Document ID: SEC-2011-2014-0001
Agency: sec
Document Type: Notice
Title: Applications: Rio Tinto PLC and Rio Tinto Ltd
Posted Date: 2011-12-23T05:00Z

[Federal Register Volume 76, Number 247 (Friday, December 23, 2011)]
[Notices]
[Pages 80430-80433]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32922]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29889; 812-13777]

Rio Tinto plc and Rio Tinto Limited; Notice of Application

December 19, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 3(b)(2) and 45(a) of the 
Investment Company Act of 1940 (the ``Act'').

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SUMMARY: Summary of Application: Rio Tinto plc (``RTP'') and Rio Tinto 
Limited (``RTL'', together with RTP, ``Rio Tinto'' or the ``Group'') 
seek an order under section 3(b)(2) of the Act declaring Rio Tinto to 
be primarily engaged in a business other than that of investing, 
reinvesting, owning, holding or trading in securities. Rio Tinto is a 
leading international mining group. Applicants also seek an order under 
section 45(a) of the Act granting confidential treatment with respect 
to certain financial and other information.
    Filing Date: The application was filed on May 27, 2010, and amended 
on December 16, 2010, and July 1, 2011.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on January 13, 2012, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090. Applicants, RTP, 2 Eastbourne Terrace, 
London W2 6LG, United Kingdom and RTL, ABN 96 004 458 404, Level 33, 
120 Collins Street, Melbourne, Victoria 3000, Australia.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
calling (202) 551-8090.

Applicants' Representations

    1. Rio Tinto is an international business involved in each stage of 
metal and mineral production including finding, developing, mining and 
processing natural resources such as aluminium, copper, coal, iron ore, 
uranium, gold and industrial minerals. Rio Tinto is a dual-listed 
company (``DLC'') comprised of two distinct, commonly controlled 
corporate entities, RTP and RTL, which operate pursuant to a DLC 
Sharing Agreement (the ``Sharing Agreement'').\1\ RTP is a foreign

[[Page 80431]]

private issuer organized under the laws of England and Wales with 
ordinary shares listed on the London Stock Exchange and Euronext and 
American Depositary Receipts (``ADRs'') traded on the New York Stock 
Exchange. RTP's ordinary shares and ADRs are registered under section 
12 of the Securities Exchange Act of 1934 (``Exchange Act''). RTL is a 
foreign private issuer organized under the laws of Australia with 
shares listed on the Australian Securities Exchange and traded on the 
over-the-counter market in the United States. RTL's shares are also 
registered under section 12 of the Exchange Act; it has no ADRs issued 
or outstanding. RTP historically held a controlling interest in RTL but 
no longer beneficially owns (directly or indirectly) any shares of RTL.
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    \1\ Applicants identify the following key principles of the DLC 
structure: (a) RTP and RTL are each required to have a ``special 
voting share'' that enables shareholders of both RTP and RTL to vote 
on key decisions on a joint basis; (b) dividends and capital returns 
are equalized via a ``DLC Dividend Share'' so that shareholders of 
each company are effectively in the same economic position as if 
they held shares in a single enterprise; (c) each of RTP and RTL has 
a separate but common board of directors, and the directors are 
authorized to do anything necessary or desirable to maintain the DLC 
structure; (d) each of RTP and RTL is subject to local laws and 
listing obligations; (e) for the protection of creditors, RTP and 
RTL have each executed a deed poll guarantee pursuant to which they 
each guarantee certain contractual obligations of the other; and (f) 
there are protections in the constituent documents of each of RTP 
and RTL with respect to potential ``change of control'' events so 
that a person could not take over or gain control of one company 
without also making an offer for the other company.
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    2. Although RTP and RTL are two distinct corporate entities with 
separately traded securities, applicants state that pursuant to the 
Sharing Agreement, each company is required to operate, as far as 
possible, as if the two companies and their respective subsidiaries 
were a single enterprise, and holders of RTP and RTL shares have shared 
rights between them. Applicants state that the DLC structure places the 
shareholders of both companies in substantially the same position as if 
they held shares in a single enterprise owning the assets of both 
companies. The practical effect of the DLC structure has been 
recognized by Rio Tinto's primary regulators. RTP and RTL file with the 
Commission a combined Annual Report on Form 20-F with combined 
financial statements which treat RTP and RTL as a single group.
    3. Applicants state that out of an abundance of caution and a 
concern that RTP, RTL and/or Rio Tinto could be classified as an 
``investment company'' under section 3(a)(1)(C) of the Act, Rio Tinto 
has viewed certain transfers of cash between RTP and RTL as creating 
``intra-group receivables'' which are treated as either ``investment 
securities'' on the balance sheet of the subsidiary distributing the 
cash or as ``investment income''; this is despite the fact that the 
cash being distributed is derived from Rio Tinto's operations and 
absent the DLC structure would not raise concerns under the Act. 
Applicants further state that Rio Tinto currently actively monitors the 
movement of funds between subsidiaries in order to maintain RTP's and 
RTL's status under the Act and that such treatment is limiting Rio 
Tinto's ability to fund its operating activities in a tax- or capital-
efficient manner. Applicants state that in order to adequately fund Rio 
Tinto's operations and successfully compete in the mining industry, Rio 
Tinto needs the financial flexibility to freely move funds between 
subsidiaries in the DLC structure and to quickly capitalize on new 
opportunities as they arise. Although each of Rio Tinto, RTP and RTL 
believes it is excepted from the definition of ``investment company'' 
in section 3(a) of the Act by virtue of section 3(b)(1), each is 
seeking to reduce any uncertainty about its respective status by having 
RTP and RTL seek an order of the Commission pursuant to section 3(b)(2) 
of the Act.

