riotintocomar2014
2014 annual report
delivering sustainable
shareholder returns contents
strategic report
performance highlights 1
group overview 2
chairman’s letter 4
chief executive’s statement 5
strategic context 7
group strategy 8
business model 11
key performance indicators 12
principal risks and uncertainties 14
capital allocation 18
sustainable development 20
independent limited assurance report 27
product groups
aluminium 28
copper 30
diamonds  minerals 32
energy 34
iron ore 36
exploration 38
technology  innovation 39
financial overview 40
five year review 41
directors’ report
directors’ report 44
board of directors 49
executive committee 52
corporate governance 53
remuneration report
annual statement by the remuneration
committee chairman 64
remuneration policy 66
remuneration implementation report 74
financial statements
group income statement 103
group statement of comprehensive income 104
group cash flow statement 105
group balance sheet 106
group statement of changes in equity 107
notes to the 2014 financial statements 110
rio tinto plc company balance sheet 175
rio tinto financial information by business unit 178
australian corporations act – summary of asic relief 183
directors’ declaration 184
auditor’s independence declaration 185
independent auditors’ report 186
financial summary 20052014 192
summary financial data 194
production reserves and operations
metals and minerals production 195
ore reserves 199
mineral resources 204
competent persons 210
mines and production facilities 212
additional information
shareholder information 220
uk listing rules cross reference table 226
financial calendar 227
contact details 228
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 41 pages of rio tinto’s 2014 annual report constitute its 2014 strategic report references to page numbers
beyond 41 are references to pages in the full 2014 annual report this is available online at riotintocomar2014 or
shareholders may obtain a hard copy free of charge by contacting rio tinto’s registrars whose details are set out on
page 228
please visit rio tinto’s website to learn more about the group’s performance in 2014
this annual report which includes the group’s 2014 strategic report complies with australian and uk reporting
requirements
copies of rio tinto’s shareholder documents – the 2014 annual report and 2014 strategic report along with the
2015 notices of annual general meeting – are available to view on the group’s website riotintocom
rio tinto is reducing the print run of this document to be more environmentally
friendly we encourage you to visit riotintocomar2014 to access a full library of
pdfs of this annual report
cautionary statement about forwardlooking statements
this document contains certain forwardlooking statements with respect to the financial condition results of operations
and business of the rio tinto group these statements are forwardlooking 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 forwardlooking statements
examples of forwardlooking 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 forwardlooking
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 forwardlooking 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 forwardlooking statements whether as a result of new information or future events the group cannot
guarantee that its forwardlooking statements will not differ materially from actual results performance highlights
2014 results demonstrate clear delivery against our commitments
in 2014 rio tinto made a commitment to materially increase cash returns to shareholders the group delivered this through a 12 per cent increase in the full year
dividend and announced a us20 billion share buyback these represent a total cash return to shareholders in respect of 2014 of almost us60 billion
during 2014 rio tinto’s continued financial and operating discipline enabled the group to offset much of the impact of lower commodity prices by increasing
volumes and reducing costs rio tinto achieved underlying earnings
a
of us93 billion and maintained the ebitda margin
b
at 39 per cent free cash flow was
assisted by a further reduction in capital expenditure
c
and a successful programme to release working capital as a consequence net debt
d
reduced by
us56 billion to us125 billion
decisive early action taken throughout the group delivered the strong balance sheet enabling the additional material cash return to shareholders
with lower commodity prices and uncertain global economic trends the operating environment remains tough however in these conditions rio tinto’s qualities and
competitive advantages deliver superior value the group’s combination of worldclass assets disciplined capital allocation balance sheet strength operating and
commercial excellence and a culture of safety and integrity gives rio tinto confidence in its ability to continue generating sustainable returns for shareholders
year to 31 december 2014 2013 change
pg 12
underlying earnings us millions
a
9305 10217 9
net earnings us millions
a
6527 3665 78
pg 12
net cash generated from operating activities us millions 14286 15078 5
pg 13
capital expenditure us millions
c
8162 13001 37
underlying earnings per share us cents 5034 5531 9
basic earnings per share us cents 3531 1984 78
ordinary dividends per share us cents 2150 1920 12
at 31 december 2014 2013 change
pg 13
net debt us millions
d
12495 18055 31
gearing ratio
e
19 25 6
the financial results are prepared in accordance with ifrs and are audited
a 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 net and underlying earnings relate to profit attributable to the owners of rio tinto underlying earnings is defined
and reconciled to net earnings on pages 124 and 125
b ebitda margin is defined as group underlying ebitda divided by product group total revenues as per the financial information by business unit on pages 178 and 179 where it is
reconciled to profit on ordinary activities before finance items and taxation
c capital expenditure is presented gross before taking into account any disposals of property plant and equipment
d net debt is defined and reconciled to the balance sheet on page 41
e gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end
revenues and earnings
– achieved consolidated sales revenues of us477 billion as a
us54 billion pretax decline in pricing was partially offset by
us30 billion from higher volumes
– sustained the ebitda margin at 39 per cent unchanged from 2013
with volume gains and cost improvements offsetting the impact of
lower prices
– achieved underlying earnings of us93 billion nine per cent lower than
2013 despite the us41 billion posttax impact of lower prices
– delivered underlying earnings per share of 5034 us cents
– generated net earnings of us65 billion reflecting noncash exchange
rate losses of us19 billion a us04 billion charge following the repeal
of the minerals resource rent tax and other charges of us05 billion an
impairment charge of us12 billion mainly related to the kitimat project
as reported at the half year was mostly offset by an impairment reversal of
us10 billion in the second half of 2014 related to an uplift in carrying
value for the pacific aluminium business
production
– set production records for iron ore and hunter valley thermal coal
and delivered a strong operational performance in bauxite copper
and aluminium
cash flow and balance sheet
– achieved us48 billion of sustainable operating cash cost
improvements and exploration and evaluation savings since 2012 of
which us15 billion were in 2014
– generated net cash from operating activities of us143 billion
including working capital improvements of us15 billion principally
from lower inventories and lower receivables
– reduced capital expenditure by us48 billion to us82 billion in
2014 reflecting completion of existing major projects and continued
capital discipline
– decreased net debt by us56 billion in 2014 to us125 billion at
31 december 2014 with gearing of 186 per cent this compares with
us181 billion and 252 per cent gearing at 31 december 2013
capital returns
– increased full year dividend by 12 per cent to 215 us cents per share
– announced an additional capital return of us20 billion
which comprises a a500 million c us04 billion offmarket share
buyback tender of rio tinto limited shares and the balance of
approximately us16 billion for an onmarket buyback of rio tinto
plc shares
– these represent a total cash return to shareholders in respect of 2014
of almost us60 billion an increase of approximately 64 per cent
on 2013
riotintocom 1
strategic report directors’ report financial statements production reserves
and operations
additional information 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 goal is to deliver strong and
sustainable shareholder returns from our portfolio of worldclass assets and
our compelling pipeline of projects
we take a longterm disciplined approach developing and running longlife
lowcost expandable operations that are capable of delivering value
throughout the cycle supported by our exploration and technology 
innovation groups our five product groups represent a diversity of
commodities that give us exposure to demand across the economic
development spectrum
a

supporting our worldclass assets is a company of worldclass people who are
the foundation of our success this 60000strong workforce across more
than 40 countries pulls together as a powerful team committed to getting the
best out of our operations their safety is always our first concern we also
foster a culture of innovation where our people are proud to achieve and are
always learning
our vision is to be a company that is admired and respected for delivering
superior value as the industry’s most trusted partner our operations give us
the opportunity to create mutual benefit with 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 find out more on
page 11
underpinning everything we do are our values respect integrity teamwork
and accountability they are fundamental to the way we operate and engage
with those around us and form the foundation of a longterm reliable
business that generates sustainable returns for shareholders
aluminium product group
building on more than a century of experience and expertise rio tinto is a
global leader in the aluminium industry our business includes highquality
bauxite mines largescale alumina refineries and some of the world’s lowest
cost most technologicallyadvanced primary aluminium smelters
products
bauxite
bauxite is the natural ore used to make aluminium it is refined into alumina
which is smelted into aluminium metal our wholly and partlyowned bauxite
mines are located in australia brazil and guinea
alumina
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 and
partlyowned alumina refineries are located in australia brazil and canada
aluminium
aluminium is a unique and versatile modern metal light strong flexible
corrosionresistant and infinitely recyclable aluminium is one of the most
widelyused 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 iceland the uk and
oman
strategic advantages
– access to the largest and bestquality bauxite ore reserves in the industry
strategically located to serve growing chinese bauxite demand
– one of the lowestcost bauxite producers
– unrivalled hydropower position which delivers significant cost and
other advantages in an energy intensive industry and today’s carbon
constrained world
– rio tinto has a firstquartile cost position for aluminium smelting with
industryleading smelting technology
key production locations key sales destinations
– canada – asia
–europe – americas
– australia – europe
full operating review on page 28
copper product group
rio tinto’s copper group is made up of four worldclass operating assets and
two attractive development projects we are managing the portfolio to bring
on new production when the market demands it
products
copper
copper is a malleable corrosion resistant antimicrobial metal and a highly
effective conductor of heat and electricity it is an essential component of
nearly all modern electrical systems including renewable energy sources such
as solar wind geothermal and hydroelectric technologies global information
and communication technologies rely on it as do hybrid and electric cars and
hospitals and medical facilities where it is used to prevent the spread of
diseases and infections we produce gold silver and molybdenum as co
products of our copper production
gold
gold is used as a store of value it is also highly conductive malleable and
inert making it a key component in the electronics chemical production
jewellery aerospace and medical industries
silver
silver has applications in art science and industry it is used in many
electronic devices in aerospace applications and semiconductors a precious
metal silver is used to make jewellery and as an investment
molybdenum
molybdenum is a metallic element frequently used to produce stainless steel
and other metal alloys it enhances the metal’s toughness hightemperature
strength and corrosion resistance
strategic advantages
– a portfolio of highquality assets and growth opportunities
– attractive growth options that can be delivered when the market requires
– clear pathway to deliver superior profitability
– industryleading technology and innovation
key production locations key sales destinations
–us – us
– chile – china
– mongolia – japan
full operating review on page 30
a on 27 february 2015 rio tinto announced that it would be streamlining its portfolio of assets into four product groups aluminium copper  coal diamonds  minerals and iron
ore with immediate effect the coal assets of the former energy product group became part of a new copper  coal product group and the uranium assets of the former energy
product group became part of the diamonds  minerals product group in this annual report references to copper diamonds  minerals and energy refer to the product groups
as they existed in 2014
2 riotintocom diamonds  minerals product group
the diamonds  minerals product group comprises a suite of industry
leading demandled 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 highgrade titanium dioxide feedstocks the
diamonds  minerals group also includes the simandou iron ore project in
guinea one of the largest known undeveloped highgrade iron ore resources
in the world
products
diamonds
diamonds are an important component in both affordable and higher
end jewellery we are able to service all 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
borates
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
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 industryleading businesses operating in attractive markets
– demandled integrated operations that are responsive to the changing
external environment
– poised to benefit from mid to latecycle demand growth as consumption
increases in emerging markets
key production locations key sales destinations
– north america – north america
– australia – south east asia
–southafrica –india
full operating review on page 32
energy product group
energy is essential for modern life and the demand for energy continues to
grow rio tinto’s energy product group produced coal and uranium two
important sources of energy from mining the thermal coal and uranium we
produce is used to generate electricity and our uranium is subject to strict
safeguards and nonproliferation conditions to ensure it is only used for
peaceful purposes we also produce coking or metallurgical coal which
is an important ingredient in steel and cement production we have
operations exploration and development projects in australia namibia
south africa and canada
products
coal
coal is a cost effective and abundant energy source and we are a leading
supplier to the seaborne thermal coal market thermal coal is used for
electricity generation in power stations we also produce highervalue coking
or metallurgical coal which produces steel when mixed in furnaces with iron
ore we have five operating mines in australia and one in south africa
uranium
uranium is one of the most powerful known natural energy sources and is
used in the production of clean stable baseload electricity after uranium ore
is mined it is processed into uranium oxide this is the product that is sold for
processing into fuel rods for use in nuclear power stations we have uranium
operations in australia and namibia and an exploration project in canada
strategic advantages
– premium australian coal assets located close to existing infrastructure and
growing asian markets
– successfully transforming the business by reducing costs increasing
productivity and improving our position on the cost curve
– 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
– taiwan
full operating review on page 34
iron ore product group
rio tinto operates a worldclass iron ore portfolio supplying the global
seaborne iron ore trade we are well positioned to benefit from continuing
demand across china and the developing world in western australia the
majority of our production continues to achieve industryleading margins
through effective cost saving measures automation and a relentless focus on
optimising operational efficiencies and marketing expertise
products
iron ore
iron ore is the key ingredient in the production of steel one of the most
fundamental and durable products for modernday 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 asian markets
– position as lowest cost major iron ore producer in the pilbara with a
pilbara cash unit cost of us1950 in 2014
– worldclass assets comprising a seamless supply chain with
unencumbered optionality
– a premium product suite driving strong customer relationships supported
by technical and commercial marketing expertise
key production locations key sales destinations
– australia – china
– canada – japan
–southkorea
full operating review on page 36
riotintocom 3
strategic report directors’ report financial statements production reserves
and operations
additional information chairman’s letter
dear shareholders
during 2014 your company maintained its steadfast commitment to generate
sustainable shareholder returns by supplying the commodities essential for
modern life as this report shows we delivered strong financial and operational
performance against a challenging market backdrop our success is
underpinned by our strong safety performance operational excellence
valuesdriven approach and the best people in the industry
