spend has been prioritised on those projects with the greatest potential to deliver value in the medium term, with spend on certain longer-dated options reduced. On a net earnings basis this resulted in an improvement of US$557 million. These are offset by the absence of a gain on disposal, and write-down of exploration properties in 2013. The Group wrote down its investment in Northern Dynasty Minerals, which owns 100 per cent of the Pebble Project in Alaska, by US$131 million following the announcement of a strategic review. In 2012, Rio Tinto reported net gains of US$346 million on divestment of various exploration properties, including its interests in Extract Resources and Kalahari Minerals.

In 2013, the Group reduced headcount by 4,000, net of new roles in the Iron Ore group to support the Pilbara 290 expansion. A further 3,300 roles left the Group through divested assets.

2012 vs 2011

Industry-wide cost pressures continued during 2012, in particular at some of the key mining regions where Rio Tinto has significant operations, such as New South Wales, Queensland and the Pilbara region of Western Australia.

Higher energy costs across the Group lowered underlying earnings by US$23 million compared with 2011. In 2012, many operations were impacted by higher fuel, diesel and power rates.

Higher operating cash costs during 2012 decreased underlying earnings by US$304 million compared with 2011 due to a combination of fixed production cost inefficiencies associated with lower volumes due to grade, higher maintenance costs, and costs associated with operational readiness for the Pilbara expansion of iron ore production.

During 2012, Rio Tinto divested various exploration properties, including interests in Extract Resources and Kalahari Minerals. The impact from movements in exploration and evaluation expenditure net of gains realised from divestments was to increase underlying earnings by US$80 million compared with 2011.

Non-cash/interest/tax, other

The effective corporate income tax rate on underlying earnings, excluding equity accounted units was 35 per cent compared with 30 per cent in 2012 (2012: 30 per cent, unchanged from 2011). The increased charge was primarily attributable to utilisation of the MRRT deferred tax asset. As in 2012 and 2011, the effective corporate tax on net earnings, excluding equity accounted units, is significantly impacted by the impairment of goodwill, which is non-deductible for tax purposes.

The Group net interest charge was US$130 million higher than in 2012 (2012: US$128 million lower than in 2011), mainly reflecting higher average net debt in 2013 (2012: mainly reflecting an increase in capitalised interest).

Exclusions from underlying earnings 2011-2013

Earnings contributions from Group businesses and business segments are based on underlying earnings. Amounts excluded from net earnings in arriving at underlying earnings are summarised in the discussion of year-on-year results below.


Impairment charges net of reversal        (3,428      (14,360      (9,290
Gains and losses on consolidation and disposal of interests in businesses        847         827         167   
Exchange differences and derivative movements        (2,731      550         (68
Restructuring costs including global headcount reductions        (367      (77        
Impact of pit wall slide at Kennecott Utah Copper        (283                
Adjustments to Clermont/Blair Athol on reclassification to disposal groups held for sale        (173                
Deferred tax asset write-off        (114      (134      (342
Recognition of deferred tax asset following introduction of MRRT in 2012                1,130           
Other exclusions          (303      (233      (204
Total excluded in arriving at underlying earnings          (6,552      (12,297      (9,737


Total impairment charges of US$3,428 million (net of tax and non-controlling interests) were recognised in 2013, of which US$1,655 million related to the Group’s copper businesses. This includes a charge of US$1,565 million related to the impairment of previous years’ fair value adjustments on consolidation of certain assets of Turquoise Hill (including Oyu Tolgoi). On 29 July 2013, Rio Tinto announced that funding and work on the underground development would be delayed pending resolution of outstanding shareholder issues, including finalising project finance. The consequent impact of updates to timing of revenues and expenditure resulted in the carrying value being higher than fair value less costs of disposal (FVLCD).

Impairments to the Group’s copper businesses also include adjustments to reduce the carrying value of the Eagle nickel-copper project to FVLCD prior to divestment on 17 July 2013, the impact of medium and long-term coking and thermal coal prices on non-cash fair value acquisition adjustments to undeveloped projects at SouthGobi Resources, and adjustment to the carrying value of Inova Resources, which was sold on 1 November 2013.

In addition, there was a post-tax impairment of US$1,293 million relating to the Group’s aluminium businesses. This includes US$555 million for the Gove refinery, following an announcement on 29 November 2013 to suspend alumina production and focus on the bauxite operation. As a result of this decision, the timing and scope of site restoration and environmental rehabilitation cash flows have been revised, together with the write-off of operating assets not fully depreciated. The remaining post-tax charge of US$738 million related to the Group’s Canadian aluminium operations, primarily at Kitimat in British Columbia, resulting from a change in assumptions about future capital required to complete the modernisation project, which diminished the value of the associated intangible assets, and another site closure within the Aluminium portfolio.

A post-tax impairment charge of US$470 million relating to Rio Tinto Coal Mozambique (RTCM) has been recognised. An assessment of FVLCD derived from future cash flows, which included a reassessment of the development plan and review of the discount rate and associated country risk premium, resulted in the recoverable value being below carrying value.







Table of Contents


Net gains on disposal of interests in businesses during 2013 mainly relate to the Group’s divestment of its remaining interest in Constellium (formerly Alcan Engineered Products) and the Northparkes mine.

Non-cash exchange and derivative losses of US$2,731 million arose primarily on US dollar debt in non-US dollar functional currency companies, and on intragroup balances. These losses are largely offset by currency translation gains recognised in equity.

Kennecott Utah Copper’s Bingham Canyon mine experienced a slide along a geological fault line of its north-eastern wall in April 2013. Charges relating to the slide, which have been excluded from underlying earnings, primarily comprise the write-off of certain deferred stripping assets and damaged equipment. Adjustments for settlement of insurance claims have been made to the amount excluded from underlying earnings, and will continue as insurance claims are settled.

Adjustments in relation to Clermont and Blair Athol arose following reclassification to disposal groups held for sale, and reflect contractual obligations for product sales and funding of closure activities, which will remain with the Group following completion of the divestments. Further adjustments in respect of these obligations will be combined with the net gain/loss on disposal expected to be recognised in 2014.


A post-tax impairment charge of US$14,360 million was recognised in 2012, of which US$11,000 million related to the Group’s aluminium businesses. During 2012, aluminium prices deteriorated further with strong Australian and Canadian currencies, high energy and raw material costs, and high volumes of LME inventory continuing to exert pressure on current market values in the industry. As in 2011, given the prevailing conditions in the aluminium market, FVLCD did not include the full value of the Group’s planned improvements in cash margins from its value-enhancement programmes.

A post-tax impairment charge of US$2,860 million was also recognised relating to Rio Tinto Coal Mozambique (RTCM). The development of infrastructure in Mozambique to support the undeveloped coal asset was found to be more challenging than initially anticipated which, combined with a downward revision to estimates of recoverable coking coal volumes, led to a reassessment of the overall scale and ramp-up schedule of RTCM and consequently to the assessment of its FVLCD.

In addition, there were net post-tax impairments of US$460 million relating to the Group’s Argyle diamond mine and US$40 million in other net impairments. An impairment review of Argyle was triggered by the announcement during 2012 of the Diamonds strategic review, as well as changes to the forecast ramp-up date for the underground mine.

Gains and losses on consolidation and disposal of interests in businesses relate primarily to a gain of US$965 million arising on consolidation of Richards Bay Minerals (RBM) in September 2012 and a US$167 million loss on consolidation of Turquoise Hill Resources.

A deferred tax asset was recognised in 2012 following introduction of the MRRT on 1 July 2012. The legislation, which applies to companies with iron ore and coal operations in Australia, allows a deduction against future MRRT liability based on the market value of past investments in these mining assets as at 1 May 2010. Accordingly, a deferred tax asset was recognised to reflect the deductibility for MRRT purposes of the market value of these mining assets to the extent recovery is probable.


A post-tax impairment charge of US$9,290 million was recognised in 2011, of which US$8,855 million related to the Group’s aluminium businesses. Valuation of Rio Tinto’s aluminium businesses for impairment testing was based on an assessment of FVLCD derived from discounted future cash flows. The impairment was largely a result of the economic environment, and related market volatility in aluminium prices in the second half of 2011, leading to declines in market values for aluminium assets.