Applicants' Legal Analysis

    1. Section 3(a)(1)(A) of the Act defines the term ``investment 
company'' to include an issuer that is or holds itself out as being 
engaged primarily, or proposes to engage primarily, in the business of 
investing, reinvesting or trading in securities. Applicants state that 
Rio Tinto has not and does not hold itself out as being engaged 
primarily, or propose to engage primarily, in the business of 
investing, reinvesting or trading in securities within the meaning of 
section 3(a)(1)(A) of the Act.
    2. Under section 3(a)(1)(C) of the Act, an issuer is an investment 
company if it is engaged or proposes to engage in the business of 
investing, reinvesting, owning, holding, or trading in securities, and 
owns or proposes to acquire investment securities having a value in 
excess of 40 percent of the value of the issuer's total assets 
(exclusive of Government securities and cash items) on an 
unconsolidated basis (``asset test'').\2\ Section 3(a)(2) of the Act 
defines ``investment securities'' to include all securities except 
Government securities, securities issued by employees' securities 
companies, and securities issued by majority-owned subsidiaries of the 
owner which (a) are not investment companies, and (b) are not relying 
on the exclusions from the definition of investment company in section 
3(c)(1) or 3(c)(7) of the Act. Applicants state that as of December 31, 
2010, the percentage of RTP's total assets on an unconsolidated basis 
(exclusive of Government securities and cash items) which were 
``investment securities'' as defined in section 3(a)(2) of the Act was 
approximately 9.1% and the percentage of RTL's total assets (exclusive 
of Government securities and cash items) which were ``investment 
securities'' was approximately 29.2%. Applicants further state that 
assuming RTP and RTL are treated as a single company for the purposes 
of testing under the Act, as of December 31, 2010, the percentage of 
Rio Tinto's total assets (exclusive of Government securities and cash 
items) which were ``investment securities'' on an unconsolidated basis 
was 1.7%. However, applicants state that if Rio Tinto were to continue 
to transfer funds among the Group in a tax- and capital efficient 
manner, and were to continue to treat intra-group receivables arising 
from such transfers as ``investment securities'', then either RTP or 
RTL (and, in effect, Rio Tinto) could run a significant risk of being 
deemed an ``investment company'' under the ``asset test.''
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    \2\ ``Government securities'' are defined under section 2(a)(16) 
of the Act as any securities issued or guaranteed as to principal or 
interest by the United States, or by a person controlled or 
supervised by and acting as an instrumentality of the United States 
pursuant to the authority granted by the Congress of the united 
States, or any certificate of deposit for any of the foregoing.
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    3. Rule 3a-1 under the Act provides an exemption from the 
definition of investment company if no more than 45% of a company's 
total assets consist of, and not more than 45% of its net income over 
the last four quarters is derived from, securities other than 
Government securities, securities of majority-owned subsidiaries and 
primarily controlled companies (``income test''). These percentages are 
determined on a consolidated basis with the company's wholly-owned 
subsidiaries. Applicants state that as of December 31, 2010, the 
percentage of total assets (exclusive of Government securities and cash 
items) which were ``investment securities'' for RTP and RTL was 10.3% 
and 24.3% of their total assets, respectively, and the total income 
derived from such ``investment securities'' (``investment income'') for 
RTP and RTL was 35.5% and 6% of their total income, respectively, as 
calculated pursuant to rule 3a-1. However, RTP no longer beneficially 
owns (directly or indirectly) any shares of RTL, and therefore there is 
no longer a presumption of ``control'' under section 2(a)(9) of the Act 
so distributing funds efficiently within the Group could result in a 
breach of the ``income test.''
    4. Section 3(b)(2) of the Act provides that, notwithstanding 
section 3(a)(1)(C) of the Act, the Commission may issue an order 
declaring an issuer to be primarily engaged in a business or businesses 
other than that of investing, reinvesting, owning, holding, or trading 
in securities either directly or through majority-owned subsidiaries or 
through controlled companies conducting