i am very pleased to report we delivered on our commitments during 2014 we
achieved underlying earnings of us93 billion and our focus on cash
generation led to net cash from operating activities of us143 billion we
exceeded our cost reduction target and lowered net debt significantly while
reducing capital expenditure to us82 billion
most importantly we fulfilled our promise to you the owners of our company
to materially increase cash returns our primary commitment in terms of
shareholder returns is our progressive dividend policy in february 2015 we
announced a 12 per cent increase in our full year dividend as well as a
us20 billion share buyback these represent a total cash return to
shareholders in respect of 2014 of almost us60 billion they underscore the
confidence your board has in the resilience and strength of the company
despite ongoing uncertainties in our external markets we believe that
delivering returns to shareholders is an important component of our overall
approach to creating shareholder value
value through the economic cycle
this improved performance reflects the strategic approach the company has
embedded throughout our more than 140 year history to invest in and
operate longlife lowcost expandable operations in the most attractive
industry sectors we focus on the best assets because they are capable of
delivering value throughout the cycle
volatility has become a characteristic of the rapidlyevolving world in which we
operate each year presents a new economic challenge the past six months
in particular have seen increased uncertainty in energy metals and foreign
exchange markets the prices for many of the commodities we produce were
significantly lower during 2014 with average iron ore prices down 30 per cent
yearonyear
however given the decisive action we have taken over the past two years your
company is in a strong position to capitalise on the positive longterm
fundamentals for our key commodities despite the shortterm market challenges
rio tinto’s position as a preeminent supplier of raw materials and refined
metals and minerals products places us in an enviable position at a time of
significant distress for lateentrant or highcost producers rio tinto has been
able to go about its business in a disciplined and orderly way this is due to
our worldclass assets the quality of our products and customer relationships
and the decisive actions we have taken to strengthen our balance sheet
we continue to focus on maximising returns from our existing assets while
ensuring only the best growth projects attract fresh capital
we also continue to optimise our portfolio and in 2014 divested the clermont
joint venture and rio tinto coal mozambique coal businesses the søral and
alucam aluminium businesses and the copper group’s sulawesi and pebble
projects
as we disclosed in october 2014 glencore contacted rio tinto regarding a
potential merger in july 2014 the rio tinto board after consultation with its
financial and legal advisers concluded unanimously that a combination was
not in the best interests of rio tinto shareholders
a responsible and transparent business
the methods the company employs to deliver superior results are as
important as the results themselves we remain deeply committed to being a
responsible company providing products the world over to support economic
improvement and social progress
we operate in a complex and interconnected world where global and local
issues – such as biodiversity climate change livelihoods and regional
economic development – bring both risk and opportunity to the design
development and management of our operations
society’s expectations are increasing and we will continue to listen carefully to
our stakeholders as we strive to create mutual value
our operations can have a substantial positive economic impact on the
regions and countries in which we operate over the past four years our
economic contribution has exceeded us230 billion
we lead our industry with our ongoing commitment to tax transparency
publishing our annual taxes paid report to hold ourselves and host governments
to account we hope others will be encouraged to follow our example
it is through this combination of facilitating social development acting as a
catalyst for growth and behaving in an environmentally responsible way that
we manage our risks and deliver value for you our shareholders and also
create projects of worth for the communities in which we work
governance – a balance of diversity and depth
the past year has again seen a broadening of experience and diversity on your
board as we welcomed a number of new nonexecutive directors
michael l’estrange joined the board in september 2014 and megan clark in
november they bring to rio tinto a mix of backgrounds deeply relevant to
our strategy and culture including mining science and technology public
policy and international relations at our australian annual general meeting in
early may lord kerr and michael fitzpatrick will step down after many years of
wonderful service i thank them both for their dedication and immense
contribution to rio tinto
i am delighted that sam walsh and chris lynch agreed to extend their tenure
with openended contracts they have provided transformative leadership
since 2013 and i am confident that their experience will continue to drive the
delivery of sustainable results
a key role of the board is to ensure it has the appropriate succession
arrangements for its senior leadership team and that it has the next
generation of leaders moving through the company
rio tinto has always prided itself on the breadth and depth of the talent within
our organisation and the capabilities of our people – across more than
40 countries – are highly regarded i would like to thank sam the executive
committee and all of our 60000 employees across the world for their
commitment leadership and resilience
looking forward with confidence
markets are challenging and in this environment investors seek strength
reliability and consistency it is in these periods that your company thrives and
the quality of its assets operational excellence and balance sheet strength
shines through
let me assure you that your board our management and all our people
are committed to delivering sustainable returns to you our shareholders
thank you for your continued investment in rio tinto i look forward to
reviewing progress in 2015 with you next year
jan du plessis
chairman
4 march 2015
4 riotintocom chief executive’s statement
dear shareholders
your company had a strong year making truly satisfying progress towards
building a safer more resilient worldclass business our relentless focus
on improving performance at all of our operations driving down costs and
strengthening our balance sheet has enabled us to deliver materially
increased cash returns to shareholders we remain committed to pursuing
further improvement in the year ahead
in 2014 we delivered excellent results and upheld our commitment to improve
performance and strengthen the balance sheet in challenging conditions we
delivered on and in many cases exceeded expectations
it is clear that in the short term we will continue to face challenging
commodity markets as economic and geopolitical uncertainty continues
divergent monetary policy paths in europe the us and parts of asia are
contributing to financial volatility china is now experiencing slower but still
significant economic growth as it rebalances its economic priorities from
investment towards consumption
but we also know that against a backdrop of uncertainty rio tinto thrives
our combination of worldclass assets disciplined capital allocation balance
sheet strength operating and commercial excellence and our culture of
safety and integrity gives me confidence we are best placed to make the most
of the positive longterm demand fundamentals to generate sustainable
returns
our strong 2014 results are first and foremost due to the efforts of our
hardworking and dedicated employees around the world i had the great
pleasure of visiting many of our operations during the year and yet again i was
inspired by the commitment of our people and impressed by their expertise
i thank them all for their contributions
i would like to thank the executive committee – including alfredo barrios and
greg lilleyman who we welcomed to the team this year – for their strong and
passionate leadership
putting safety first
we strive to put safety first in everything we do from small things such as
starting our meetings with what we call a “safety share” to supporting
community mental health initiatives and understanding our critical risks
safety is deeply embedded in our culture
we reduced our all injury frequency rate by nine per cent in 2014 compared
with 2013 this was our best year ever in terms of injury rate performance and
over the past five years we have reduced our all injury frequency rate by
145 per cent
however success really means everyone returning home safely every day
therefore it is with much sadness i report the deaths of two employees at
managed operations during 2014 in february at the gove alumina refinery in
australia our colleague darryl manderson died due to an equipment incident
while carrying out maintenance work in november enrick gagnon died when
a landslide derailed an iron ore train in canada i was also greatly saddened by
two further fatalities earlier in 2015 at qit madagascar minerals and at
zululand anthracite colliery in south africa both of these 2015 fatalities are
currently being investigated
these deaths have had a major impact on the family friends and workmates of
these colleagues we will learn from these tragedies to prevent future ones
although our safety performance leads our industry we need to be constantly
vigilant and focused on improvement we refreshed our safety strategy in
2014 and our goal above all remains to eliminate fatalities
managing a worldclass portfolio
over decades and across our product suite we have built a strong portfolio
of businesses across the group in 2014 we saw numerous examples of the
strength of our portfolio among the highlights of our operational performance
were the production records we set for iron ore and hunter valley thermal coal
our pilbara iron ore business reached its 290 mta run rate two months ahead
of schedule expanding our pilbara operations to 360 mta rests comfortably
with our view of the longerterm demand for iron ore these operations are
world class in terms of assets optionality and lowcost operating
performance as well as in our marketing expertise and leadingedge
application of technology
the expansion translated into excellent product group earnings and cash flow
for iron ore despite significant price declines for its products iron ore’s
underlying earnings reached us81 billion this was a reduction of only
18 per cent on 2013 thanks to continued cost reduction efforts and the
favourable effect of the weaker australian dollar
the turnaround of our aluminium business continued in 2014 higher prices for
aluminium and our focus on efficiency and productivity saw the product group’s
underlying earnings more than double from us557 million in 2013 to
us12 billion in 2014 our bauxite business is generating handsome margins
but more work is needed in the alumina side of the portfolio so we have set
some tough targets for 2015 and we expect alumina’s profile to steadily
improve
the copper group delivered an 11 per cent increase in underlying earnings
this was despite a seven per cent reduction in average copper prices and
reflects the group’s success in reducing costs and boosting productivity
copper also increased production volumes and made more good progress in
simplifying the portfolio
the diamonds  minerals group continued to focus on maximising cash flow
matching capacity to the market – the right approach for these specialist
products the product group achieved underlying earnings of us401 million
a 15 per cent increase on 2013 as higher volumes and lower costs more than
offset lower prices in the minerals portfolio
lower prices across the coal sector decreased our energy group’s earnings by
us434 million not all of this could be offset by the good progress the energy
team continued to make in reducing operating costs and maximising efficiencies
ultimately this resulted in a loss of us210 million of underlying earnings
all of our product groups have highquality growth options which we continue
to pursue in a disciplined manner we believe we have the right capital
allocation framework and the right level of spending to support valueaccretive
growth while ensuring we retain a strong balance sheet and meet our
commitment to deliver sustainable returns
as part of our continued focus on efficiency and costs we announced on
27 february 2015 that we would be streamlining our product group structure
with immediate effect under the new arrangements rio tinto’s worldclass
portfolio of assets has been condensed into four product groups aluminium
copper  coal diamonds  minerals and iron ore
i would like to recognise the significant contributions of jacynthe côté and
harry kenyonslaney who left or will leave the company during 2014 and early
2015 respectively i thank them both and wish them both well
riotintocom 5
strategic report directors’ report financial statements production reserves
and operations
additional information chief executive’s statement continued
focus and agility
in many respects our industryleading businesses are where others wish to
be however now is not the time for complacency
we must anticipate adapt and respond with urgency to changing conditions
sustaining our focus on efficiency in areas that make a difference – rein in our
costs ensure every dollar is spent wisely and remove wasteful working capital
rio tinto’s balance sheet is strong and sound and we are committed to
maintaining this position in a period of market instability a robust balance sheet is
a major advantage it protects the business it protects shareholders and it creates
a platform for future growth it provides flexibility to undertake future projects – as
and when required – and to find the best ways to reward shareholders
on page 10 you can read more about the areas we will be focusing on in 2015
as we strive to enhance our performance even further
delivering sustainable value
in 2014 your company fulfilled its commitment to deliver greater value for
shareholders in doing so we have also created value for many of our
partners around the world who are so integral to the continuing success
of our business
i believe the quality and commitment of our people sets us apart as does
the way they embrace and embody our values respect integrity teamwork
and accountability
i would like to thank our employees for their dedication and hard work our
stakeholders for continuing to partner with us and you our shareholders for
investing in our company
sam walsh ao
chief executive
4 march 2015
6 riotintocom strategic context
global economy
the positive momentum in developed economies in late 2013 fuelled
expectations of an acceleration in global growth but that faded in early 2014
in the end the us remained one of the few bright spots in the global economy
in 2014 while china’s slowdown became more entrenched europe failed to
emerge meaningfully from imposed austerity japan’s growth was negatively
impacted by a consumption tax hike and emerging economies suffered from
the delayed recovery in global trade as a result the global economy grew by
only just over three per cent in 2014 in line with growth in the previous two
years and below the international monetary fund’s forecast of 37 per cent
growth at the start of the year
despite most economies continuing to deal with consequences from the
200809 global financial crisis gfc volatility in financial markets fell to low
levels during the first part of 2014 equity markets reached record levels
supported by sustained loose monetary policies nervousness however
returned to the markets towards the end of year on the back of rising
geopolitical tensions a very sharp drop in oil prices and reminders of fragilities
in the eurozone
in china growth in 2014 came just below the government’s target of 75 per
cent the new leadership attempted to bring the credit boom of the past five
years under control while preventing a contagion from weak property and
export sectors to the broader economy this balancing act is likely to continue
into 2015 and we expect china’s gdp growth to slow further to around seven
per cent the economy is in the middle of a longsignalled transition away
from the investmentled and commodityintensive growth model of the past
couple of decades towards a stronger focus on consumption and services as
well as a cleaner environment this “new normal” implies stillsignificant but
slower gdp growth and maturing commodity demand
among developed economies monetary policies are moving on divergent
paths the us managed to shrug off severe winter disruptions at the start of
2014 to sustain a robust pace of growth manufacturing activity was strong
throughout the year and the labour market strengthened appreciably as a
result the federal reserve unwound its quantitative easing qe programme
and the focus has now shifted towards the timing of the first interest rate hike
in the us since the financial crisis expected in 2015 in contrast the european
central bank has embarked on a new qe initiative in an attempt to kickstart a
recovery in europe’s periphery countries stimulate growth in the core beyond
germany and counter growing deflation risks with the bank of japan also
extending its qe programme in october 2014 there is an increasingly
pronounced dual track in the postgfc recovery process within organisation
for economic cooperation and development oecd economies
the divergent monetary policies are putting upward pressure on the us dollar
which rallied strongly against most currencies in the later part of 2014
meanwhile the euro fell to a nineyear low against the us currency by the
start of 2015 the broad us dollar strength combined with weaker metals and
minerals prices also put downward pressure on commoditydependent
currencies such as the australian and canadian dollars both of which
depreciated by around eight per cent in the course of 2014 unlike foreign
exchange the us bond market was resilient to the anticipated shift in
monetary policy last year this could reflect concerns that even as developed