In addition, there were net post-tax impairments of US$344 million relating to the Group’s diamond business and US$91 million in other net impairments.

Profits on the disposal of businesses in 2011 related principally to the sale of the Group’s talc business and Colowyo mine.

The deferred tax asset write-off in 2011 of US$342 million followed a change in French legislation which restricted the utilisation of tax losses.

Group financial results by product group 2011-2013


























Iron Ore

    9,858        9,247        13,268   


    557        54        610   


    821        1,059        2,013   


    33        309        1,114   

Diamonds & Minerals (b)

    350        149        (159

Other operations

    (281     (582     (288

Inter-segment transactions

    (4     (8     40   

Other items

    (730     (750     (684

Exploration and evaluation

    (145     (97     (102

Net interest

    (242     (112     (240

Group underlying earnings

    10,217        9,269        15,572   

Exclusions from underlying earnings

    (6,552     (12,297     (9,737

Net earnings/(loss)

    3,665        (3,028     5,835   


(a) Comparative information for 2012 and 2011 has been restated to reflect a number of new accounting standards; refer to note 46 in the financial statements.


(b) Includes the Simandou iron ore project in Guinea, which is the responsibility of the Diamonds & Minerals product group chief executive.

Sales revenue



Commodity   Source   Unit     2013
Average prices          
Iron ore 62% Fe       Platts Index less        
Fines FOB   Baltic Exchange        
  Freight Rate     dmt (a)      126        122        160   
Aluminium   LME(b)     Tonne        1,845        2,018        2,395   
Copper   LME     Pound        3.33        3.61        4.00   
Gold   LBMA     Ounce        1,410        1,669        1,571   
Closing prices (quoted commodities only)         
Aluminium       Tonne        1,755        2,041        1,970   
Copper       Pound        3.35        3.65        3.43   
Gold         Ounce        1,208        1,675        1,575   


(a) Dry metric tonne


(b) LME cash price

The above table shows published prices for Rio Tinto’s commodities for the last three years where these are publicly available, and where there is a reasonable degree of correlation between the published prices and Rio Tinto’s realised prices.

Group sales revenue will not necessarily move in line with these published prices for a number of reasons which are discussed below.

The discussion of revenues below relates to the Group’s gross revenue from sales of commodities, as included in the financial information by business unit.










Table of Contents

Additional financial information continued



2013 sales revenue compared with 2012

The Aluminium group’s sales revenues are from aluminium and related products such as alumina and bauxite.

Sales revenue increased by two per cent, reflecting increasing volumes across all products, and a rise in regional market premia more than offsetting a nine per cent decline in LME prices over the period. Market premia on aluminium shipments continued to perform strongly in 2013, supported by balanced physical supply/demand, despite significant LME inventories, much of which remains tied up in financing deals due to higher forward prices and low interest rates.

2012 sales revenue compared with 2011

Gross sales revenue for Rio Tinto Alcan decreased by 17 per cent compared with 2011, due to the combined effects of lower market prices and reduced production at Alma, offset by the Yarwun refinery expansion.

The impact of lower prices on Group sales revenue in 2012 was partially offset by higher market premia as significant amounts of aluminium inventories remained locked in financing deals and therefore unavailable for physical delivery.


2013 sales revenue compared with 2012

Gross sales revenue for the Copper group decreased by 11 per cent in 2013 compared with 2012. This reflected an eight per cent decline in the copper price during the period, and a 16 per cent decline in the gold price, together with divestment of the Palabora and Northparkes operations during 2013.

At 31 December 2013, the Group had an estimated 254 million pounds of copper sales (2012: 249 million pounds) that were provisionally priced at 333 US cents per pound (2012: 360 US cents per pound). The final price of these sales will be determined during the first half of 2014.

2012 sales revenue compared with 2011

Gross sales revenue for the Copper group decreased by 13 per cent in 2012 compared with 2011. This reflected the impact of lower prices and decreased volumes following lower mill throughput and an anticipated period of lower gold grades at Kennecott Utah Copper and no metal share from Grasberg. This was partly offset by increasing volumes from Escondida due to higher grades and improvements to the crushing and conveying circuit and from Northparkes in line with a recovery in ore grades.

Diamonds & Minerals

2013 sales revenue compared with 2012

Gross sales revenue increased by three per cent, largely as the result of consolidating a full year of sales at Richards Bay Minerals (RBM), which offset the impact of lower prices for zircon, titanium dioxide feedstocks, borates and metallics and lower sales volumes of titanium dioxide feedstocks due to challenging market conditions. Markets for titanium dioxide and zircon have softened further over the course of the year as the industry continues to work through high levels of inventories.

Diamonds revenue was 15 per cent above 2012 due to higher volumes and increased prices; polished diamond prices were relatively stable throughout 2013 whilst slightly greater volatility was experienced in prices for rough diamonds. Diamond prices realised by Rio Tinto depend on the size and quality of diamonds in the product mix.

2012 sales revenue compared with 2011

Revenues for Rio Tinto Iron & Titanium (RTIT) increased 41 per cent year-on-year due to higher prices for titanium dioxide feedstocks and the RBM transaction in September 2012, partially offset by the divestment of the talc business on 1 August 2011. The market for both titanium dioxide and zircon started the year strongly, although demand subsequently softened in the second half. RTIT continued to replace its multi-year sales contracts with alternative pricing mechanisms in 2012, increasing the exposure to market prices.

Diamonds revenue was two per cent higher than 2011, as the effect of higher volumes was largely offset by lower prices.


2013 sales revenue compared with 2012

Gross sales revenue in 2013 for the Energy group decreased by ten per cent compared with 2012 as a result of significantly lower prices. Global thermal coal prices continued the weaker trend of the past two years, and excess supply continues to impact the coking coal market with nearly all major exporting countries increasing output in 2013. Excess supply and enduring closure of Japan’s nuclear industry continued to adversely impact the uranium market in 2013. The uranium spot price index ended the year 20 per cent below 2012 at US$34.50 per pound, while the long-term price indicator lost 12 per cent to end the year at US$50 per pound U3O8.

A significant proportion of Rio Tinto’s coal production is sold under long-term contracts. In Australia, the prices applying to sales under the long-term contracts are generally renegotiated annually for thermal coal, but prices are fixed at different times of the year and on a variety of bases. Coking coal prices for 2013 have been negotiated on a quarterly basis. For these reasons, average realised prices will not necessarily reflect the movements in any of the publicly-quoted prices. Rio Tinto Uranium also sells predominantly on a longer-term contract basis. Moreover, there are significant product specification differences between mines. Sales volumes of all products will vary during the year and the timing of shipments will also result in differences between average realised prices and published prices.

2012 sales revenue compared with 2011

Gross sales revenue in 2012 for the Energy group decreased by 17 per cent compared with 2011 as a result of lower prices.

2012 was a difficult year in coal and uranium markets as supply and demand fundamentals struggled to balance in the face of global economic uncertainty, with prices declining across most of the year. Coking coal spot prices reached a low of US$140 per tonne in the third quarter of 2012 after peaking at US$366 per tonne in early 2011. Thermal coal spot prices reached a low of US$80 per tonne in the third quarter of 2012 after peaking at US$130 per tonne in early 2011. The uranium spot price reached a low of US$42 per pound in October 2012, down US$10 from the same time in 2011.

Iron Ore

2013 sales revenue compared with 2012

Gross sales revenue for the Iron Ore group increased by seven per cent compared with 2012, attributable to record sales volumes in the Pilbara and marginally higher prices; and sales volumes increased by five per cent across the product group. In 2013, approximately 30 per cent of sales were priced with reference to a quarterly average index set at the prior quarter’s average lagged by one month. The remainder was sold via pricing mechanisms priced closer to the index price at the time of shipment, such as current quarter average, current month average or spot index prices. Index prices are adjusted for product characteristics and iron and moisture content.

2012 sales revenue compared with 2011

Gross sales revenue for the Iron Ore group decreased by 18 per cent in 2012 compared with 2011, reflecting lower iron ore prices partly offset by higher volumes. Sales increased quarter-on-quarter throughout 2012, resulting in record annual sales volumes despite significant volatility in the marketplace.