[[Page 80432]]

similar types of businesses. Rio Tinto requests an order under section 
3(b)(2) of the Act declaring that it is primarily engaged in a business 
other than that of investing, reinvesting, owning, holding or trading 
in securities, and therefore not an investment company as defined in 
the Act.
    5. In determining whether a company is primarily engaged in a non-
investment company business under section 3(b)(2), the Commission 
considers: (a) The issuer's historical development; (b) its public 
representations of policy; (c) the activities of its officers and 
directors; (d) the nature of its present assets; and (e) the sources of 
its present income.\3\
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    \3\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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    a. Historical Development. Rio Tinto's predecessor companies, the 
Rio Tinto Company and The Consolidated Zinc Corporation, were formed in 
1873 and 1905, respectively, to mine ancient copper workings and to 
treat zinc bearing mine waste. The RTZ Corporation (``RTZ'') was formed 
in 1962 by a merger of The Rio Tinto Company and the Consolidated Zinc 
Corporation. At the same time, CRA Limited (``CRA'') was formed by a 
merger of the Australian interests of The Rio Tinto Company and The 
Consolidated Zinc Corporation. Between 1962 and 1995, both RTZ and CRA 
discovered important mineral deposits, developed major mining projects 
and also grew through acquisitions. RTZ and CRA were unified in 1995 
through the DLC structure; RTZ became RTP and CRA became RTL, together 
known as Rio Tinto. Historically, the vast majority of the revenues of 
Rio Tinto's predecessor companies have come from their mining and 
natural resource processing operations.
    b. Public Representations of Policy. Rio Tinto states that it has 
never represented that it is involved in any business other than the 
finding, developing, mining and processing of the earth's mineral 
resources. Rio Tinto asserts that it has consistently stated in its 
annual reports, press releases, filings with the Commission, marketing 
materials and Web site, that it is a diversified mining and exploration 
company. Rio Tinto states that it generally does not make public 
representations regarding its investment securities except as required 
by its obligation to file periodic reports to comply with federal 
securities laws. Rio Tinto further states that its press releases and 
other written communications have emphasized operations and it has 
never emphasized either its ``investment income'' or the possibility of 
significant appreciation from its cash management investment strategies 
as a material factor in its business or future growth.
    c. Activities of Officers and Directors. Rio Tinto states that its 
executive directors and officers spend substantially all of their time 
directing and managing the diversified mining and related businesses. 
The Chief Financial Officer of Rio Tinto spends approximately 5% or 
less of his time overseeing cash management and investment (or 
``treasury'') activities, and spends the vast majority of his remaining 
time advising the Chief Executive Officer and Rio Tinto's boards on 
strategic initiatives and transactions, overseeing economic analysis 
and forecasting and financial reporting activities, and overseeing Rio 
Tinto's taxation policies and meeting with investors. Apart from the 
Chief Financial Officer, the directors and other officers have little 
involvement in treasury activities. Applicants state that, as of 
December 31, 2010, Rio Tinto employed approximately 77,000 people on a 
global basis, with approximately 73,000 focused on Rio Tinto's 
operations; approximately 3,700 employees are focused on business 
support functions, of which fewer than 50 spend any appreciable amount 
of their time on cash management and treasury policies.
    d. Nature of Assets. Applicants state that Rio Tinto is an 
international mining group, and its assets are mainly goodwill and 
fixed, tangible assets used in its operations. Rio Tinto states that 
the value of its ``investment securities'' (as defined in section 
3(a)(2) of the Act), including intra-group receivables, was 
approximately 1.7% of its total assets (exclusive of Government 
securities and cash items) in accordance with rule 3a-1, and the 
corresponding values for RTP and RTL were 10.3% and 24.3%, 
respectively, when calculated pursuant to rule 3a-1. Excluding intra-
group receivables from the calculations under rule 3a-1, the percentage 
of total assets (exclusive of Government securities and cash items) 
that would be considered ``investment securities'' as of December 31, 
2010, for RTP and RTL would have been 1.6% and 1.1%, respectively.
    e. Sources of Income and Revenue. Applicants state that both RTP 
and RTL currently satisfy the income test under rule 3a-1. For the year 
ended December 31, 2010, Rio Tinto had net income from continuing 
operations of US$15,281 million, of which approximately 1.1% was 
``investment income''. The corresponding values for RTP and RTL were 
35.5% and 6%, respectively. Applicants state that in the future, Rio 
Tinto expects substantially all of its revenues to come from its mining 
and related operations.
    6. RTP and RTL thus assert that Rio Tinto satisfies the standards 
for an order under section 3(b)(2) of the Act.