economies finally emerge from postgfc adjustment they might only return
to a growth trajectory that is lower than that of the early2000s
drivers of commodity prices
longterm 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
investmentled growth phase which is particularly commodityintensive this
benefits commodities such as steel and copper used in construction and
infrastructure as economies evolve other commodities such as light metals
energy products and industrial minerals tend to take over as the main
enablers of consumptionled growth models
while the macroeconomic environment provides a common demand context
supplyside factors can result in stark structural differences between
commodities 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 depends on barriers to entry and
exit which are specific to each sector and evolve over time
the longterm nature of mining investment combined with high capital
intensity and long project leadtimes tends to result in cyclical investment
patterns in the industry as a whole which also translates into cyclical
commodity prices
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 in a context of accelerating
demand from china a period of higher prices and margins was required to
incentivise the necessary supplyside response with supply finally catching up
with demand for most commodities focus has naturally switched towards
managing margin compressions and extracting productivity gains from recent
investment instead of committing significant capital into new projects
commodity markets
the subdued global macro environment combined with strong supply resulted
in significant downturns for most commodity prices in 2014 and into 2015
prices for iron ore which had been one of the most resilient commodities in
2013 were down 30 per cent on average yearonyear in 2014 the addition of
seaborne iron ore capacity exceeded demand growth tipping the markets into
oversupply pressured by falling prices about 125 million tonnes of high cost
production from china and nontraditional seaborne suppliers exited the market
in 2014 the continued rampup of committed supply is expected to once again
exceed the growth in iron ore demand in 2015 however with further exits of
highcost producers anticipated the market will be more in balance
thermal and metallurgical coal had already experienced large price falls in
2013 and continued on a declining trend in 2014 reaching five and seven
year lows respectively production has been slow to react to the new price
environment in particular in china where state owned enterprises account for
a large share of output which combined with further cost reductions across
the industry led to lower prices
aluminium was one of the few commodities to see an increase in prices in
2014 when considering rising regional premiums a combination of continued
stock financing and more disciplined supply contributed to the improved
market environment indonesia’s bauxite ore export ban remained in place
throughout 2014 resulting in higher chinese demand for alumina and bauxite
from alternative sources lower bauxite inventories in china should support
imports of australian bauxite into china in 2015
in copper despite the stronger rampup in new mine supply low reported
inventories moderated the price decline in 2014 concerns over nearterm
demand have weighed more heavily on copper prices so far in 2015
titanium dioxide prices remained under pressure in 2014 as inventories
continued to be absorbed
outlook
economic growth is likely to remain modest and only mildly supportive for
commodity demand in the near term the start of 2015 suggests it will be a
challenging year with continued industrywide margin compression the falls
in oil prices and applicable exchange rates will provide some relief for miners
but could also delay the exit of higher cost producers it is therefore likely that
the industry will continue to put strong controls over capital budgets and
further focus on productivity costs and margins
although the outlook for our operating environment remains tough rio tinto
is positioned to perform better than many competitors in challenging
conditions our strong balance sheet and worldclass portfolio are competitive
advantages that equip us to generate sustainable returns through the cycle
riotintocom 7
strategic report directors’ report financial statements production reserves
and operations
additional information group strategy
external pressures continue
the mining industry is cyclical following a decadelong growth phase it has
now firmly entered a period of lower prices driven by a subdued global macro
environment combined with strong supply we expect the current phase of
margin compression to continue as previously committed supply enters our
markets and the key drivers of demand growth taper off meanwhile volatility –
a feature of the macroeconomic environment since the global financial crisis –
is expected to continue bringing with it further shortterm risk
our response to this has been to continue to focus on productivity cost
reductions and capital discipline – squeezing maximum returns out of our
existing businesses while ensuring only the best growth projects attract
capital others in the sector have embarked upon similar paths inefficiencies
are being exposed and so reductions in costs and capital expenditure
productivity improvements and project deferrals and cancellations have
become widespread across the mining industry
despite the uncertain conditions that we currently face the longterm outlook
for our sector remains positive these factors drive demand for the minerals
and metals we produce as essential ingredients of modern life they make our
business a sustainable and valuable one to be in
consistent strategy underpinned by six value drivers
in today’s challenging market conditions it is all the more important to have a
clear and effective strategy we remain convinced that our longstanding and
consistent strategy is the right one to invest in and operate longlife lowcost
expandable operations in the most attractive industry sectors
sustainable shareholder returns
in 2014 we reaffirmed our commitment to deliver sustainable returns to
shareholders six critical value drivers underpin this commitment and
combine to create a platform for our ongoing success
free cash
flow generation
operating 
and commercial 
excellence
balance sheet
strength
capital
allocation
discipline
a worldclass 
portfolio
quality growth
sustainable
shareholder
returns
1 worldclass portfolio
at the heart of rio tinto is a portfolio of worldclass assets – from our pilbara
iron ore business to our queensland bauxite ore reserves hydropowered
aluminium smelters our global suite of copper mines and sectorleading
energy diamonds and minerals assets we use a clear strategic framework to
assess our existing assets and new opportunities – taking into account the
industry attractiveness and the competitive advantage of each asset and its
capacity to deliver bestinclass returns
2 quality growth
we have a compelling pipeline of nearterm and longer dated projects across
the portfolio by reinforcing capital discipline and reshaping our projects we
have retained significant high quality growth despite significantly reducing our
capital expenditure our project pipeline has a compelling internal rate of
return and is expected to deliver strong compound annual growth
3 operating and commercial excellence
the safety of our people is core to everything we do and we remain at
the forefront of the industry in safety performance a wellrun operation is
a safe operation
we have established a leading position in the development and use of
technology and innovation – allowing us to increase productivity and reduce
risk as the industry faces increasingly complex geological environmental and
cost pressures our technology advantage will be an increasingly important
value driver
our commercial activities aim to ensure we reap the maximum value from
each of our businesses our marketing teams work handinhand with our
operations so that our resource management is fully aligned to the market
over the years we have leveraged our understanding of customer needs to
create new markets for our products including high temperature weipa
bauxite and champagne and pink diamonds we deploy industryleading
capabilities in supply chain optimisation and a variety of logistics solutions
across the group – and have inhouse centres of excellence for valueinuse
analysis pricing and contracting strategies together these activities allow us
to manage risk and capture value in all market conditions
4 balance sheet strength
in a cyclical and capital intensive industry such as mining a strong balance
sheet is essential in order to preserve optionality and generate shareholder
wealth at all points in the cycle we target a net gearing ratio of 20 to
30 per cent in order to maintain our robust balance sheet – and aim to stay at
the lower end of this range at the current point in the cycle this positions us
favourably to withstand current industry pressures protect shareholders and
seize on any opportunities these market conditions create
5 capital allocation discipline
we have a consistent and disciplined approach to capital allocation our first
allocation is to essential sustaining capital for our operations next we fund
our primary contract with our shareholders – the progressive dividend finally
we assess the best use of the remaining capital between alternatives of
compelling growth debt reduction and further cash returns to shareholders
at each stage we apply stringent governance and assessment criteria as we
seek to maximise return on every dollar spent
6 free cash flow generation
over recent years we have made improvements to our business – increasing
our productivity reducing operating and capital costs and delivering
incremental volume expansions from high quality projects together with the
quality of our asset base these actions enhance our capacity to generate free
cash flows and underpin our confidence in our ability to deliver sustainable
returns to shareholders
8 riotintocom progress against strategy
what we said we would do in 2014 what we did
worldclass portfolio
continue reshaping our portfolio announced or completed asset sales of us39 billion since 2013
see page 19
curtail the gove alumina refinery during the first half of 2014 production at gove curtailed in may 2014
seepages28to29
keep sustaining capital expenditure at 2013 levels of around us3 billion reduced sustaining capital expenditure to us27 billion
see page 13
quality growth
reduce total capital expenditure to less than us11 billion in 2014 and to around
us8 billion in 2015 while delivering steady growth
reduced capital expenditure from us130 billion in 2013 to us82 billion
completing two major projects which enabled us to bring on significant
new volumes
see page 18
continue to progress key evaluation projects at a pace that matches our overall
view of investment priorities
progressed studies at south of embley bauxite la granja and resolution
copper zulti south titanium dioxide mount pleasant thermal coal and
ranger 3 deeps uranium
seepages28to37
ramp up the pilbara operations to reach an annual production rate of 290 mta
before the end of the first half of 2014
annual production rate of 290 mta from the pilbara reached in may 2014
two months ahead of schedule
increase pilbara mine production capacity by 60 mta between 2014 and 2017 by
focusing predominately on brownfield expansions and lowcost productivity gains
40 mta of lowcost brownfield growth in implementation investment
decision on silvergrass mine not required in 2015
seepages36to37
continue to discuss the pathway forward for oyu tolgoi underground expansion
with the government of mongolia
continued discussions with the government of mongolia over the
development pathway finalised underground feasibility study and
technical report
seepages30to31
operating and commercial excellence
target above all the elimination of workplace fatalities regrettably our group had two fatalities at our managed operations
during 2014
see page 22
achieve yearonyear improvement in aifr and lost time injuries our all injury frequency rate aifr improved from 065 per 200000 hours
worked in 2013 to 059 in 2014
see page 22
improve how we manage critical risks and learn from serious potential accidents updated our safety strategy to confirm our focus on injury reduction
and strengthen our emphasis on fatality elimination and catastrophic
event prevention
see page 22
deliver further savings to reach us3 billion fullyear improvement in 2014
versus 2012 in operating cash costs
achieved a further us13 billion of operating unit cash cost improvements in
2014 delivering total operating cash cost savings of us36 billion versus
2012
see page 40
maintain the reduced exploration and evaluation spend achieved in 2013 reduced exploration and evaluation spend by a further us02 billion
see page 38
increase sales volumes at oyu tolgoi increased mined copper and gold production at oyu tolgoi by 94 and 275
respectively compared with 2013 with copper sales increasing sevenfold
seepages30to31
riotintocom 9
strategic report directors’ report financial statements production reserves
and operations
additional information group strategy continued
what we said we would do in 2014 what we did
balance sheet strength
pay down debt to a more sustainable level reduced net debt from us221 billion in june 2013 to us125 billion at
31 december 2014 the gearing ratio at the end of 2014 was 186
compared with 252 at the end of 2013
see page 13
capital allocation discipline
continue to apply our enhanced capital allocation systems and controls maintained “cash generation offices” to strengthen the focus on cash and
improve visibility for senior managers in this area
continued to reinforce investment committee approvals process
seepages18to19
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
disciplined capital allocation framework adhered to resulting in sustaining
capital of us27 billion progressive dividend of us37 billion compelling
growth of us55 billion and net debt reduction of us56 billion
seepages18to19
free cash flow generation
reduce working capital released us15 billion of working capital
see page 1
materially increase returns to shareholders increased our progressive dividend by 12 per cent and announced on
12 february 2015 a share buyback of us20 billion a combined increase of
64 per cent compared with 2013
seepages18to19
our 2015 strategic priorities
we will continue to focus on our critical value drivers in 2015 in order to meet
our commitment to deliver sustainable returns to shareholders
as always we will maintain our relentless focus on safety as measured by
both the elimination of fatalities and minimising all injury frequency rates
and lost time injuries
we will continue to shape our worldclass portfolio – ensuring that we focus on
only the highest returning assets in our preferred industry sectors and that
our capital is deployed in the most efficient way
we will further enhance our portfolio as we complete a number of key growth
projects including the infrastructure for our 360 mta iron ore expansion and
our new kitimat smelter beyond this we will progress our south of embley
bauxite project and will continue our work on creating the conditions
necessary to further advance the underground expansion of oyu tolgoi
importantly we will deliver measured valueadding growth while reducing our
capital expenditure to less than us70 billion in 2015
our strong focus on costs will continue in 2015 as we target further operating
cash cost savings of us750 million and continue to optimise our working
capital we will further leverage our strength in technology and innovation and
our leading commercial capabilities to ensure we remain the supplier of choice
to our customers and maximise the cash generated from every business
maintaining our balance sheet strength will remain a core priority we aim to
maintain our gearing ratio at the low end of the 20 per cent to 30 per cent range
10 riotintocom business model
how we create value
rio tinto owns a portfolio of worldclass assets the result of investment
decisions made in line with our longstanding strategy the way we find
develop and operate these assets the way we market the minerals and metals
we produce and the legacy we leave at the end of these assets’ lives enables
us to create value and deliver sustainable shareholder returns
through productivity improvements cost reductions and prudent growth we
preserve and enhance value from our portfolio we commit to finding ever
safer smarter and more sustainable ways to run our businesses and our
competitive advantages – which spring from a combination of our assets our
people our capabilities and our values – keep us strong throughout the cycle
explore and evaluate
our experienced inhouse exploration team has a proven track record of
discovering tier 1 orebodies the highestvalue deposits that are profitable
throughout the commodity cycle we maximise opportunities by exploring for
and evaluating deposits in new geographies and in our preferred commodities
we also explore the orbits of our current operations like weipa in australia or
bingham canyon in the us which sustains the value of our existing
businesses so that we can keep our focus on targets that are important to
rio tinto we operate the majority of exploration programmes ourselves rather
than outsourcing we will however partner with others if it gives us access to
attractive opportunities or skills that we do not possess inhouse and which
support the quality of our exploration pipeline
our orebody knowledge allows us to find valueenhancing ways of developing
our resources and positioning our products in the marketplace and helps
support the group’s investment decisionmaking 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
develop
we develop orebodies for longterm value delivery we have strengthened our
investment assessment criteria our levels of independent review of
opportunities and our investment approval processes we approve investment
only in opportunities that after prudent assessment offer attractive returns
that are well above our cost of capital
during the development phase we plan the most efficient configuration
for mining the orebody and for getting the products to market we work