Table of Contents


Cash flow

2013 compared with 2012

A full consolidated statement of cash flows is contained in the financial statements.

Cash flows from operations, including dividends from equity accounted units, were US$20.1 billion, 22 per cent higher than 2012, reflecting the positive impact of higher volumes and the cost reduction initiatives. Tax payments in 2013 of US$3.7 billion were US$2.1 billion lower than in 2012. The stronger cash flows from operations and lower taxes drove net cash generated from operating activities 60 per cent higher to US$15.1 billion.

Purchase of property, plant and equipment and intangible assets (net of proceeds of sales of fixed assets) declined by US$4.6 billion or 26 per cent to US$12.9 billion in 2013. Five major capital projects were completed during the year: the Pilbara iron ore mines and infrastructure expansion to 290Mt/a in Western Australia, the Oyu Tolgoi copper-gold mine and concentrator in Mongolia, the Kestrel coking coal mine extension and expansion in Queensland, the Argyle diamond underground mine in Western Australia and the AP60 aluminium smelter in Quebec. Ongoing capital projects include the second phase expansion of the Pilbara iron ore infrastructure to 360Mt/a, due to come on stream at the end of the first half of 2015, and the modernisation of the Kitimat aluminium smelter in British Columbia, which is due to be complete in the first half of 2015 (subject to any additional capital required to complete the project receiving board approval).

Net proceeds from disposals of subsidiaries, joint ventures and associates totalled US$1.9 billion in 2013, primarily reflecting the sale of the Group’s interests in Northparkes, Constellium, Eagle and Altynalmas Gold. Additional cash inflows from disposals were reflected within Sales of financial assets and Dividends from equity accounted units. Total disposal proceeds in 2013 of US$2.5 billion are presented after adjusting for working capital and other items.

Dividends paid in 2013 of US$3.3 billion reflected the 15 per cent increase in the 2012 final dividend.

2012 compared with 2011

Cash flows from operations, including dividends from equity accounted units, were US$16.5 billion, 40 per cent lower than 2011, primarily as a consequence of lower prices.

Purchase of property, plant and equipment and intangible assets rose to US$17.6 billion, an increase of US$5.1 billion from 2011. This included the continued expansion of the Pilbara iron ore mines and infrastructure to 290Mt/a in Western Australia, the construction of the Oyu Tolgoi copper-gold mine and concentrator in Mongolia, the modernisation of the Kitimat aluminium smelter in British Columbia, the extension and expansion of the Kestrel coking coal mine in Queensland and the continued underground development of the Argyle diamond mine in Western Australia.

During 2012, the Group doubled its holding in RBM to 74 per cent through the acquisition of BHP Billiton’s entire interests for US$1.7 billion.

The Group received US$1.35 billion following completion of the agreement with Chalco to develop and operate the Simandou iron ore project in Guinea and US$0.9 billion from the Turquoise Hill Resources rights offering. These amounts have been recognised as proceeds from issue of equity to non-controlling interests in the cash flow statement.

Cash returns to shareholders totalled US$4.5 billion in 2012, comprising US$1.5 billion in share buy-backs with the completion of the Group’s US$7 billion share buy-back programme in March 2012, and dividends of US$3.0 billion.

Dividend payments were US$0.8 billion higher than in 2011, reflecting a 34 per cent increase in the 2011 total dividend.

Statement of financial position

Net debt decreased from US$19.2 billion to US$18.1 billion at 31 December 2013 as operating cash inflows and divestment proceeds fully offset the outflows relating to capital expenditure and the increase in the dividend. Net debt at

31 December 2013 was made up principally from adjusted total borrowings (as defined in note 24 to the financial statements) of US$28.3 billion, offset by US$10.2 billion in cash and cash equivalents. The proportion of net debt to total capital stood at 25 per cent at 31 December 2013, unchanged from the prior year.

Total borrowings at 31 December 2013 were US$28.5 billion. The weighted average cost of total borrowings was approximately four per cent and the weighted average maturity of total borrowings was around eight years with the maximum nominal amount maturing in any one calendar year currently US$3.2 billion. At 31 December 2013, approximately two-thirds of Rio Tinto’s adjusted total borrowings were at fixed interest rates. In 2013, Rio Tinto issued US$3.0 billion of fixed and floating rate bonds in US dollars. The offering comprised US$1.0 billion of three year and US$1.25 billion of 5.5 year fixed rate bonds at coupons of 1.375 per cent and 2.25 per cent respectively, and US$250 million two year and US$500 million three year floating rate bonds at coupons of three month US$ LIBOR plus 55 and 84 basis points respectively.

Total provisions have decreased by US$2.9 billion; this is primarily related to the impact of the strengthening US dollar, actuarial gains on pensions and other post-retirement obligations due to the impact of higher bond yields and significant positive returns on equities held in pension plans.

Financial instruments and risk management

The Group’s policies with regard to financial instruments and risk management are clearly defined and consistently applied. They are a fundamental part of the Group’s long-term strategy covering areas such as foreign exchange risk, interest rate risk, commodity price risk, credit risk, and liquidity risk and capital management. Further details of our Financial instruments and risk management are disclosed in note 30 “Financial instruments and risk management” to the financial statements.

The Group’s 2013 Annual report and financial statements show the full extent of its financial commitments, including debt. The risk factors to which the Group is subject are summarised on page 14 to 17. The effectiveness of internal control procedures continues to be a high priority in the Rio Tinto Group. The board’s statement on internal control is set out in the Risk management section.


The 2013 interim dividend was 83.5 US cents (2012: 72.5 US cents) and the final dividend is determined as 108.5 US cents (2012: 94.5 US cents). Dividends paid on Rio Tinto plc and Rio Tinto Limited shares are equalised on a net cash basis; that is, without taking into account any associated tax credits. Dividends are determined in US dollars. Rio Tinto plc dividends are paid and declared in pounds sterling and Rio Tinto Limited dividends are declared and paid in Australian dollars, converted at exchange rates on 13 February 2014. Details relating to the dividend policy, determination and payment of dividends in sterling, Australian dollars and other currencies and on the payment of dividends to holders of American Depositary Receipts (ADRs) are included in the Shareholder information section.

Capital and liquidity risk management

The Group’s total capital is defined as equity attributable to owners of Rio Tinto plus equity attributable to non-controlling interests and net debt, as shown below:

Total capital



Equity attributable to owners of Rio Tinto

     45,886         46,553   

Equity attributable to non-controlling interests

     7,616         11,187   

Net debt (note 24)

     18,055         19,192   

Total capital

     71,557         76,932   

The Group’s major capital and evaluation projects are listed in the Capital allocation section on page 12.










Table of Contents

Additional financial information continued


We expect that contractual commitments for expenditure, together with other expenditure and liquidity requirements will be met from internal cash flow and, to the extent necessary, from the existing facilities described in note 30 “Financial instruments and risk management”, part (v) to the financial statements. This note also provides further details of our liquidity and capital risk management.

Treasury management and financial instruments

Details of our Treasury management and financial instruments are contained within the introductory paragraphs of note 30.

Foreign exchange

The following sensitivities give the estimated effect on underlying earnings assuming that each exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and movements in exchange rates can cause movements in commodity prices and vice versa. Where the functional currency of an operation is that of a country for which production of commodities is an important feature of the economy, such as the Australian dollar, there is a certain degree of natural protection against cyclical fluctuations, in that the currency tends to be weak, reducing costs in US dollar terms when commodity prices are low, and vice versa.

Earnings sensitivities – exchange rates



Average exchange

rate for 2013

US cents


Effect on

underlying earnings

of 10% change in

full year average

+/- US$m


Australian dollar

     97         563   

Canadian dollar

     97         289   


     133         22   

Chilean peso

     US$1= 495 pesos         29   

New Zealand dollar

     82         38   

South African rand

     10         40   

UK sterling


The exchange rate sensitivities quoted above include the effect on net operating costs of movements in exchange rates but exclude the effect of the revaluation of foreign currency financial assets and liabilities. They should therefore be used with caution. Further details of our exposure to foreign currency fluctuations and currency derivatives, and our approach to currency hedging, are contained within note 30 “Financial instruments and risk management”, part A(b)(i), to the financial statements.

