Company: RTNTF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001628280-25-006642
Chunk: 371

Company: RIO TINTO LTD
Filing Date: 2025-02-20
Form: 20-F
Chunk 371
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 the US Midwest Transaction Premium (Midwest premium). In accordance with IFRS 9, we apply hedge accounting to 2 embedded derivatives within our power contracts. The embedded derivatives

(nominal aluminium forward sales) have been designated as the hedging instrument. The forecast aluminium sales, priced using the LME price

and the Midwest premium, represent the hedged item.

The hedging ratio is 1:1, as the quantity of sales designated as being hedged matches the notional amount of the hedging instrument. The

hedging instrument’s nominal amount, expressed in equivalent metric tonnes of aluminium, is derived from our expected electricity consumption

under the power contracts as well as other relevant contract parameters.

When we designate such embedded derivatives as the hedging instrument in a cash flow hedge, we recognise the effective portion of the

change in the fair value of the hedging instrument in other comprehensive income, and it is accumulated in the cash flow hedge reserve. The

amount that is recognised in other comprehensive income is limited to the lesser of the cumulative change in the fair value of the hedging

instrument and the cumulative change in the fair value of the hedged item, in absolute terms. On realisation of the hedges, realised amounts are

reclassified from reserves to consolidated sales revenue in the income statement.

We recognise any ineffectiveness relating to the hedging relationship immediately in the income statement.

Sources of ineffectiveness include differences in the timing of the cash flows between the hedged item and the hedging instrument, non-zero

initial fair value of the hedging instrument, the existence of a cap on the Midwest premium in the hedging instrument and counterparty credit risk.

We held the following nominal aluminium forward sales contracts embedded in the power contracts as at 31 December:

|                                     |          2024 |                      |                       |         |          2023 |                      |                       |         |
|                                     | Within 1 year | Between 1and 5 years | Between 5and 10 years |   Total | Within 1 year | Between 1and 5 years | Between 5and 10 years |   Total |
| Nominal amount (tonnes)             |        73,117 |              286,455 | —                     | 359,572 |        72,617 |              289,801 |                66,268 | 428,686 |
| Nominal amount (US$ millions)       |           174 |                  716 | —