closely 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 resource is confirmed and internal and external approvals are received
the project moves into implementation and construction we aim to deliver
projects on time and on budget – such as reaching our targeted 290 mta
annual production rate from the pilbara iron ore operations in may 2014
two months ahead of schedule
mine and process
we create value by safely and efficiently operating assets that fit with our
strategy by focusing on operating excellence we will sustain our lowcost
leadership position and drive our operations even further down the cost curve
our global operating model allows us to implement standard processes and
systems across the group for instance in procurement operations and
maintenance this 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
our commitment to technology and innovation sets us apart from our peers
and allows us to take advantage of opportunities that may not be available to
others our worldclass technologies bring us ongoing productivity benefits and
help us tailor our products to our customers’ needs through our network of
partnerships with academia technology suppliers and other experts we gain
access to knowledge and technical prowess that augment our own capabilities
market and deliver
supplying highquality products which have been developed to meet our
customers’ needs is the basis of our business 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
addedvalue 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
our marketing teams work closely with our operations so that our resource
management is fully aligned to the market and we innovate and improve our
products and services to maximise value to customers
we are constantly adding to our knowledge of our markets and our customers’
requirements allowing us to improve our investment decisions in many
cases we are responsible for delivering product to our customers and do so
efficiently reliably and costeffectively we have capabilities across a variety
of logistics solutions including 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 and aim to progressively rehabilitate as
much land as possible before closure when a resource reaches the end of its
life we seek sustainable and beneficial future land uses to minimise financial
social and environmental impact we work together with our stakeholders to
identify postclosure options that take into account their concerns and their
priorities for the use of the land 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 and
uphold our licence to operate
read more about how we embed sustainability throughout our business on
pages20to26
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 longterm investment
opportunity and commit to sustainable growth in 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
customers
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
communities
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
governments
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
suppliers
by seeking a balance of global national and local supply capability and
supporting local supplier development we drive value for our shareholders
and deliver economic benefits for the communities in which we operate
riotintocom 11
strategic report directors’ report financial statements production reserves
and operations
additional information 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
2014 are explained below
some kpis are used as a measure in the
longterm incentive arrangements for the
remuneration of executives these are
identified with this symbol
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 64
notes
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
2014 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 noncontrolling interests
in subsidiaries
indicator
all injury frequency rate aifr
per 200000 hours worked
underlying earnings
a b
us millions
net cash generated from operating
activities
a
us millions
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
sustainable returns to shareholders
net cash generated from operating activities
is a complementary measure demonstrating
conversion of underlying earnings to cash it
provides additional insight to how we are
managing costs and increasing efficiency and
productivity across the business in order to
deliver increased returns
performance
2014 2013 2012 2011 2010 2014 2013 2012 2011 2010
067
067
065
059
069
15572
9269
10217
9305
13987
2014 2013 2012 2011 2010
20235
9430
18277
15078
14286
our aifr has improved by 14 per
cent over the last five years we
improved our aifr by nine per cent from
2013 however we did not meet our goal
of zero fatalities and two people died
while working at rio tinto managed
operations in 2014
underlying earnings have decreased by
us912 million compared with 2013
this reflects strong volumes primarily
in iron ore favourable exchange rates
operating cash cost improvements and
reductions in exploration and
evaluation expenditure which largely
offset the unfavourable effect of price
movements on major commodities
net cash generated from operating
activities of us14286 million which include
us298 million of dividends from equity
accounted units are five per cent lower than
in 2013 primarily as a result of lower prices
which were partially offset by higher volumes
cash cost improvements and favourable
movements in working capital
definition
aifr is calculated based on the number
of injuries per 200000 hours worked
this includes medical treatment cases
andrestrictedworkdayandlostday
injuries for employees and contractors
items excluded from net earnings to
arrive at underlying earnings are
explained in note 2 to the 2014
financial statements
net cash generated from operating activities
represents the cash generated by the group’s
consolidated operations after payment of
interest taxes and dividends to non
controlling interests in subsidiaries
more information
page 22 pages 178 to 179 page 105
12 riotintocom total shareholder return tsr

net debt
a
us millions
capital expenditure
a
us millions
greenhouse gas ghg emissions
intensity
indexedrelativeto20082008being
equivalent to 100
the aim of our strategy is to maximise
total shareholder return over the long
term this kpi measures performance in
terms of shareholder wealth generation
we also monitor our relative tsr
performance against peers
netdebtisameasureofhowweare
managing our balance sheet and
capital structure a strong balance
sheet is essential for withstanding
external pressures and seizing
opportunities through the cycle we
constantly evaluate and balance the
alternative uses for our cash between
disciplined investment strengthening
our balance sheet and returning cash
to investors
we adopt a consistent approach to
capital allocation 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 an
important indicator of our
commitment and ability to manage
exposure to future climate policy
and legislative costs and is closely
linked to our energy use and cost
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
2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010
8342
4071
19192
18055
12495
70
961
959
941
832
820
12573
17615
13001
8162
4591
2014 2013 2012 2011 2010
312
148
21
97
316
rio tinto’s tsr performance over the
fiveyear period from 2010 to 2014 was
characterised by continued nervousness
in global equity markets total dividends
paid in calendar year 2014 were 2045 us
cents per share a 15 per cent increase on
2013 the subdued global macro
environment coupled with a strong
supply response caused prices for many
of our commodities to decrease which in
turn pushed the rio tinto plc and
rio tinto limited share prices lower in
2014 these factors resulted in the
rio tinto group registering a tsr of 
97 per cent in 2014
net debt decreased from us18055
million at 31 december 2013 to
us12495 million at 31 december
2014 due to operating cash inflows
from divestment proceeds and the
turquoise hill rights offering far
exceeding outflows relating to capital
expenditure and the increased
dividend payment
capital expenditure declined by
us4839 million or 37 per cent to
us8162 million in 2014 following the
completion of five major capital
projects in 2013 pilbara iron ore
infrastructure expansion to 290 mta
oyu tolgoi coppergold mine ap60
aluminium smelter kestrel coking
coal mine and argyle underground
diamond mine
we have reduced our total ghg
emissions intensity by 18 per cent
between 2008 and 2014 this is
largely a result of the aluminium
smelter divestments ningxia in
2009 sebree and saint jean in
2013 closure of the lynemouth
smelter in 2012 commissioning
of our low intensity ap60 smelter
in late 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
netdebtiscalculatedasthenet
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 2014
financial statements
capital expenditure comprises the cash
outflow on purchases of property plant
and equipment and 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 90 page 141 pages 180 to 181 page 24
riotintocom 13
strategic report directors’ report financial statements production reserves
and operations
additional information principal risks and uncertainties
the focus on the six value drivers articulated on pages 8 to 10 has been accompanied by a significant review of the principal risks and uncertainties the
business faces
overview of rio tinto’s risk management framework
our risk management framework recognises that managing risk effectively is an integral part of how we create value and fundamental to our business
success the responsibility for identifying and managing risks lies with all of rio tinto’s managers and business leaders they operate within the groupwide
framework to ensure that risks are managed within agreed thresholds the framework underpinned by rio tinto’s risk policy and standard includes clearly
defined oversight responsibilities for the board of directors and the executive committee supported by the risk management committee it also outlines the roles
played by central support functions by group risk and by group audit  assurance to support effective risk analysis and management across rio tinto
this approach reflects a “three lines of defence” model for the management of risks and controls
– first line of defence ownership of risk by the operations
– second line of defence control of risk by group functions and management committees
– third line of defence assurance of our systems by group audit  assurance
more information on the group’s approach to risk management can be found in the corporate governance section on page 62
business risk owners
managers across the business
are accountable and responsible
for effective risk identification
and management 
board of directors and board committees
provides oversight across the risk management process
confirms that management’s risk thresholds reflect the 
level of risk the board is willing to accept in pursuit of
strategic objectives and monitors grouplevel risks
group audit  assurance
responsible for providing reasonable assurance that the
systems for internal control are adequate and effective
central support functions
provide targeted expertise and
support to risk owners develop and
maintain risk specific controls to
ensure effective management of
material grouplevel risk within
agreed thresholds
group risk
responsible for maintaining
appropriate risk policy and standard
providing coordination and support
of grouplevel risk management
activity and risk reporting  
risk management committee
responsible for ensuring that
significant risks to grouplevel
objectives are identified and for
ensuring the risk management
process is effective
executive committee
responsible for risk strategy and
accepting risks inherent in key
investments and in strategic
business or annual plans
risk factors
rio tinto’s business units and functions assess the potential economic and
noneconomic consequences of their respective risks using the framework
defined by the group’s risk policy and standard principal risks and
uncertainties are those that the risk management committee business unit
or function determine to have potential material consequences at a group
level they also include factors that 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
pages 15 to 17 describe the currentlyknown principal risks and uncertainties
that could materially affect rio tinto or its ability to meet its strategic
objectives there may be additional risks unknown to rio tinto and other risks
currently not believed to be material which could turn out to be material the
risk factors outlined do not include the management detail on how each is
managed and mitigated or the controls established to decrease the likelihood
or impact of these risks occurring this is discussed in more detail on page 62
risks may materialise individually simultaneously or in combination and could
significantly affect the group’s
– short medium and longterm 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 shortterm health of its
employees
– environmental and social impact on neighbouring communities
– social licence to operate or
– group or business unit reputation
the principal risks and uncertainties should be considered in connection
with any forwardlooking statements in this document and the cautionary
statement on the inside front cover
14 riotintocom 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 fluctuating world economic conditions the group’s
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
past strong demand for the
group’s products in china could
be affected by future
developments in that country
the group is highly exposed to the chinese market china’s demand for any of the group’s products and iron ore in
particular could be substantially affected by
– aneconomicslowdowninchina
– financial or banking market conditions impacting investment
– an accelerated shift from infrastructureled to serviceoriented growth or
– a material change in energy policy
any or all of these may adversely affect the group’s profitability and cash position
rio tinto is exposed to
fluctuations in exchange rates
the vast 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 not to hedge 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 operates across a large number of jurisdictions resulting in exposure to a broad spectrum of economies political
and legal frameworks and societal norms each jurisdiction poses unique complexities and challenges that in turn impose
risks on the value chain from new business development through to closure and rehabilitation and on asset carrying values
these can include
– 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 levels in group businesses
– changes in taxation rates regimes or international tax agreements
– currency and foreign investment restrictions
– limitations to power water energy and infrastructure access and
– general increases in regulation and compliance requirements
jurisdictionspecific behaviour or circumstance may also present uncertainties to our operating environment unclear land
title and rights to land and resources including indigenous title political and administrative change policy reform and
changes in law or government regulation an inherent culture of bribery and corruption violent criminal or sectarian
tensions any such jurisdictional instability or legislative uncertainty that impacts the group’s operations may result in
increased costs curtail or negatively impact existing operations andor 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 any of the
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 energyintensive and depend on fossil fuels in numerous jurisdictions there is increasing
regulation of greenhouse gas emissions tighter emission reduction targets and progressive introduction of carbon pricing
mechanisms these may raise worldwide energy production and transport costs over the medium to long term which may
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 social
licencetooperatebusiness
viability 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
riotintocom 15
strategic report directors’ report financial statements production reserves
and operations
additional information principal risks and uncertainties 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 for worldclass orebodies the group may also not be able to source or maintain adequate 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 and the mineral resources from which future cash flows should come
rio tinto may fail to
successfully execute
divestments and acquisitions
potential acquisitions may not succeed and the group may not be able to successfully divest assets it wishes to sell resulting
in unforeseen pressure on the group’s cash position or 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 writeoffs 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 were 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
large outsourcing programmes
may result in exposure to third
party failure or loss of
intellectual property
the group is implementing business transformation programmes to increase efficiency these include outsourcing and off
shoring elements of important business support delivery as well as increasing procurement of goods and services from
emerging market suppliers the group may be exposed to business continuity failure impacting financial performance loss of
intellectual property or data data privacy violations andor reputational damage as a result of thirdparty failure or actions
financial risks
factor nature
the group’s reported results
could be adversely affected by
the impairment of assets
including 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 reserves and resources infrastructure availability discount and foreign
currency exchange rates operating and development cost projections and the 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 will negatively impact the group’s profitability during the
relevant period
discount rates used in
determining provisions and
asset valuations may change
causing changes to provisions
asset carrying values and
capital allocation
discount rates are utilised to determine provisions for costs of known future obligations such as closedown and
remediation as well as valuing assets for impairment testing and capital allocation purposes discount rates may vary over
time as underlying assumptions change these assumptions include observable long term government bond yields market