Interest rates

Details of our exposure to interest rate fluctuations are contained within note 30 “Financial instruments and risk management” to the financial statements.

Commodity prices

The approximate effect on the Group’s underlying and net earnings of a ten per cent change from the full year average market price in 2013 for the following products would be:

Earnings sensitivities – commodity prices



Average market

price for 2013



Effect on

underlying and net

earnings of 10%

change in full year


+/- US$m


Iron ore


62% Fe fines FOB

     dmt         126         1,214   

Aluminium (a)

     Tonne         1,845         553   

Copper (a)

     Pound         3.33         221   


     Ounce         1,410         29   


(a) Excludes the impact of commodity derivatives.

The sensitivities give the estimated impact on net earnings of changes in prices assuming that all other variables remain constant. These should be used with caution. As noted previously, the relationship between currencies and commodity prices is a complex one and changes in exchange rates can influence commodity prices and vice versa.

Further details of our exposure to commodity price fluctuations are contained within note 30 “Financial instruments and risk management” to the financial statements.

Credit risks

Details of our exposure to credit risks relating to receivables, financial instruments and cash deposits, are contained within note 30 “Financial instruments and risk management” to the financial statements.

Disposals and acquisitions

Information regarding disposals and acquisitions is provided in note 37 “Purchases and sales of subsidiaries, joint ventures, associates and other interests in businesses” to the financial statements.

Critical accounting policies and estimates

Many of the amounts included in the financial statements involve the use of judgment and/or estimates. These judgments and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ from the amounts included in the financial statements.

Information about such judgments and estimation is contained under “Judgements in applying accounting policies and key sources of estimation uncertainty” in note 1 “Principal accounting policies” on page 119 of the financial statements.

Off balance sheet arrangements and contractual commitments

The table below presents information in relation to our material off balance sheet arrangements, and contractual commitments. Information regarding the Group’s pension commitments and funding arrangements is provided in note 45 “Post retirement benefits” to the financial statements. Information regarding the Group’s close-down and restoration obligations is provided in note 26 “Provisions including post retirement benefits” to the financial statements.

We expect that these contractual commitments for expenditure, together with other expenditure and liquidity requirements will be met from internal cash flow and, to the extent necessary, from the existing facilities.


At 31 December 2013   < 1 yr

1-3 yrs



3-5 yrs



> 5 yrs





Expenditure commitments in relation to:          
Operating leases     439        667        540        832        2,478   
Other (capital commitments)     5,929        1,153        133        31        7,246   
      6,368        1,820        673        863        9,724   
Long-term debt and other financial obligations:          
Debt     4,011        4,770        5,006        14,684        28,471   
Interest payments     1,007        1,817        1,661        6,164        10,649   
Purchase obligations     3,178        4,636        3,608        14,359        25,781   
Other     33        69        (15     (76     11   
      8,229        11,292        10,260        35,131        64,912   
Total     14,597        13,112        10,933        35,994        74,636   






Table of Contents

Board of directors


Key for committee memberships:

(A) Audit Committee

(R) Remuneration Committee

(N) Nominations Committee

(S) Sustainability Committee

(C) Chairman’s Committee

(I) Independent

Jan du Plessis (R, N and C)

Chairman, BCom, LLB, CA(SA), age 60

Appointment: Director of Rio Tinto since 2008. Jan was appointed chairman in 2009. He is the chairman of the Nominations Committee.

Skills and experience: Jan, a South African and British citizen, became group finance director of Compagnie Financière Richemont, the Swiss luxury goods group, in 1988. In 2004, he was appointed chairman of British American Tobacco plc, a position which he held until 2009.

External appointments (current and recent): Non-executive director and senior independent non-executive director of Marks and Spencer Group plc since 2008 and 2012 respectively, non-executive director of British American Tobacco plc from 1999 until 2009 and chairman of the board from 2004 until 2009, non-executive director and chairman of the audit committee of Lloyds Banking Group plc from 2005 and 2008 respectively, until 2009.

Sam Walsh AO (C)

Chief executive, BCom (Melbourne), age 64

Appointment: Director of Rio Tinto since 2009. He was appointed chief executive in January 2013.

Skills and experience: Sam, an Australian citizen, joined Rio Tinto in 1991, following 20 years in the automotive industry at General Motors and Nissan Australia. He has held a number of management positions during his career at Rio Tinto including chief executive of the Aluminium group from 2001 to 2004, chief executive of the Iron Ore group from 2004 to 2009 and chief executive, Iron Ore and Australia from 2009 to January 2013. Sam is a Fellow of the Australian Institute of Management, the Australasian Institute of Mining and Metallurgy, the Chartered Institute of Purchasing and Supply Management, the Australian Institute of Company Directors and the Australian Academy of Technical Science and Engineering. In 2010, he was appointed an Officer in the General Division of the Order of Australia.

External appointments (current and recent): Member of the Council of the International Council on Mining & Metals and a director of The International Council on Mining and Metals (UK) Limited since January 2013. Non-executive director of Seven West Media Limited from 2008 until January 2013.

Chris Lynch (C)

Chief financial officer, BCom, MBA, age 60

Appointment: Director of Rio Tinto since 2011 (non-executive) and chief financial officer since April 2013.

Skills and experience: Chris, an Australian citizen, has nearly 30 years’ experience in the mining and metals industry. He was chief executive officer of the Transurban Group, an international toll road developer and manager with interests in Australia and North America, until 2012. His career has included seven years at BHP Billiton, where he was chief financial officer and then executive director and group president – Carbon Steel Materials. Prior to this, Chris spent 20 years with Alcoa Inc. where he was vice-president and chief information officer based in Pittsburgh, and chief financial officer Alcoa Europe in Switzerland. He was also managing director of KAAL Australia Limited, a joint venture company formed by Alcoa and Kobe Steel.

External appointments (current and recent): Chief executive officer of the Transurban Group Limited from 2008 until 2012, commissioner of the Australian Football League from 2008 until March 2014.

Robert Brown (N, S and I)

Non-executive director, BSc, age 69

Appointment: Director of Rio Tinto since 2010.

Skills and experience: Bob is a Canadian citizen and contributes his considerable experience in large, high-profile Canadian companies. He is chairman of Aimia Inc., a customer loyalty management provider, and serves on the board of BCE Inc. (Bell Canada Enterprises), Canada’s largest communications company. He was previously president and chief executive officer of CAE Inc., a world leader in flight simulation and training. Before that he spent 16 years at Bombardier Inc., the aerospace and transportation company, where he was firstly head of the Aerospace Group and then president and chief executive officer. He has also served as chairman of Air Canada and of the Aerospace Industries Association of Canada. Bob was inducted to the Order of Canada as well as l’Ordre National du Québec. He has been awarded honorary doctorates from five Canadian universities.

External appointments (current and recent): Non-executive director and chairman of Aimia Inc. since 2005 and 2008 respectively, non-executive director of BCE Inc. and Bell Canada since 2009, non-executive director of Fier CPVC-Montreal L.P. since 2005, president and chief executive officer of CAE Inc. from 2004 until 2009, non-executive director of Ace Aviation Holdings Inc. from 2004 until 2009.

Vivienne Cox (N, S and I)

Non-executive director, MA (Oxon), MBA (INSEAD), age 54

Appointment: Director of Rio Tinto since 2005. Vivienne will retire at the conclusion of the Rio Tinto plc annual general meeting in 2014.

Skills and experience: Vivienne is a British citizen. She was executive vice president of Gas, Power and Renewables at BP and former chief executive of BP Alternative Energy. During her career at BP she served in a variety of positions ranging from supply and trading, to commercial, finance and exploration and renewable energy. Vivienne holds degrees in chemistry from Oxford University and in business administration from INSEAD.