Section 45(a) of the Act

    1. Section 45(a) of the Act provides that information contained in 
any application filed with the Commission under the Act shall be made 
available to the public, unless the Commission finds that public 
disclosure is neither necessary nor appropriate in the public interest 
or for the protection of investors. Applicants request an order 
pursuant to section 45(a) of the Act granting confidential treatment to 
certain financial and other information set forth in Exhibit D.
    2. Applicants state that Exhibit D contains detailed financial and 
other information that Rio Tinto does not otherwise disclose. 
Applicants state that the application provides a description of the 
nature of Rio Tinto's assets and the sources of its income, and that 
the publicly available financial data and other information in the 
application is sufficient to fully apprise any interested member of the 
public of the basis for the requested relief.
    3. Applicants believe that public disclosure of this information 
about Rio Tinto would cause substantial harm to its competitive and 
negotiating positions as it would provide competitors and financial 
counterparties with insight into the assets, liabilities and income of 
Rio Tinto and its subsidiaries which they would not otherwise have. For 
these reasons, applicants believe that public disclosure of the 
information in Exhibit D is neither necessary nor appropriate in the 
public interest or for the protection of investors.

Applicants' Conditions

    Applicants agree that any order granted pursuant to the application 
will be subject to the following conditions:
    1. Rio Tinto (consisting of RTP and RTL) continues to constitute a 
DLC.
    2. None of RTP, RTL or Rio Tinto will hold itself out as being 
engaged primarily, or propose to engage primarily, in the business of 
investing, reinvesting, or trading in securities.
    3. Rio Tinto (consisting of RTP and RTL) continues to allocate and 
utilize their accumulated cash and investment securities primarily for 
bona-fide business purposes arising out of the finding, developing, 
mining and processing of mineral resources.

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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32922 Filed 12-22-11; 8:45 am]
BILLING CODE 8011-01-P