risk premiums and other situational changes such as change in political stability in a particular jurisdiction
changes to the discount rate may impact the size of provisions recognised lead to changes in the carrying value of assets or
alter the capital allocated to various projects
the group’s liquidity and
cash flow expectations may
not be realised inhibiting
planned expenditure
both the group’s ability to fund planned expenditure such as capital growth mergers and acquisitions innovation and other
objectives or obligations as well as the ability to weather a major economic downturn could be compromised by inadequate
access to sufficient liquidity including external financing sources such as bank financing or capital markets
failure to reduce costs may
result in reduced margins
failure to reduce 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 in addition volatility in commodity prices can result in substantial adjustments in the
group’s recognition of ore reserves
labour disputes could lead
to lost production andor
increased costs
some of the group’s employees including employees in nonmanaged 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 and labour disputes may arise even in circumstances where the group’s employees are not
represented by labour unions
16 riotintocom factor nature
some of the group’s
technologies are unproven and
failures could adversely impact
costs andor 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 services
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
joint ventures strategic
partnerships or nonmanaged
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
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 controlling partners may take action contrary to the
group’s interests or policies resulting in adverse impact to the group’s operations financial performance legal liability
or reputation
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 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 and deliver product to market
limitations delayed development bottlenecks or interruptions in 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 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 systems failure or a breach of operating standards and could result in a significant environmental health
or safety incident
5 sustained pandemic
the group has exploration development projects and operations in numerous countries and is reliant on effective global
shippingtransportation movements to deliver product to markets the sustained outbreak of a pandemic may result in
health exposure to our workforce as well as the temporary closure of a site or access to shippingtransportation movements
adversely impacting financial performance
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 highlyskilled 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
downreclamationand
rehabilitation could be higher
than expected
closedown 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 or increases in the cost of reclamation techniques in addition
the expected timing of expenditure could change significantly due to changes in the business environment that might vary
thelifeofanoperation
riotintocom 17
strategic report directors’ report financial statements production reserves
and operations
additional information 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 opportunitiesovera
number of years to determine what will be the best use of capital
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 net cash generated from operating activities forecasts set the boundaries for how much capital is available
for investment
in today’s capitalconstrained environment only the highestreturning 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 37 per cent to us82 billion in 2014 compared with the peak level in 2012 of us176 billion it is expected to be
reduced further to less than us7 billion in 2015 of which around us25 billion is expected to be sustaining capital rio tinto funded its capital expenditure with
net cash generated from operating activities in 2014 and aims to continue funding its capital programme from internal sources
compelling 
growth
further cash returns 
to shareholders
debt reduction
2 1
essential sustaining 
capex
progressive 
dividends
iterative  
cycle of
3
major capital projects us1bn
rio tinto 100 owned unless otherwise stated
total approved
capital cost
100 us statusmilestones
in production
iron ore – expansion of the pilbara mines ports and
railways from 237 mta to 290 mta rio tinto share
us84bn
98bn the integrated mines rail and ports reached a runrate of 290 mta in may
2014 two months ahead of schedule the nammuldi mine expansion was
completed and is commencing production
ongoing and approved
iron ore – expansion of the pilbara port rail and power
supply capacity to 360 mta rio tinto share us35bn
59bn the phase two expansion to 360 mta includes investment in the port rail
and power supply and investment in automation
iron ore–investmenttoextendthelifeofthe
yandicoogina mine in the pilbara to 2021
17bn 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
48bn first production from the modernisation is expected towards the end of the
first half of 2015 with full capacity expected to be reached in the first half
of 2016
copper – development of organic growth project 1
ogp1 at escondida rio tinto 30 chile
13bn
rio tinto share
replacement of the los colorados concentrator with a 152kt per day plant
accessing highergrade ore initial production is expected in the first half
of 2015
copper – construction of a desalination facility to ensure
continued water supply and sustain operations at
escondida rio tinto 30 chile
10bn
rio tinto share
the project is designed to provide a sustainable supply of water for the new
ogp1 copper concentrator commissioning is scheduled for 2017
cash returns to shareholders
the aim of rio tinto’s progressive dividend policy is to maintain or increase the us dollar value of ordinary dividends per share 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 the interim dividend is set at one half of the total
dividend per share for the previous year
the full year dividend in respect of 2014 was increased by 12 per cent to 215 us cents per share reflecting the board’s confidence in the business and its
attractive prospects this follows a 15 per cent increase in both the 2013 and 2012 full year dividends
in february 2015 rio tinto announced a us20 billion share buyback programme comprising a targeted a500 million c us04 billion offmarket share
buyback tender of rio tinto limited shares and the balance of approximately us16 billion for an onmarket buyback of rio tinto plc shares
these represent a total cash return to shareholders in respect of 2014 of almost us60 billion an increase of approximately 64 per cent on 2013
18 riotintocom divestments and acquisitions
asset
consideration
usm status
divested in 2014
clermont joint venture 1015
a
sold to gs coal pty ltd
rio tinto coal mozambique 50
a
sold to international coal ventures private limited icvl
søral undisclosed sold to norsk hydro
alucam undisclosed sold to the government of cameroon
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 bv
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 hig
lynemouth power station undisclosed sold to rwe
energy – extract resources ltdkalahari minerals plc 429 equity investment sold to taurus mineral limited
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 1700 acquisition of bhp billiton group’s entire interests in richards bay
minerals doubling the group’s holding to 74 per cent
a before working capital and completion adjustments
there were no material acquisitions in 2014 or 2013
riotintocom 19
strategic report directors’ report financial statements production reserves
and operations
additional information sustainable development
rio tinto’s vision is to be a company that is admired and respected for
delivering superior business value and for being the industry’s trusted partner
to earn this trust we must continually find safer smarter more sustainable
ways to run our business
we are always looking for new answers to the complex global and local
challenges we face which include resource scarcity climate change
community employment and regional economic development we see these
challenges as opportunities to advance our reputation and create value for our
business our shareholders and the people we are proud to work alongside to
achieve our sustainable development goals we work handinhand with our
partners and communities on the ground where it matters most
the foundation is the way we work our global code of business conduct it
contains the principles and standards of conduct which reaffirm our
commitment to sustainable development and operational excellence at our
sites all of our sites must meet a minimum set of performance standards for
health safety environment closure and community and social performance
these ensure we meet or go beyond our statutory and regulatory
requirements the standards are backed up by strong processes to assure
management that we are performing to the right levels and establishing
longerterm identification and management of risks
we also measure ourselves against the performance of other companies in our
sector as well as leaders in other industries over many years we have played
a leading role in developing sustainable development standards in the mining
and metals sector through organisations such as the international council on
mining and metals icmm and national bodies particularly in australia we
look to learn from other sectors where leading companies’ performance can
informusandhelpusimprove
materiality
we use a materiality assessment to focus our report on the sustainable
development issues that matter most this tells us which issues are material
to our stakeholders and to our business we run this process annually as part
of our corporate reporting cycle to ensure that each year we provide the
information that our stakeholders are looking for
current or potential impact on our business
level of concern to stakeholders
issues of highest 
materiality 
reported in 
the annual report
issues addressed 
through direct 
communications 
not reported in 
normal channels
issues reported 
in the sustainable 
development 
website
low medium high
low medium high
our process has been developed in line with the global reporting initiative
gri guidance on materiality and completeness wwwglobalreportingorg
this specifies that sustainable development reports should cover topics and
indicators that “reflect the organisation’s significant economic environmental
and social impacts” or that “substantively influence the assessments and
decisions of stakeholders” it involves identifying and prioritising issues that
may affect our business and stakeholders over the next three years taking
internal and external perspectives into account
we create a materiality matrix which plots external stakeholders’ level of
concern against the current or potential impact on our business each issue is
given a rating of “low” “medium” or “high” from both internal and external
perspectives an impact can be either positive or negative
issues that are of high importance to both our external and internal
stakeholders are reported in this section of our annual report those of
mediumtohigh importance are reported in the full sustainable development
report on our website
having determined which topics to include in our 2014 materiality matrix we
reviewed these with internal experts from each of our sustainable
development focus areas to determine their validity and relative importance
the results of this assessment were reviewed and approved by the
sustainability committee
further information on the sustainability committee is included in the
directors’ report on page 59
performance overview
performance progress in 2014 included
– a nine per cent reduction in our all injury frequency rate aifr compared
with 2013
– a 12 per cent reduction in our lost time injury frequency rate ltifr
compared with 2013
– an 18 per cent reduction in our greenhouse gas emissions intensity
from 2008
– receiving the cdp leadership award for the largest absolute carbon
reduction on the asx 200
– meeting our communities target that all operations have locally
appropriate publiclyreported indicators in place consistent with the
millennium development goals
– being recognised as having good practice on human rights reporting in
line with the un guiding principles on business and human rights
– improving our listing as a leading company on the ftse4good and dow
jones sustainability indexes which investors use to monitor businesses’
sustainability performance
however we did not achieve all our goals and there are areas where we need
to improve above all we must achieve our target of zero fatalities tragically
two colleagues lost their lives while working at our managed operations in
2014
also in addition to complying with statutory reporting obligations we reported
12 environmental incidents to the executive committee with the potential to
impact the environment or to concern local communities in 2013 we reported
15 such incidents
our priorities for 2015 are to
– deliver our refreshed safety strategy for fatality elimination injury
reduction and catastrophic risk management
– maintain progress on reducing greenhouse gas emissions intensity
– achieve our target to implement critical control monitoring plans against
material health risks
– complete an epidemiology study of the workforce at rössing
uranium limited
– further develop and implement our mental health framework throughout
the business
20 riotintocom – implement our updated health safety environment  communities
hsec and closure standards throughout our operations
– enhance business management of water risks and rehabilitation performance
– meet our diversity and inclusion targets for women and graduates
– advance our talent pipeline and the continued implementation of diversity
and inclusion
– develop a regional economic development toolkit in partnership with local
communities and our procurement function
– further streamline the integration of human rights considerations into
existing corporate processes we will also develop a more targeted risk
based approach for standalone human rights studies
– continue developing our integrity and compliance programme we will
focus on ways in which we can improve risk assessments where they relate
to business integrity third party due diligence and monitoring
– refresh the way we work to ensure it remains relevant to our employees
the business and the risks we face
performance data
our sustainable development performance data are reported for calendar years
and unless stated otherwise represent 100 per cent of the parameters 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 icmm and the mandatory requirements set out in icmm
position statements into our own policies strategies and standards we report
in line with the gri g3 guidelines at application level a in 2015 we will
begin reporting in accordance with the gri g4 guidelines
further information on our data definitions our grichecked report and our
alignment with the icmm sustainable development principles and supporting
position statement can be found online at riotintocomsd2014
goals and targets
as part of our commitment to continuous improvement we have set group targets for a range of sustainable development metrics these help us drive
performance improvement and manage risk further information on the risk framework that rio tinto applies to identify these metrics and drive decisionmaking
can be found on pages 14 to 17
targets performance to date
our goal is zero harm including above all the elimination of
workplace fatalities
2 fatalities at managed operations in 2014
performance against this goal is measured by the number of fatalities and a
yearonyear improvement in our all injury frequency rate aifr per 200000
hours worked
9 per cent reduction in our aifr compared with 2013
a yearonyear improvement in the rate of new cases of occupational illness
per 10000 employees annually
6 per cent reduction in the rate of new cases of occupational illness
compared with 2013
all managed operations will have reviewed – and increased their focus on
managing – their health risks through implementation of critical control
management plans ccmps to address their specific material health risks by
the end of 2015
41 per cent of managed operations have identified their critical health risks
and implemented ccmps
ten per cent reduction in total greenhouse gas emissions intensity between
2008 and 2015
18 per cent reduction in our total greenhouse gas emissions intensity
compared with 2008 currently beating our 2015 target
all managed operations with material water risk will have achieved their
approved local water performance targets by 2018
66 per cent of managed operations are on track to meet their recently
approved local water performance targets
our diversity goal is to employ people based on job requirements that represent
the diversity of our surrounding communities
we are targeting
– women to represent 20 per cent of our senior management by 2015 – women represented 155 per cent of our senior management in 2014
– women to represent 40 per cent of our 2015 graduate intake – women represented 318 per cent of our 2014 graduate intake
– 15 per cent of our 2015 graduate intake to be nationals from regions where
we are developing new businesses
– 178 per cent of our 2014 graduate intake were nationals from regions
where we are developing new businesses
by 2015 all operations have in place locallyappropriate publiclyreported
social performance indicators that demonstrate a positive contribution to the
economic development of the communities and regions where we work
consistent with the millennium development goals
we met our target and all operations have locallyappropriate publicly
reported indicators in place
riotintocom 21
strategic report directors’ report financial statements production reserves
and operations
additional information sustainable development continued
performance data 20102014
2014 2013 2012 2011 2010
social
fatalities at managed operations from safety incidents 2 3263
fatalities at managed operations from health incidents – –1 – –
all injury frequency rate per 200000 hours worked 059 065 067 067 069