External appointments (current and recent): Member of Kingfisher plc Net Positive Advisory Council since October 2013, non-executive director of BG Group plc since 2012, non-executive director and senior independent non-executive director of Pearson plc since 2012 and January 2013 respectively, non-executive director of the UK Department for International Development since 2010, non-executive director of The Climate Change Organisation since 2010, non-executive director and non-executive chairman of Climate Change Capital Limited from 2008 and 2009 respectively until 2012, member and chairman of the supervisory board of Vallourec, since 2010 and May 2013 respectively, member of the offshore advisory committee of Mainstream Renewable Power from 2010 until 2012, a member of the board of INSEAD business school from 2009 until December 2013.










Table of Contents

Board of directors continued


Michael Fitzpatrick (A, R, N and I)

Non-executive director, BEng, BA (Oxon), age 61

Appointment: Director of Rio Tinto since 2006.

Skills and experience: Michael, an Australian citizen, contributes wide-ranging investment and local knowledge of Australian business. He is chairman of Treasury Group Limited, a Sydney-based incubator of fund management companies, chairman of the Australian Football League and a former chairman of the Australian Sports Commission. After leaving professional football in 1983 and working for the Treasury of the State of Victoria and with investment banks in New York, Michael founded the pioneering infrastructure asset management company Hastings Funds Management Limited in 1994. He was a Rhodes Scholar in 1975.

External appointments (current and recent): Non-executive director of Carnegie Wave Energy Limited since 2012, chairman of Infrastructure Capital Group Limited since 2009, chairman of the Treasury Group Limited since 2005, commissioner and chairman of the Australian Football League since 2003 and 2007 respectively, director of the Walter & Eliza Hall Institute of Medical Research since 2001.

Ann Godbehere (A, N and I)

Non-executive director, FCGA, age 58

Appointment: Director of Rio Tinto and chairman of the Audit Committee since 2010.

Skills and experience: Ann, a Canadian and British citizen, has more than 25 years’ experience in the financial services industry. She spent ten years at Swiss Re, a global reinsurer, latterly as chief financial officer from 2003 until 2007. She was interim chief financial officer and executive director of Northern Rock bank after its nationalisation. Ann is a qualified accountant.

External appointments (current and recent): Non-executive director of British American Tobacco plc since 2011, non-executive director of UBS AG since 2009, non-executive director of Atrium Underwriting Group Limited and Arden Holdings Ltd since 2007, non-executive director and chairman of the audit committee of Prudential Public Limited Company since 2007 and 2009 respectively, chief financial officer and executive director of Northern Rock (Asset Management) plc from 2008 until 2009.

Richard Goodmanson (R, N, S and I)

Non-executive director, MBA, BEc and BCom, BEng (Civil), age 66

Appointment: Director of Rio Tinto since 2004 and chairman of the Sustainability Committee.

Skills and experience: Richard, a US citizen, was executive vice president and chief operating officer of DuPont until 2009. Prior to this he was president and chief executive officer of America West Airlines and senior vice president of operations for Frito-Lay, Inc., a North American division of PepsiCo. Richard has worked at senior levels for McKinsey & Co, where he led client service teams on major programmes of strategy development. He spent ten years in heavy civil engineering project management, principally in South East Asia, including the construction of the Hong Kong Subway System.

External appointments (current and recent): Non-executive director of Qantas Airways Limited since 2008, economic adviser to the governor of Guangdong Province, China from 2003 until 2009, executive vice president and chief operating officer of E.I. du Pont de Nemours and Company Limited from 1999 until 2009, director of the United Way of Delaware from 2002 until 2009.

Lord Kerr of Kinlochard (N, S and I)

Non-executive director, GCMG, MA (Oxon), age 72

Appointment: Director of Rio Tinto since 2003.

Skills and experience: John, a British citizen, was a member of the UK Diplomatic Service for 36 years and headed it from 1997 to 2002 as permanent under secretary at the Foreign Office. He previously served in HM Treasury and in the former Soviet Union and Pakistan, and was ambassador to the European Union and the US. He has been an Independent member of the House of Lords since 2004.

External appointments (current and recent): Advisory board member of Edinburgh Partners Limited since 2012, director and vice chairman of Scottish Power Limited since 2009 and 2012 respectively, chairman of the Centre for European Reform (London) since 2008, vice president of the European Policy Centre (Brussels) since 2007, trustee of the Carnegie Trust for the Universities of Scotland since 2005, director of The Scottish American Investment Company plc since 2002, deputy chairman of Royal Dutch Shell plc from 2005 until 2012, chairman of the Court and Council of Imperial College London from 2005 until 2011, advisory board member of BAE Systems from 2008 until 2011, advisory board member of Scottish Power (Iberdrola) from 2007 until 2009, trustee of the National Gallery in London from 2002 until 2010, trustee of the Rhodes Trust from 1997 until 2010, a Fulbright Commissioner from 2004 until 2009.

Hon. Paul Tellier (A, R, N and I)

Non-executive director, LLL, BLitt (Oxon), LL.D, C.C. age 74

Appointment: Director of Rio Tinto since 2007.

Skills and experience: Paul, a Canadian citizen, entered the civil service in the 1970s. He was clerk of the Privy Council Office and secretary to the Cabinet of the Government of Canada from 1985 to 1992. He became president and chief executive officer of the Canadian National Railway Company from 1992 to 2002. Until 2004, he was president and chief executive officer of Bombardier Inc., the aerospace and transportation company.

External appointments (current and recent): Chairman of Global Container Terminals Inc. since 2007, director of McCain Foods Limited since 1996, trustee of the International Accounting Standards Foundation from 2007 until 2012, co-chair of the Prime Minister of Canada’s Advisory Committee on the Renewal of the Public Service from 2006 until February 2014, strategic adviser to Société Générale (Canada) from 2005 until May 2013, member of the advisory board of General Motors of Canada since 2005, director of Bell Canada from 1996 until 2010, director of BCE Inc. (Bell Canada Enterprises) from 1999 until 2010.

John Varley (A, R, N and I)

Non-executive director, BA, MA (Oxon), age 57

Appointment: Director of Rio Tinto and chairman of the Remuneration Committee since 2011 and senior independent director since 2012.

Skills and experience: John, a British citizen, joined Barclays PLC in 1982 after working as a solicitor. He was chief executive of Barclays from 2004 until 2010. During a 28-year career with the bank he held several senior positions, including chairman of the Asset Management division, group finance director and deputy chief executive.

External appointments (current and recent): Director of Barclays PLC and Barclays Bank PLC from 1998 until 2010, non-executive director of BlackRock Inc. since 2009, non-executive director of AstraZeneca plc since 2006, chairman of Marie Curie Cancer Care since 2011 and chairman of Business Action on Homelessness since 2006.







Table of Contents


Directors who left the board

Tom Albanese

Chief executive, BS (Mineral Economics), MS (Mining Engineering), age 56

Appointment: Director of Rio Tinto from 2006 and chief executive from 2007 until January 2013.

Skills and experience: Tom, a US citizen, joined Rio Tinto in 1993 on Rio Tinto’s acquisition of Nerco Minerals, a US energy company, where he was chief operating officer. His first position with Rio Tinto was general manager of the Greens Creek mine in Alaska. He then held a series of management positions, including overseeing the integration of North Limited into Rio Tinto operations on North’s acquisition in 2000. He was appointed chief executive of the Industrial Minerals group in 2000, and chief executive of the Copper group and head of Exploration in 2004.

External appointments (current and recent): Director of the International Council on Mining and Metals from 2007 until 2013, member of the board of visitors, Duke University, Fuqua School of Business from 2009.

Guy Elliott

Senior executive director, MA (Oxon), MBA (INSEAD), age 58

Appointment: Director of Rio Tinto since 2002 and senior executive director since 2012. Guy retired from Rio Tinto at the end of 2013.

Skills and experience: Guy, a British citizen, was with Rio Tinto for more than 30 years. He joined the Group in 1980 in the uranium marketing division, having previously been in investment banking. He subsequently held a variety of commercial and management positions, including head of Business Evaluation and president of Rio Tinto Brasil. He was chief financial officer from 2002 to April 2013.

External appointments (current and recent): Non-executive director and senior independent director of SAB Miller plc since July 2013 and December 2013 respectively, non-executive director and chairman of the audit committee of Royal Dutch Shell plc since 2010 and 2011 respectively, a member of the Takeover Panel since 2012, non-executive director and senior independent director of Cadbury plc from 2007 and 2008 respectively until 2010.

Company secretaries

Eleanor Evans

LLB (Lond), age 47

Skills and experience: Eleanor joined the Group as company secretary of Rio Tinto plc and joint company secretary of Rio Tinto Limited in June 2013. Prior to joining Rio Tinto, Eleanor was general counsel and company secretary at AMEC plc and chief legal officer and company secretary at Cobham plc. In both roles Eleanor was responsible for legal, compliance and secretariat matters globally, was a member of the executive committee and the risk committee, and was secretary to the board of directors and their principal committees. Eleanor commenced her career as a solicitor specialising in corporate and financial law with Norton Rose Fulbright and in her earlier career held senior legal roles at The BOC Group plc and Corus Group plc.

External appointments (current and recent): Eleanor is a member of the executive committee of GC100, the Association of General Counsel and Company Secretaries of the FTSE 100, and is a trustee of the StepChange Foundation UK, a charity.

Tim Paine

BEc, LLB, age 50

Skills and experience: Tim joined the Group as joint company secretary of Rio Tinto Limited in December 2012. He has over 20 years’ experience in corporate counsel and company secretary roles, including at ANZ Bank, Mayne Group, Symbion Health and Skilled Group. Tim commenced his career as a solicitor in private practice and has also managed his own consulting company.

External appointments (current and recent): He has no external appointments.










Table of Contents

Executive committee


Hugo Bague

MA (Linguistics), age 53

Hugo Bague was appointed Group executive, Organisational Resources in 2013 after joining Rio Tinto as global head of Human Resources in 2007. Previously he worked for Hewlett-Packard where he was the global vice president, Human Resources for the Technology Solutions Group, based in the US. Prior to this he worked for Compaq Computers, Nortel Networks and Abbott Laboratories based in Switzerland, France and Germany.

He has been a non-executive director and member of the nominating and governance committee, and the compensation committee of Jones Lang LaSalle Incorporated, a global real estate services firm, since 2011.

Jacynthe Côté

BChem, age 55

Jacynthe became chief executive, Rio Tinto Alcan in 2009. She joined Alcan in 1988 and has significant operational and international experience in the aluminium industry. She was president and chief executive officer, Primary Metal, Rio Tinto Alcan, where she was responsible for all primary metal facilities and power generation installations worldwide. Her previous roles in Alcan include president and chief executive officer, Bauxite & Alumina business unit and senior management roles in business planning, human resources and environment, health and safety. Jacynthe has a degree in chemistry from Laval University in Québec and was awarded an honorary doctorate from Université du Québec à Chicoutimi in 2011.

Jacynthe has been a member of the Advisory Board of the Montreal Neurological Institute since 2010, member of the Hautes Études Commerciales Board since 2009, member of the Canadian Council of Chief Executives since 2009, and a member of the International Aluminium Institute since 2009.

Alan Davies

BBus (Acctcy) LLB, LLM, FCA, age 43

Alan was appointed chief executive, Diamonds & Minerals in 2012. He joined the Group in 1997 and has held management positions in Australia, London and the US for the Iron Ore and Energy businesses. Prior to his current role, Alan was president, international operations for Rio Tinto’s Iron Ore business with global accountability for operations and projects in Canada, India and Guinea. Alan is a Fellow of the Institute of Chartered Accountants in Australia.

He was a director of the Art Gallery of Western Australia from 2010 to 2011.

Andrew Harding

BEng (Mining Engineering), MBA, age 47

Andrew Harding was appointed chief executive, Iron Ore in February 2013. Prior to his current role, Andrew spent three years as chief executive, Copper, where he was responsible for a range of mines and projects including the development of the world-class Oyu Tolgoi copper-gold mine in Mongolia. Andrew joined Rio Tinto in 1992 and spent seven years in Rio Tinto Iron Ore. He has also held a range of positions in Technology & Innovation, Energy and Aluminium and was president and chief executive officer of Kennecott Utah Copper.

He was a director of Turquoise Hill Resources Ltd between 2009 and 2010 and between 2011 and February 2013.

Jean-Sébastien Jacques

MSc, age 42

Jean-Sébastien was appointed chief executive, Copper in February 2013. He joined Rio Tinto in 2011 as president, International Operations – Copper, where he led a senior team and oversaw Rio Tinto’s interests in the Palabora Mining Company in South Africa, Northparkes Mines in Australia, Kennecott Eagle Minerals, the Pebble Mine in the US and Sulawesi in Indonesia. Prior to joining Rio Tinto, Jean-Sébastien spent more than 15 years working across Europe, South East Asia, India and the US in operational and strategy roles in the aluminium, bauxite and steel industries. He served as group director, Strategy and was on the executive committee at Tata Steel Group from 2007 to 2011.

Jean-Sébastien was appointed vice chairman of the International Copper Association in October 2013. He was a director of Turquoise Hill Resources Ltd from February to September 2013, a director of Bougainville Copper Limited from 2012 until April 2013, and a director of Palabora Mining Company Limited from 2011 until July 2013.

Harry Kenyon-Slaney

BSc (Hons) (Geology), age 53

Harry was appointed chief executive, Energy in 2012. He joined the Group in 1990 from Anglo American Corporation and has held management positions in South Africa, Australia and the UK. Harry spent his early career at Rio Tinto in marketing and operational roles in the uranium, copper and industrial minerals businesses. In 2004, he was appointed chief executive of Energy Resources of Australia and in 2007, managing director of Rio Tinto Iron & Titanium. Prior to his current role, he was chief executive of Rio Tinto’s Diamonds & Minerals product group.

Harry has been a director of the World Coal Association since 2012 and became a director of the Coal industry Advisory Board to the IEA in March 2013.

Greg Lilleyman

BEng (Construction), age 47

Greg was appointed Group executive, Technology & Innovation in January 2014. He joined the Group in 1990 and held a number of operational roles across the Pilbara, Hunter Valley and Canada with both the Iron Ore and Energy businesses. In 2011 Greg was appointed president, Pilbara Operations for Rio Tinto Iron Ore and in August 2013 assumed the role of head of productivity improvement with Technology & Innovation.

Greg was a board member of the Australian Institute of Management of Western Australia between 2012 and May 2013, a board member of the Energy & Minerals Institute between 2011 and May 2013, and a director of the Chamber of Minerals and Energy of Western Australia between 2008 and May 2013, holding the position of president between 2011 and May 2013. Since 2012 he has been a board member of the Curtin University Foundation.

Debra Valentine

BA (History), JD, age 60

Debra was appointed Group executive, Legal, External & Regulatory Affairs in 2009 having joined Rio Tinto as global head of Legal in 2008. She previously worked at United Technologies Corporation in the US where she was vice president, deputy general counsel and corporate secretary. Before then, she was a partner with the law firm O’Melveny & Myers, in Washington D.C. Debra served as general counsel at the US Federal Trade Commission from 1997 to 2001.

She has been a member of the US-based Council on Foreign Relations since 1993, and the American Law Institute since 1991. She is on the board of the Extractive Industries Transparency Initiative and the North America Advisory Council at Chatham House.

Executive director members

Sam Walsh and Chris Lynch were also members of the Executive Committee in 2013 through their positions as chief executive and chief financial officer respectively. Guy Elliott was a member through his position as chief financial officer until April 2013. Tom Albanese was a member through his position as chief executive until January 2013. Their biographies are shown on pages 53 and 55.







Table of Contents

Corporate governance


Rio Tinto takes a unified approach to corporate governance to comply with the regulatory obligations associated with its three principal stock exchange listings in the UK, Australia and the US.

Statement of compliance with governance codes and standards in 2013

In compiling this report, the directors have referred to the September 2012 edition of the UK Corporate Governance Code (the Code), the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (2nd edition with 2010 amendments) (the ASX Principles), and the New York Stock Exchange (NYSE) Corporate Governance Standards (the NYSE Standards).

Throughout 2013, and at the date of this report, the Group applied the principles of, and was compliant with the provisions of, the ASX Principles and with the Code.