new cases of occupational illness per 10000 employees 15 16 15 13 20
employees number
a
60000 66000 71000 68000 77000
environment
greenhouse gas emissions intensity indexed relative to 2008 820 832 941 959 961
total energy use petajoules 450 484 502 516 513
freshwater used billion litres 465 436 446 465 457
land footprint – disturbed square kilometres 3592 3556 3530 3485 3453
land footprint – rehabilitated square kilometres 502 472 446 422 420
economic contribution
value add us million
a b
29178 31818 26195 38193 33812
payments to suppliers us million
a
21370 26054 30271 28444 27486
community contributions us million 261 331 291 294 166
 numbers restated from those originally published to ensure comparability over time amendments due to changes in measurement and calculation methodologies or immaterial
updates to data
a these figures include the group’s share of joint ventures and associates
b value add is the sum of labour costs payments to governments and returns on capital invested in operations
social
safety
2014 proved to be our best year ever in terms of injury rate performance our
all injury frequency rate aifr which includes data for employees and
contractors is one of the key safety measures we consider in monitoring our
performance at the end of 2014 our aifr was 059 per 200000 hours worked
over the last five years we have reduced our aifr by 145 per cent our lost
time injury frequency rate ltifr was 037 per 200000 hours worked in 2014
our commitment to safety is the foundation of how we operate as we work to
achieve our vision of everyone going home safe and healthy after each
working day we believe we can prevent fatalities injuries and illness by
effectively identifying and controlling risks in our business
for us to achieve our goal of zero fatalities every person working at rio tinto
must be fully engaged to this end we are building a positive safety culture
where everyone contributes to improving our safety performance and has the
confidence to stop work and ensure it is safe
we have a long history of good safety performance and strive to improve on
this every year in 2014 we updated our safety strategy to confirm our focus
on injury reduction and strengthen our emphasis on fatality elimination and
catastrophic event prevention this helps us drive effective risk management
identify critical risks verify that we have controls in place and provide our
people with appropriate training
regrettably we did not meet our goal of zero fatalities in 2014 two people
lost their lives while working at rio tinto managed operations darryl
manderson died due to an equipment incident during maintenance activities at
the gove alumina refinery in australia enrick gagnon died in a train
derailment incident at the iron ore company of canada these are tragic
events that affect families friends and workmates we provide support and
counselling to those who have lost loved ones
to achieve our target of zero fatalities it is essential we learn from both actual
and potential significant incidents to prevent them happening again we are
strengthening our investigative process so that we improve our understanding
of the factors that lead to fatalities and the behavioural and process changes
needed to eliminate them we continue to collaborate industrywide to share
and apply best practice
this focus on investigation and sharing lessons learned extends to our non
managed operations further discussion of this is covered on page 25
we continued our focus on incorporating learnings from the oil and gas
industry into our management of process safety  we have projects in place to
– build leader awareness and competence
– improve incident reporting and investigation and
– deepen our understanding of the process safety risks and the effectiveness
of controls through rigorous process hazard risk analysis studies
health
we provide a healthy environment for our workforce we continue to focus on
identifying minimising and managing key occupational health risks to control
occupational exposures we also focus on promoting the fundamentals of
fitness for work particularly for safetycritical roles
we are targeting a yearonyear improvement in the rate of new cases of
occupational illness in 2014 we reduced our rate of new cases of occupational
illness by six per cent from 2013 the main types of occupational illnesses
recorded relate to musculoskeletal disorders 49 per cent stress 33 per
cent and noiseinduced hearing loss four per cent
worldwide our employees face occupational health risks that vary significantly
because of the diversity and geographic spread of our operations we now
have a 2015 group target for all managed operations to have reviewed – and
increased their focus on managing – their health risks through
implementation of critical control management plans ccmps to address their
specific material health risks by the end of 2015 this will help businesses to
focus on the right issues and have the right critical controls in place
the process we are using to help businesses put these plans in place has led
to a more pragmatic focused approach to the control of material health risks
we have helped businesses to develop internal competency in this area forty
one per cent of managed operations have identified their critical health risks
and implemented ccmps most 89 per cent believe they are well placed to
meet the ccmp target by the end of 2015
in 2014 we revised our health standards to simplify them to provide a
consistent framework for managing health risks and focus on material risks for
the group these will be rolled out in 2015 this change aims to encourage
improved ownership of the standards by operations’ leaders and ensure we are
managing the impacts and risks related to our operations in order to protect
employees and improve our workplaces
22 riotintocom the potential for fatigue to contribute to safety incidents is well understood
to improve fatigue management we use research tools and technology to
complement our programmes including personal alerting tools personal
monitors to measure sleep quantity quality and associated mental
effectiveness and scheduling
across many industries the potential for mental health problems to lead to
short and longterm disability employee turnover and occupational injuries is
becoming better understood in partnership with subject matter experts in this
field we have developed tools and training that will support the management of
mental health risks for our workers these cover a broad range of areas across
mental health management including crisis response understanding mental
health and ultimately improving the wellbeing and resilience of our workforce
march 2015 marks one year since the world health organisation who was
notified of an outbreak of ebola in west africa in guinea where we have
operations 2730 cases were reported and 1739 deaths since the outbreak
began responding to the outbreak a rio tinto business resilience team was
established and a number of control measures have been implemented in
partnership with the guinean government who and other international
organisations we have put prevention measures in place both for our
employees and the local guinean communities we have supported the
government and communities through awareness raising and providing
logistics and food as part of our efforts we have organised and conducted
prevention and awareness campaigns distributed hygiene kits and provided
support to local hospitals with protective equipment and medical supplies to
date none of our employees or their families in guinea have been affected by
the disease
rössing was challenged by local and international stakeholders in relation to
the longterm health of and impacts from radiation on its employees at the
rössing mine in namibia it was alleged that employees were not given
access to their medical records in fact since the mine started in 1976 all
employees have had access to their own health records and rössing has
longstanding standards and programmes to help manage health risks
including monitoring and academic review for 2015 rössing will undertake
a new epidemiological study this study will be conducted by independent
experts and will be peer reviewed
people
the way we work sets out the principles that form the foundation of our
business collaboration fair treatment and living our values of respect
integrity teamwork and accountability
we seek to hire motivate and retain people who demonstrate our values and
are passionate about making a difference to our business and the
communities in which we live and work we employ people on the basis of job
requirements and do not discriminate on grounds of age ethnic or social
origin gender sexual orientation politics religion disability or any other
status we do not employ forced bonded or child labour we recognise the
right of all employees to choose to belong to a union and seek to bargain
collectively we employ people with disabilities and make considerable efforts
to offer suitable alternative employment and retraining to employees who
become disabled and can no longer perform their regular duties
to ensure that what we do creates longterm value for all our stakeholders
we set clear performance objectives for employees we have groupwide
performance and remuneration systems that ensure we assess employees
consistently and transparently by engaging with employees about the
business and their career aspirations we make a clear link between
performance and reward
in 2014 we employed 60000 people including the group’s share of joint
arrangements and associates of these approximately 31000 were located in
australasia 16000 in north america 7000 in africa 4000 in europe and
2000 in central and south america see page 180 for a breakdown of
employees by business units
throughout 2014 we remained one of the largest private sector employers of
indigenous australians with over 1650 full time indigenous employees who
represented approximately 75 per cent of our permanent australian workforce
in addition to our permanent indigenous workforce we had over 550 indigenous
contractors working on our australian mine sites our local employment
commitments are often managed through directlynegotiated agreements with
traditional owners
diversity helps us generate new and innovative ways of thinking we are
committed to increasing the representation of women in our business and
remain focused on ensuring our workforce is representative of the countries
and communities in which we operate women represented 318 per cent
female 34 male 73 of our graduate intake in 2014 214 per cent female 3
male 11 of the board 155 per cent female 104 male 565 of our senior
management and 187 per cent female 9963 male 43122
c
of our total
workforce in 2014 178 per cent of our graduate intake were nationals from
regions where we are developing new businesses further information on
diversity and inclusion can be found on page 60 in the corporate
governance section
we recognise we have further work to do to deliver on our diversity targets for
2015 and this is reflected in our work plan we will continue to develop our
graduate talent to build on the completion of a successful threeyear
emerging regions graduate intake programme from 2011 to 2014
our 2014 employee survey showed that our people continue to report high
levels of engagement with employees feeling that safety efficiency and
flexibility have improved since the last survey they believe that we can do
more to celebrate our successes and manage personal performance action
planning has occurred across the group with improvement plans developed
in partnership between leaders and employees the implementation of these
plans will continue throughout 2015
good communication and open honest dialogue are vital if we are to meet
the expectations of our employees rio tinto’s culture of leaderled
communication and engagement is supported by a number of communication
tools these include myriotinto a portal dedicated to employment needs and
keeping employees informed of group updates news and announcements
communities and regional development
we strive to build good relationships with our host communities we engage
with them to understand the social environmental and economic implications
of our activities seeking to minimise negative impacts and bring shared value
totheplaceswherewework
we work to a communities and social performance csp framework based on
building knowledge engaging with communities and developing programmes
that reflect local community priorities our csp programme and our policy
standards and guidance notes support this
during 2014 our business contributed to just under 2200 socioeconomic
programmes covering a wide range of activities such as health education
environmental protection housing agricultural and business development
in 2014 we spent us261 million on these community contribution
programmes there was a decrease in overall community contributions of
21 per cent compared to 2013 which reflects prevailing market conditions
divestments and completion of key programmes at developing projects such
as oyu tolgoi and la granja
our communities target requires that by 2015 all operations must have
in place locallyappropriate publiclyreported social performance indicators
that demonstrate a positive contribution to the economic development of the
communities and regions where we work this is consistent with the un’s
millennium development goals we met our target and 100 per cent of
operations have the indicators in place and have reported them publicly in
2014 during 2015 we will establish a new group target to apply from 2016
to indicate progress and results of our communities and social performance
work in our businesses
c gender distribution for our total workforce is based on managed operations
excludes nonmanaged operations and joint ventures as of 31 december 2014
riotintocom 23
strategic report directors’ report financial statements production reserves
and operations
additional information sustainable development continued
we accept that we cannot meet everybody’s concerns and expectations
however wherever we operate we seek to do so with broadbased community
support by listening carefully to the concerns of our stakeholders and
consistently aiming to align their needs with our own we work to create
mutually beneficial outcomes through collaboration with our partners to
manage the shared risks responsibilities and benefits of the longlife
investments we make
environment
climate change
the scale of necessary emissions reductions – coupled with the world’s
increasing requirements for secure affordable energy – create large
challenges which require worldwide attention our climate change programme
focuses on reducing the energy intensity of our operations as well as the
carbon intensity of our energy
our total greenhouse gas ghg emissions were 339 million tonnes of carbon
dioxide equivalent co
2
e in 2014 35 million tonnes lower than in 2013 in
2008 we set a target of a ten per cent reduction in total ghg emissions
intensity to be achieved by 2015 we have reduced our total ghg emissions
intensity by 18 per cent compared with 2008 currently beating our 2015
target over the same period absolute emissions were reduced by 31 per cent
a new target will be set in 2015 that extends the existing external target to
2020 this will focus on the challenge to increase energy efficiency targets
will be developed in collaboration with businesses and take into account their
current circumstances and future plans
our business is inherently energy intensive the majority of our ghg
emissions are generated from energy use electricity fuel and chemical
processes anodes and reductants during mining milling and smelting
activities at our sites the majority 65 per cent of the electricity we use is
from hydropower
transportation processing and use of our products also contribute
significantly to ghg emissions in 2014 the three most significant sources of
indirect emissions associated with our products were
– approximately 53 million tonnes of co
2
e associated with third party
transport of our products and raw materials
– an estimated 1296 million tonnes of co
2
e associated with customers
using our coal in electricity generation and steel production
– approximately 4594 million tonnes of co
2
e associated with customers
using our iron ore to produce steel these emissions are not all in addition
to the coaluse emissions above as some customers use both our iron ore
and our coal to produce steel
to assess how carbon policy and regulation will affect our businesses and our
products in the future we closely monitor national and international climate
and energy policy developments and we advocate constructively for policies
that are environmentally effective economically efficient and equitable we
also assess the potential risks to the resilience of our operations from
changing climatic events
further information on the group’s greenhouse gas emissions is included in
the directors’ report on page 48
closure
although it may extend over decades mining is a temporary land use
it is a priority that we plan ahead for the closure of our operations after the
commercially recoverable ore is exhausted we must balance the needs and
expectations of the present with those of future generations while responding
to environmental and social challenges of mine closure
the closure standard applies to all our managed operations and to non
operational legacy sites this provides consistency in closure planning and
management it also helps us identify opportunities for generating positive
socioeconomic benefits from our activities
closure planning is integrated into our operational activities and we aim to
progressively rehabilitate as much land as possible prior to closure in 2014
26 per cent of our disturbed land excluding land disturbed for hydroelectricity
dams had been rehabilitated our biodiversity goal is also closely connected to
closure planning and management at sites with high or very high biodiversity
values we aim to have achieved a net positive impact npi on biodiversity or
have a clear set of criteria that demonstrates trajectory to npi agreed by the
time we close operations these sites are determined by their proximity to
biodiversityrich habitats species of conservation significance and the site
conservation context in 2014 32 of our operations were prioritised with either