Rio Tinto plc, as a foreign issuer with American Depositary Shares listed on the NYSE, is obliged by the NYSE Standards to disclose any significant ways in which its practices of corporate governance differ from the NYSE Standards.

The Company has reviewed the NYSE Standards and believes that its practices are broadly consistent with them, with the following exceptions where the strict requirements of the NYSE Standards are not met.

The NYSE Standards state that companies must have a nominating/corporate governance committee composed entirely of independent directors which, in addition to identifying individuals qualified to become board members, develops and recommends to the board a set of corporate governance principles applicable to the company. Rio Tinto has a Nominations Committee, information about which is set out on page 63. This committee does not develop corporate governance principles for the board’s approval. The board itself performs this task.

Under US securities law and the NYSE Standards, the company is required to have an audit committee that is directly responsible for the appointment, compensation, retention and oversight of the work of external auditors. While the Rio Tinto Audit Committee makes recommendations to the board on these matters, the ultimate responsibility for the appointment of the external auditors rests with the shareholders.

A discussion of the Group’s position on audit tenders is set out on page 62 of this report.

Further information about the corporate governance framework is available in the “Corporate governance” section of Rio Tinto’s website.

The board

Rio Tinto plc and Rio Tinto Limited have a common board of directors. The directors are responsible for the success of the Group and, through the independent oversight of management, are accountable to shareholders for the performance of the business.

Role and responsibilities

The principal role of the board is to set the Group’s strategy and to review regularly its strategic direction. In doing this, the board also has responsibility for corporate governance.

A formal schedule of matters reserved by the board has been established by the directors. This covers areas such as the Group’s strategy, major investments, acquisitions and divestments and oversight of risk. It is available on the website.

Responsibility for day-to-day management of the business is delegated to the chief executive and the Executive Committee. In turn, authorities are also delegated to individual members of the Executive Committee.

As part of the annual financial planning process, the board sets annual performance targets, which include personal and business performance measures, under the Group’s short-term incentive plan (detailed on page 81) for the chief executive. These performance targets are determined by the Remuneration Committee on behalf of the board. The chief executive establishes targets for the Executive Committee. Those objectives are cascaded throughout management teams.

Further details of the performance evaluation of the executive directors and other senior executives are discussed in the Implementation Report section of the Remuneration Report on page 80.

Board balance and independence

Board composition

The names, skills and experience of each director together with their terms in office are shown in the biographical details on pages 53 to 54. Details of changes to the board during 2013 and in the year to date are set out in the Directors’ report on page 44.

Director independence

The tests of independence of a non-executive director vary between the jurisdictions where Rio Tinto has listings. The board has adopted a formal policy for the determination of the independence of its non-executive directors which is available on the Group’s website.

Among the key criteria of the independence policy are independence from management and the absence of any business relationship which could materially interfere with the director’s independence of judgment and ability to provide a strong, valuable contribution to the board’s deliberations, or which could interfere with the director’s ability to act in the best interests of the Group. Where contracts in the ordinary course of business exist between Rio Tinto and a company in which a director has declared an interest, these are reviewed for materiality both to the Group, and the other party to the contract. “Material” is defined in the policy as being where the relationship accounts for more than two per cent of either party’s consolidated gross revenue per annum, although the test also takes other circumstances into account. The Code includes criteria to assess independence where a director has served on the board for more than nine years from the date of their first election.

The chairman was considered independent upon his appointment under the Code, and in the board’s view he continues to satisfy the tests for independence under the ASX Principles and the NYSE Standards.

Applying the criteria of the independence policy, the board is satisfied that all of its non-executive directors are and remain independent.










Table of Contents

Corporate governance continued


Lord Kerr, Richard Goodmanson and Vivienne Cox have been non-executive directors since 2003, 2004 and 2005 respectively. Lord Kerr and Richard Goodmanson have both agreed to stand for re-election to the boards at the annual general meetings in 2014. The board considers that Lord Kerr and Richard Goodmanson will provide continuity to the board, given their significant knowledge of the business and has confirmed that they both continue to satisfy the tests for independence in carrying out their respective roles. Vivienne Cox is not seeking re-election at the annual general meetings.

Executive directors’ other directorships

Executive directors may be invited to become non-executive directors of other companies. The Nominations Committee, on behalf of the board, operates a procedure under which approval may be given to accept such invitations, recognising the benefit to be derived to the individual and to Rio Tinto from such appointments.

Election and re-election

The directors may appoint additional members to join the board during the year. Directors appointed in this way will be subject to election by shareholders at the first annual general meetings after their appointment. In subsequent years, the directors are expected to submit themselves for re-election at the annual general meetings each year.

Non-executive directors are normally expected to serve at least six years and would not normally serve more than nine years.

Lord Kerr and Richard Goodmanson have been non-executive directors since 2003 and 2004 respectively, and have therefore already served for ten and nine years respectively. For the reasons noted above, both offer themselves for re-election in 2014.

On 5 March 2014, Rio Tinto announced the appointments of Anne Lauvergeon and Simon Thompson effective 15 March and 1 April respectively. Both will offer themselves for election at the annual general meetings in 2014 and further details about them are set out in the notices of annual general meetings.

Governance processes

In 2013, there were nine scheduled board meetings and two board meetings convened and held at short notice. Details of the directors’ attendance at all of the board and committee meetings held in 2013 are set out on the following page.

The board has regular discussions with senior management on the Group’s strategy. These discussions typically include presentations given by senior management during the year. The board attends an annual two-day strategy meeting with the Executive Committee, which includes broader, detailed review sessions on the Group’s strategic direction. The outputs from this event help underpin the board’s annual financial planning exercise and provide strategic direction and focus to the Executive Committee.

Directors receive timely, regular and appropriate information to enable them to fulfil their duties. They also have direct access to the advice and services of the company secretary

of Rio Tinto plc and the joint company secretaries of Rio Tinto Limited. The directors are also able to obtain independent professional advice at the Group’s expense.

The chairman and non-executive directors meet, at the start of each board meeting, without the executive directors, to create an opportunity for non-executive directors to raise any issues in private session.

In addition, the directors are in regular informal communication with members of the Executive Committee and other members of senior management. This helps to foster an open and regular exchange of knowledge and experience.

All new non-executive directors undertake a full, formal and tailored induction on joining the board. The board is provided with training and development opportunities during the year. The directors are also encouraged to participate in site visits to the Group’s operations around the world and to meet with employees and, from time to time, shareholders and other key stakeholders. In 2013, the board visited our copper mine in Utah, US and our iron ore operations in the Pilbara, Western Australia. These events are arranged by the company secretary on behalf of the chairman, and seek to ensure directors have appropriate knowledge of the company and access to its operations and staff.

Progress against our priorities

The progress made towards achieving the priorities set by the board during 2013 are set out on page 8.

Annual performance evaluation

An annual exercise is undertaken to evaluate the effectiveness of the board, board committees and individual directors.

For 2013, the board and committee (audit, nominations, remuneration and sustainability) evaluation process was conducted by the company secretary of Rio Tinto plc.

The process involved a review of the findings of the externally-facilitated 2012 evaluations of the board and its committees and interviews conducted with directors seeking their views with regard to progress on the actions arising and generally upon the performance of the board and its committees in 2013.

The findings from the evaluation reports for the board and its committees were discussed with the chairman and the chairmen of the committees ahead of a full review at the February 2014 meetings of the board and its committees.

Actions for 2014 were agreed at those meetings.

The non-executive directors, led by the senior independent director, were responsible for the performance evaluation of the chairman. Non-executive directors met to give their views and the senior independent director also sought the views of the executive directors. The senior independent director gave feedback on the chairman’s performance to him in January.

The chairman continues to be responsible for the assessment of each individual director’s performance and contribution.