high eight or very high 24 biodiversity values to achieve our goal these
sites are required to develop and implement biodiversity action plans
stakeholder consultation – with local communities including traditional
landowners governments and employees – is a fundamental part of our
closure planning
water
wherever possible we prevent – or otherwise minimise mitigate and
remediate – the impact that our operations may have on water resources our
approach to water management is based on the identification assessment and
control of waterrelated risks we seek riskbased local solutions to promote
sustainable water supply for our operations and communities
for many years our focus has been on reducing the freshwater use per tonne
of product and we set ourselves a target for this metric from 2008 to 2013
however over this period we learnt that this metric alone did not always
address the issues that have the greatest potential to impact our performance
or that were of most concern to local stakeholders
water challenges and risks vary by region and site so we have redefined our
group water target to better reflect the local and regional conditions and the
risks to the environment where we operate the current group water target
requires that by 2018 all managed operations with material water risk will
have reviewed and improved their management of these material water risks
and will have achieved their approved local water performance targets
a site is identified as having a material water risk where there is potential for a
high or critical impact on the business through effects on the environment
production community compliance or reputation
local water performance targets have been set to improve the sitespecific
water performance these cover three areas water supply ecological impacts
and water surplus management each site has a target that is appropriate to its
specific operational circumstances at the end of 2014 66 per cent of managed
operations were on track to meet their approved local water performance
targets by 2018 and the remaining sites are committed to making progress and
will have submitted by the end of 2015 clear plans to meet these targets
unfortunately five incidents related to water were reported to the executive
committee in 2014 these are listed in the environmental regulation section
included in the directors’ report on page 47 we use these incidents and our
annual assessment of performance against the targets to focus attention and
effort on those sites and businesses that need support to improve their water
management performance
in 2014 our total water use was 834 billion litres and total recycled water was
264 billion litres this is consistent with 2013 performance
environmental regulation
we are subject to various environmental regulations and are required to
disclose grouplevel environmental incidents and fines further information on
the group’s environmental regulation is included in the directors’ report on
page 47
24 riotintocom economic
economic contributions
our operations can have a substantial impact on the regions and countries in
which we operate through our tax payments to local and national
governments the direct and indirect employment we generate and our
community programmes
globally the group’s economic contribution was us51 billion
d
in 2014 this
includes
– us29 billion in value add made up of payments to employees payments
to governments and returns to capital
– us21 billion as payments to suppliers
we are committed to contributing to the social and economic development of
our host communities it is important to our shareholders employees and
many other stakeholders that we contribute to social stability through local
employment opportunities procurement and the transparent payment of tax
and dividends
details of payments to governments are available in our report on taxes paid
in 2014 which is made available on the group’s website
the figures presented in this section include the group’s share of joint
ventures and associates
nonmanaged 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
coppergold 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 and encourage them to embed a strong
safety and security culture in their workforces
escondida
rio tinto has a 30 per cent interest in escondida which is managed by bhp
billiton our seats on the owners’ council ensure we have regular input on
strategic and policy matters in 2014 escondida began construction of the
escondida water supply project to develop a new 2500 litre per second
seawater desalination facility this project will ensure a continued water supply
to sustain operations while minimising escondida’s need to use groundwater
escondida is recognised as having a worldclass process for managing
significant health safety and environmental risks rio tinto is in the process of
adopting the escondida process to effectively manage critical fatality risk and
has benefited from escondida’s guidance and willingness to openly share
its learnings
grasberg
pt freeport indonesia ptfi a subsidiary of freeportmcmoran inc owns
and operates the grasberg mine in papua indonesia rio tinto has a joint
venture interest attributable to the 1995 mine expansion which entitles it 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 engage with and influence
ptfi through five formal channels the operating technical communities and
sustainable development committees and the tailings board
tragically there were six industrial fatalities at ptfi in 2014 four at the
surface mine involving a collision between a light vehicle and a haul truck one
due to a fall of ground in the underground operation and one due to a roll
over involving a concrete mixer truck in the surface area of the operation we
have worked closely with and continue to support the ptfi leadership team in
the investigations and in the postinvestigation lesson implementation in
2014 senior rio tinto leaders and technical specialists visited the site shared
our group’s knowledge and provided practical advice to support ptfi’s actions
to learn from and avoid a recurrence of these tragic accidents there was a
further fatality at grasberg in early 2015 as a result of an equipment
pedestrian interaction
d due to rounding sum does not equal the total shown
the operation employs controlled riverine tailings transport a process that the
world bank does not consider as good industry practice on the basis that it is
contrary to the international finance corporation’s 2007 environmental
health and safety guidelines for mining however several independent expert
reviews concluded that this method represents the best available option for
this operation because of the extremely rugged topography high rainfall and
significant seismic activity we continue to believe that this method is
appropriate given these conditions but have adopted the standard that
riverine and shallow marine disposal of mining and processing mineral waste
will not be used at new rio tinto managed operations
rio tinto technical personnel review and provide guidance and oversight of
the controlled riverine tailings management system with a focus on
geotechnical geochemical and environmental issues there is an official
multidisciplinary technical committee which addresses environmental issues
along with technical issues related to geology worker health and safety mine
planning processing and tailings management rio tinto is represented by a
senior environmental manager on the ptfi tailings management board
which meets twice a year at grasberg and includes thirdparty experts the
emphasis of rio tinto’s involvement is to promote continuous improvements
in the environmental performance of the existing tailings management
system historic and ongoing improvements since rio tinto’s involvement
began include
– construction extension and maintenance of a levee system to limit the
lowlands depositional footprint
– diversion of the ajkwa river system in the lowlands out of the permitted
tailings deposition area
– ongoing revegetation programmes in the deposition area
– ongoing efforts to increase tailings retention within the deposition
area and
– ongoing efforts to ensure that the tailings remain geochemically benign
and will therefore not pose an acid rock drainage risk
governance
human rights
rio tinto respects and supports human rights wherever it operates in a way
that is consistent with the universal declaration of human rights our human
rights approach is founded in the way we work our human rights policy and
voluntary commitments it is also consistent with the un guiding principles on
business and human rights ungps in implementing our policies we are
subject to local laws we build on compliance with local laws and where our
policies and procedures are more stringent we operate to these standards
in line with the human rights due diligence process in the ungps we look to
understand our potential and actual human rights impacts ensure we are
managing them and communicate our performance we embed human rights
considerations into existing corporate processes including risk analysis impact
assessment and complaints handling and may also conduct standalone
human rights studies where appropriate while we respect all internationally
recognised human rights there are some issues to which we pay particularly
close attention because of our geographical and operating footprint these
include security land access and resettlement environment including access
to water and sanitation cultural heritage including the rights of indigenous
peoples labour rights and inmigration related impacts on local communities
including access to health services
riotintocom 25
strategic report directors’ report financial statements production reserves
and operations
additional information sustainable development continued
we work with suppliers contractors and other partners to avoid our
involvement in human rights harm and to positively influence human rights
through those business relationships the way we work and our procurement
principles apply to all suppliers and contractors working with rio tinto or on its
behalf the principles reiterate that we oppose and prohibit forced bonded or
child labour they specify that suppliers should maintain human rights policies
and have a process to assure compliance prequalification checks contractual
arrangements and ongoing monitoring help us to ensure that suppliers follow
these principles
we provide employees an online human rights training programme it explains
why respecting human rights is important what human rights impacts we
might have and internal resources and mechanisms to help manage them
last year approximately 1500 employees a large proportion of whom work in
our procurement function completed this training we also provide site
specific training and in 2014 developed a training package that sites can adapt
to address their priority human rights issues
rio tinto has made voluntary commitments to the oecd guidelines for
multinational enterprises un global compact and the voluntary principles on
security and human rights vpshr to avoid human rights violations
through our security arrangements we provide training for security personnel
and continue to conduct security and human rights assessments at all high
risk sites we have developed practical guidelines toolkits and training on
implementing the vpshr our online vpshr training became mandatory for
all security personnel at high risk sites from january 2014 and is strongly
recommended for all other sites in 2014 we conducted inperson vpshr and
use of force training for guards at four sites in africa this training involved
both private and public security
under our communities standard all sites must have a complaints disputes
and grievance mechanism in place in line with the effectiveness criteria for
operationallevel grievance mechanisms in the ungps speakout the
group’s confidential and independentlyoperated whistleblowing programme
can also be used to lodge human rightsrelated complaints
we respect the land connection of indigenous communities and seek mutually
beneficial agreement with affected communities in the development and
performance of our operations we strive to achieve the free prior and
informed consent of indigenous communities as defined in the 2012
international finance corporation performance standard 7 and the 2013 icmm
position statement on indigenous peoples and mining we seek consent as
defined in relevant jurisdictions and ensure agreementmaking processes are
consistent with such definitions
integrity and compliance
the way we work sets out our overall commitment to integrity and
compliance it puts our values – respect integrity teamwork and
accountability – into practice and holds us to the highest ethical standards to
behave in ways that earn the trust of others we operate within all applicable
laws and regulations and are dedicated to open and transparent dealings with
our stakeholders
our compliance standards are core to our integrity and compliance
programme in 2014 we introduced a new business integrity standard which
applies to all rio tinto businesses and functions developed in consultation
with compliance managers from across the businesses it consolidates and
streamlinesfourpreviousbusinessintegrityrelated standards antibribery
due diligence fraud business integrity anticorruption and business
integrity conflicts of interest this ensures that employees and contractors
have a single point of reference for integrity and compliance matters the
standard applies a riskbased approach with simplified language and
improved readability
we refreshed our online training to ensure it is geared more towards the risks
encountered by each individual the new system incorporates a wider range
of shorter taskbased or awareness modules which tailor the training
dependingontheindividual’sroleeachpersonthencompletesasetofcore
and elective modules
we are committed to a culture of transparency and speaking up about issues
we provide our businesses with internal and external channels for raising
concerns anonymously if required speakout the group’s confidential and
independentlyoperated whistleblowing programme enables employees to
report anonymously subject to local law any significant concerns about the
business or behaviour of individuals this could include suspicion around
safety violations environmental procedures human rights financial reporting
or business integrity issues in general we encourage employees to raise
their concerns to management first speakout is always available as an
alternative option
in 2014 588 speakout reports were lodged representing approximately five
per cent fewer than the number reported in 2013
in line with our commitment to transparency and good governance we issue
information on the group’s operational financial and sustainable development
performance in a timely way through a number of channels such as media
releases and regulatory filings we communicate views to governments and
others on matters affecting our business interests
assurance
we engaged an independent external assurance organisation
pricewaterhousecoopers to provide the board of directors of rio tinto plc and
rio tinto limited with assurance on selected sustainable development subject
matters as explained on the next page
pricewaterhousecoopers’ assurance statement satisfies the requirements
of subject matters 1 to 4 of the icmm assurance procedure whilst our online
gri report has been checked by gri satisfying subject matter 5 of the
icmm procedure
further information on external auditors and internal assurance is included in
the directors’ report under the corporate governance section on pages 62
and 63
26 riotintocom independent limited assurance report
what we found
based on the work described below nothing has come to our attention that causes us to believe that the selected
subject matter for the year ended 31 december 2014 has not been prepared in all material respects in accordance
with the reporting criteria
to the directors of rio tinto plc and rio tinto limited together rio tinto
what we did
rio tinto engaged us to perform a limited assurance engagement on the
selected subject matter within the sustainable development sections of the
rio tinto 2014 annual report and the rio tinto 2014 strategic report for the
year ended 31 december 2014
selected subject matter
– rio tinto’s assertion that it has incorporated the requirements of the
10 sustainable development principles of the international council on
mining and metals icmm and the mandatory requirements set out in
icmm position statements into its own policies strategies and standards
– rio tinto’s assertions regarding the approach that it has adopted to
identify and prioritise its material sustainable development risks
and opportunities
– rio tinto’s assertions regarding the existence and status of
implementation of systems and approaches used to manage the
following selected sustainable development risk areas
–safety
– greenhouse gas emissions
– energy use
–water
– the following rio tinto performance data related to the selected
sustainable development risk areas
– number of fatalities
– all injury frequency rate
– lost time injury frequency rate
– number of lost time injuries numerator of the lost time injury
frequency rate
– total greenhouse gas emissions
– greenhouse gas emissions intensity
– total energy use
– percentage of managed operations with material water risk that are on
track to achieving their approved local water performance targets
reporting criteria
the subject matter above has been assessed against the definitions and
approaches which will be presented at wwwriotintocomsd2014 as at
6 march 2015
responsibilities
pricewaterhousecoopers
our responsibility is to express a conclusion based on the work we performed
rio tinto
rio tinto management is responsible for the preparation and presentation of
the selected subject matter in accordance with the reporting criteria
what our work involved
we conducted our work in accordance with the international standard on
assurance engagements 3000 assurance engagements other than audits or
reviews of historical financial information and for selected subject matter
relating to greenhouse gas emissions the international standard on assurance
engagements 3410 assurance engagements on greenhouse gas statements
these standards require that we comply with independence and ethical