Table of Contents

Directors’ membership of, and attendance at, board and committee meetings during 2013











short notice

































Jan du Plessis

     9/9         2/2                 8/8                 8/8         18/18   

Tom Albanese (a)


Guy Elliott (b)

     9/9         2/2                                         6/7   

Chris Lynch (c)

     9/9         2/2         2/2                         1/1         13/14   

Sam Walsh (d)

     9/9         2/2                                         18/18   

Robert Brown

     8/9         2/2                         5/5         8/8           

Vivienne Cox

     8/9         2/2                         5/5         7/8           

Michael Fitzpatrick

     9/9         2/2         7/7         7/8 (f)               8/8           

Ann Godbehere

     9/9         2/2         7/7                         8/8           

Richard Goodmanson

     9/9         2/2                 8/8         5/5         8/8           

Lord Kerr

     9/9         2/2         3/3                 5/5         8/8           

Paul Tellier

     8/9         2/2         7/7         8/8                 8/8           

John Varley

     9/9         2/2         4/4         8/8                 8/8           


(a) Stood down from the board on 17 January 2013.


(b) Resigned from Chairman’s Committee with effect from 18 April 2013 and retired from the board with effect from 31 December 2013.


(c) Appointed chief financial officer-designate on 1 March 2013, at which time Chris Lynch resigned from the Audit Committee and joined the Chairman’s Committee.


(d) Appointed chief executive on 17 January 2013.


(e) Number of meetings attended/maximum the director could have attended.


(f) The meeting missed was called on short notice for 15 January 2013.









Table of Contents

Corporate governance continued

Governance structure

The board has established sub-committees which are responsible for audit, remuneration, sustainability and nominations issues. In addition, a Chairman’s Committee operates under delegated authority between scheduled board meetings. These committees support the board in ensuring that high standards of corporate governance are maintained across the Group.

The committees are governed by terms of reference, set and approved by the board, which are reviewed annually. The terms of reference of the audit, nominations, remuneration and sustainability committees (revised versions of which were issued in February 2014) can be viewed in the “Corporate governance” section of the website.

The chief executive is assisted by the key management committees noted below in monitoring performance and delivering Rio Tinto’s strategy.









Table of Contents


Board committees

Audit Committee

Members of the Committee are Ann Godbehere (chairman), Michael Fitzpatrick, Paul Tellier and John Varley. Chris Lynch was appointed to the Committee on 1 June 2012 and stood down upon his appointment as chief financial officer-designate on 1 March 2013. Lord Kerr stood down from the Committee at the conclusion of its meeting on 4 March 2013. John Varley was appointed to the Committee on 19 March 2013.

Key responsibilities

The objective of the Audit Committee is to assist the board to monitor decisions and processes designed to ensure the integrity of financial reporting, sound systems of internal control and risk management.

The Committee’s terms of reference set out its main responsibilities. The Committee is responsible for:


Financial reporting;


Internal control, including internal control over financial reporting;


Group Audit & Assurance (including internal audit);


External auditors;


Risk management system effectiveness;


The integrity and compliance programme including the Group’s Speak–OUT whistleblowing programme.

In carrying out its responsibilities, the Committee has full authority to investigate all matters that fall within its terms of reference. Accordingly, the Committee may:


obtain independent professional advice in the satisfaction of its duties at the cost of the Group; and


have direct access to the resources of the Group as it may reasonably require including the external and internal auditors.

Financial reporting

During 2013 the Committee considered, among others, the following matters which it considered to be significant in relation to the 2013 financial statements:


Impairments in the 2012 accounts and continued monitoring of management’s determination of cash-generating units, review of impairment triggers and consideration of potential impairment charges and reversals over the course of the year.


Management’s key accounting judgments and policies, and the application of these in the accounts, including:


  the adoption of new and revised accounting standards (including IFRIC 20, IFRS 10, IFRS 11 and IAS 19R) that became effective in 2013 and required prior period restatements; and


  accounting for the slide at the Bingham Canyon copper mine.

To date in 2014 the Committee has considered, among others, the following matters which it considered to be significant in relation to the 2013 financial statements:


Impairments in the 2013 accounts.


Management’s key accounting judgments and policies, and the application of these in the accounts, including:


  reviewing the justifications for exclusion of certain items from underlying earnings;


  reviewing the impact of new standards (including IFRS 12 and IFRS 13) which have required additional disclosure in these financial statements;


  reviewing the Group’s tax exposure and the appropriateness of provisions for uncertain tax positions; and


  reviewing the accounting treatment of the significant divestments announced in 2013, including contractual obligations for product sales and funding of closure activities which remain with the Group following completion of the divestments.

Key judgments considered

In preparing the financial statements, a number of subjective judgments and estimates are required involving assumptions and consideration of future events that are inherently uncertain. The Committee focused its work on assessing management’s ongoing judgments and estimates against available evidence, and evaluating the disclosures in the financial statements. The Committee also considered the external auditors’ views on these matters.

Of the judgments and key sources of estimation uncertainty listed as critical accounting policies and estimates in note 1 to the financial statements, the following areas received specific focus from the Committee over the year:


Impairment review of asset carrying values


  The Committee focused on the assessment of the carrying value and annual impairment reviews of goodwill (Rio Tinto Alcan, Rio Tinto Coal Mozambique and Oyu Tolgoi), indefinite lived intangible assets (Rio Tinto Alcan) and property, plant & equipment (particularly Rio Tinto Alcan, Rio Tinto Coal Mozambique and Oyu Tolgoi) because they involve complex judgments about the expected future performance of the business.


  The assumptions on discount rate, long-term pricing, risk factors for future growth projects amongst others were considered and challenged.


  For Rio Tinto Alcan, and in addition to the testing of individual cash generating units the Committee considered the combined carrying value of the product group and how it had been assessed against external market data, including comparables and broker reports.


  Infrastructure assumptions were a key consideration for the Rio Tinto Coal Mozambique impairment testing and the Committee considered these closely.


  For Oyu Tolgoi, the timing of the underground development was an important factor in determining impairment, and the Committee reviewed and challenged the likely timing in light of the progress of discussions with the Government of Mongolia.


Close-down, restoration and environmental obligations


  The Committee focused on the estimates of risk free discount rates in light of the ongoing impact of fiscal interventions. It also focused on the probability weighting, where appropriate, of the different remediation or closure outcomes which could realistically arise when assessing the adequacy of the provisioning for these obligations. Both involve complex judgments.


Recoverability of potential deferred tax assets


  The Committee focused on the appropriateness of continued recognition of deferred tax assets, particularly those related the Mineral Resources Rent Tax starting base allowance in Australia and tax losses in France, recovery of which are restricted by legislation

In addition, the Committee critically assessed the future projections of cash flow under different future scenarios and compared this to cash balances and committed facilities available so the Committee could recommend to the board that the adoption by the Group of the going concern basis of preparation was appropriate.

Governance processes

The Committee met seven times in 2013. The chairman of the board, chief financial officer, other senior management and external and internal auditors regularly attended its meetings. The Committee carries out its business following an agreed annual cycle of meetings and topics for consideration.

The members of the Committee are independent and free of any relationship that would affect their impartiality in carrying out their responsibilities. The members meet the independence requirements of the Code, the ASX Principles and the NYSE Standards. The Committee meets the composition, operation and responsibility requirements of the ASX Principles.

The Committee is also bound by SEC requirements for audit committees’ financial experts and the Code and ASX Principles requirement that at least one committee member should have recent and relevant financial qualifications and










Table of Contents

Corporate governance continued


experience. Ann Godbehere, chairman of the Committee, is considered by the board to have recent and relevant financial experience, and financial qualifications, and has been designated the Committee’s financial expert. All other members of the Committee are, in the opinion of the Committee, deemed to be financially literate by virtue of their business experience.

The Committee applies policies for the pre-approval of permitted services provided by the Group’s external auditors PwC. All of the engagements for services provided by PwC were either within the pre-approval policies or approved by the Committee. The Committee members are satisfied that the provision of non-audit services by PwC in accordance with this procedure is compatible with the general standard of independence for auditors imposed by relevant regulations, including Australian, UK and US legislation.

The Committee considered reports from PwC and Group Audit & Assurance on the activities undertaken in reviewing and auditing the control environment in order to assess the quality and effectiveness of the internal control system. This included an evaluation of the effectiveness of the Group’s internal controls over financial reporting and the Group’s disclosure controls and procedures in accordance with sections 4