requirements and plan the engagement so that it will be performed effectively
main procedures performed
– making enquiries of relevant management of rio tinto
– evaluating the design and effectiveness of the key processes and controls
for capturing collating and reporting the performance data within the
selected subject matter
– testing performance data on a selective basis substantively at both an
operational and corporate level which included testing at a selection of
operations from across aluminium energy iron ore copper and
diamonds  minerals
– undertaking analytical procedures over the performance data
– reviewing a sample of relevant management information and
documentation supporting assertions made in the selected subject matter
we believe that the information we have obtained is sufficient and appropriate
to provide a basis for our conclusion
liza maimone pricewaterhousecoopers
partner canberra
4 march 2015
liability limited by a scheme approved under professional standards legislation
inherent limitations
inherent limitations exist in all assurance engagements
due to the selective testing of the information being
examined therefore fraud error or noncompliance may
occur and not be detected additionally nonfinancial
data may be subject to more inherent limitations than
financial data given both its nature and the methods
used for determining calculating and sampling or
estimating such data
restriction on use
this report has been prepared in accordance with our
engagement terms to assist rio tinto in reporting its
sustainable development performance we do not accept
or assume responsibility for the consequences of any
reliance on this report for any other purpose or to any
other person or organisation any reliance on this report
byanythirdpartyisentirelyatitsownrisk
we consent to the inclusion of this report in the rio tinto
2014 annual report and the rio tinto 2014 strategic
report to assist rio tinto’s members in assessing whether
the directors have discharged their responsibilities by
commissioning an independent assurance report in
connection with the selected subject matter
limited assurance
this engagement is aimed at obtaining limited assurance
for our conclusions as a limited assurance engagement
is restricted primarily to enquiries and analytical
procedures and the work is substantially less detailed
than that undertaken for a reasonable assurance
engagement the level of assurance is lower than would
be obtained in a reasonable assurance engagement
riotintocom 27
strategic report directors’ report financial statements production reserves
and operations
additional information aluminium
financial performance
2014
us million
2013
us million
revenue 12123 12463
net cash generated from operating activities 2550 1696
underlying earnings 1248 557
capital expenditures 2021 2226
net operating assets 18297 18814
strategy and strategic priorities
rio tinto’s aluminium group is focused on delivering industryleading
performance through the cycle and strong returns in the years to come the
business has been reshaped around the core pillars of bauxite and the group’s
smelting assets that are in the first quartile of the industry by taking action to
move the smelting asset base down the cost curve the portfolio has been
positioned squarely into the first quartile upon completion of the kitimat
modernisation project more than 80 per cent of the aluminium group’s
smelter assets will be in the first quartile compared with only 40 per cent in
2011 following the transition of gove to a bauxite export business the group
has ramped up bauxite exports and supplied around 50 per cent of chinese
bauxite imports in 2014 its goal is to establish its cape york bauxite as the
productofchoiceforchineseseabornedemand
in 2015 the aluminium group intends to capitalise on its competitive
advantages through
– growing the group’s sectorleading highmargin bauxite position
while further enhancing performance and cash generation from its
lowcost smelters
– driving operating excellence at the group’s alumina refineries providing
competitive supply security to its firstquartile smelter portfolio
– capitalising on its commercial and trading capabilities to increase margins
and value
– achieving continuous improvement from driving sustainable cost
reduction productivity improvement initiatives and working capital
reductions across all the aluminium group’s operations
– optimising the portfolio by divesting noncore operations to concentrate
on strategic toptier assets
– exercising a disciplined approach to capital allocation geared to delivering
key brownfield and modernisation projects that leverage the group’s
competitive advantages in bauxite ore reserves and selfgenerated energy
safety
the aluminium group’s allinjury frequency rate continued its steady
downward trend in 2014 the key allinjury metric at the year’s end was 053
which represented a 20 per cent improvement over the 066 rate at the end of
2013 however despite showing an incremental improvement in the group’s
overall safety performance the tragic death of darryl manderson at the gove
operations in australia in the first half of 2014 is a sobering reminder of the
importance of the relentless focus on safety the aluminium group is
committedtoazeroharmworkplaceandthereissimplynoroomforthese
kinds of accidents the group has therefore redoubled its efforts to improve
further through initiatives such as the “zero harm by choice” leadership
development programme a human performance initiative and activities to
improve process safety drawing on lessons learned from previous incidents
the group is constantly working to implement enhanced policies systems and
procedures to improve performance
greenhouse gas emissions
rio tinto’s aluminium group has one of the lowest carbon footprints in the
aluminium industry the group has reduced greenhouse gas emissions by
40 per cent since 2008 almost 80 per cent of its total power needs comes
from nonfossilfuel based hydro 72 per cent and nuclear six per cent
power compared with an industry average of 35 per cent for nonfossilfuel
based power this means that the emissions intensity from the group’s
smelters is around half of the industry average – less than six tonnes of co
2
equivalent per tonne of aluminium versus an industry average of around
11 tonnes
review of operations
with effect from 1 june 2014 alfredo barrios succeeded jacynthe côté
as chief executive of the aluminium group and also joined the rio tinto
executive committee
the group’s position as a sectorleading business is demonstrated in its
financial performance in 2014 the aluminium group’s underlying earnings
increased by 124 per cent to us1248 million us691 million higher than in
2013 the group achieved underlying ebitda of us2930 million which
represented a gain of 55 per cent from 2013 while widening the gap with the
competition on the strength of its industryleading ebitda margins the
improved underlying ebitda combined with reduced working capital levels
has increased net cash generated from operating activities by us854 million
to us2550 million and generated positive free cash flow the solid financial
results reflected numerous ongoing cost reduction and productivity
improvement initiatives across the aluminium group as well as benefits
derived from rising regional and product premiums and the impact of the
weaker australian and canadian dollars valueadded products which are
produced to individual customer specifications represented some 62 per cent
of the primary metal produced by rio tinto in 2014 which translated into
superior realised prices and margins
the average london metal exchange price for aluminium in 2014 was
us1867 per tonne which compares with an average of us1845 per tonne
in 2013 rio tinto’s average realised price for primary metal products –
including market and product premiums – was us2395 per tonne in 2014
compared with us2249 per tonne in 2013
cash cost improvements lifted earnings by us168 million us232 million
pretax greater production efficiencies lower raw material prices reduced
functional costs and increased production at various operations all helped to
reduce unit cash costs of production
in 2014 record bauxite production was achieved at the sangaredi mine in
guinea and the weipa mine in australia delivered a similarly strong
performance to that achieved in 2013 however global bauxite production was
marginally lower in 2014 compared with 2013 as gove production was
impacted by infrastructure constraints following the shift to bauxite exports
after curtailment of the refinery exports are expected to ramp up towards a
run rate of eight million tonnes per annum in 2015 as export infrastructure
constraints are addressed
alumina production increased by six per cent in 2014 this position will be
further improved during the second half of 2015 when the expanded yarwun
refinery in australia is expected to reach full capacity as design and
construction challenges are progressively addressed
rio tinto’s share of aluminium production for 2014 totalled 34 million tonnes
which was broadly in line with 2013 production from the new ap60 plant and
capacity creep across the smelter portfolio offset the closure of shawinigan in
november 2013 and the partial shutdown at kitimat as preparations are made
to commission the modernised smelter eight smelters representing 54 per
cent of 2014 production volumes achieved annual production records
28 riotintocom the aluminium group continues to make some difficult but necessary
decisions with respect to portfolio management the gove site in australia is
now operating as a bauxite export business following the curtailment of
refinery operations in may 2014 the plan is to ramp up export capacity from
six to eight million tonnes per annum towards the end of 2015 following
upgrades to export infrastructure while the workforce at gove has been
reduced the bauxite business will be used to sustain an important economic
base for the region and its indigenous population
since 2009 rio tinto has closed curtailed or divested approximately one
million tonnes of primary aluminium capacity and three million tonnes of
alumina capacity in october 2014 rio tinto sold its 50 per cent interest in the
søral aluminium smelter in norway and in december divested its 4667 per
cent interest in the alucam smelter in cameroon
the new arvida aluminium smelter – ap60 technology centre in quebec’s
saguenaylacsaintjean region was inaugurated in january 2014 with an
initial capacity of 60000 tonnes per annum the smelter provides an
industrialscale research  development platform for commercialisation of
rio tinto’s latestgeneration ap technology™ this facility also benefits from
lowcost selfgenerated hydropower
in iceland modernisation of the isal smelter including the addition of a
leadingedge casting facility to produce valueadded billet was completed in
the first half of 2014 annual capacity has been increased from 190000 to
205000 tonnes
in june 2014 as a result of further revisions to future capital required to
complete the modernisation project at kitimat in british columbia and related
impacts on the project the kitimat assets were impaired by us800 million
net of tax in december 2014 an impairment reversal of us1 billion net of
tax was recognised relating to the pacific aluminium operations where
significant cost improvements and high regional and product premiums have
increased the value of the assets
development projects
the aluminium group’s development pipeline is focused on leveraging the
product group’s two sustainable competitive advantages unrivalled positions
in energy and bauxite
at the year’s end preparations were being finalised for full commissioning of
the transformed kitimat smelter in the first half of 2015 leveraging the
aluminium group’s whollyowned kemano hydropower resource and high
efficiency ap smelting technology the kitimat modernisation project will
increase production capacity at the smelter by more than 48 per cent to
approximately 420000 tonnes per year while reducing overall environmental
emissions by nearly 50 per cent kitimat will be one of the lowestcost
smelters in the world – in the first decile of the cost curve – and is strategically
located to supply key emerging markets in the pacific rim in august 2014
the board approved additional capital of us15 billion to complete the kitimat
project taking the total approved capital cost to us48 billion
in early 2014 rio tinto entered into an option agreement with lng canada for
an undisclosed sum exercise of the option would entitle lng canada to
acquire or lease a wharf and associated land at the kitimat port to facilitate a
proposed liquid natural gas export project the exercise of this option would
not impact the group’s ability to operate the kitimat aluminium smelter
rio tinto is now prioritising the south of embley bauxite growth project at
cape york queensland in australia with mining costs in the first quartile and
with attractive returns this is a tier 1 investment opportunity the project
includes mine port and infrastructure elements with a planned initial output
of 228 million tonnes per year and options using the same infrastructure to
later expand up to 50 million tonnes the project feasibility study is under way
the project will be brought to the board for approval in 2015
outlook
after several very challenging years there is growing optimism and positive
sentiment about the prospects for the aluminium industry the fundamentals
are strong with forecasters anticipating a healthy market deficit outside china
for the coming years
global primary demand reached around 54 million tonnes in 2014 and is
expected to grow in the range of six to seven per cent during 2015 aluminium
prices gradually improved over the course of 2014 and regional premiums
have continued to increase reflecting the tight market outside china
a combination of current forecast production rates and strong demand is
expected to result in the global market maintaining a supply deficit for 2015
crucially the exchina market appears set to continue a strong rate of
drawdown of stored metal in the coming years which is expected to result in
inventory returning to prefinancial crisis levels when measured against
growing demand
over the medium term forecasters envisage compound annual aluminium
demand growth of around four per cent through 2025 supported by increased
intensities in key applications most notably the transportation sector
aluminium’s unique properties – light weight strength and resistance to
corrosion – are driving increasing market penetration in the automotive market
it is expected that within the next ten years seven out of ten new pickup trucks
produced in north america will be aluminiumbodied as competitors follow the
lead of ford which recently introduced its first aluminiumbodied f150 many
other leading automakers also have been increasing the amount of aluminium
used in lightweight and fuelefficient car models
demand for alumina will be underpinned by aluminium and will be nearly
balanced given that alumina cannot be stored as easily as aluminium
or bauxite
prospects for bauxite – a sector where rio tinto enjoys an unrivalled position –
are particularly bright with a projected rate of growth outpacing that of
aluminium thanks in large part to robust demand in the chinese market the
emerging middle east market represents an additional opportunity
on the supply side exports from indonesia a major bauxite producer have
ceased in the wake of an export ban imposed by the indonesian government
that took effect in january 2014 although mediumterm uncertainty remains
sustained tightness in supply is expected with attractive growth opportunities
ranging from south of embley to rich deposits in brazil and guinea the
aluminium group is well positioned to capitalise on increased demand for
seaborne bauxite
riotintocom 29
strategic report directors’ report financial statements production reserves
and operations
additional information copper
financial performance
2014
us million
2013
us million
revenue 6282 5916
net cash generated from operating activities
a
1701 379
underlying earnings 912 821
capital expenditure 1011 1866
net operating assets 10581 12070
a net cash generated from operating activities excludes that from equity accounted
units escondida but includes dividends from equity accounted units
strategy and strategic priorities
the copper group’s strategy is to focus its resources on generating value from
a core portfolio of lowcost highvalue worldclass assets this includes
existing operations at rio tinto kennecott oyu tolgoi escondida and
grasberg and greenfield growth opportunities at la granja and resolution
the copper group’s goal is to set an industry profitability benchmark by
– focusing on a worldclass asset portfolio
– positioning itself in the first or second quartile of the cost curve
– delivering quality earnings by reducing costs and improving productivity
– making selective investments that can deliver growth to meet
market opportunities
the group’s strategic priorities are to
– improve productivity through safer better and smarter practices and
selected technology investments
– drive maximum value out of the products the group mines and optimise
the entire supply chain
– develop strong leadership and an aligned capable engaged and
collaborative workforce
safety
in 2014 the copper product group’s all injury frequency rate was 051
compared with 049 in 2013 while there has not been a fatal incident in the
copper group’s managed operations in the past two years unfortunately six
employees were killed at the nonmanaged grasberg operation during 2014
four in a haul truck incident one due to a fall of ground in the underground
operation and one due to a rollover involving a concrete mixer truck
during 2014 the group launched several new safety initiatives
– a critical risk management programme aimed at easily identifying and
mitigating the common risks that can lead to fatalities and catastrophic
accidents the programme was built on the principles of the material
safety risk management process at escondida where there have been no
fatalities since the process was put in place in 2011
– a hand safety campaign designed to increase employee awareness of safe
practices and decrease common injuries to hands and fingers
– drilling safety standards and improvements to underground control
safety standards
greenhouse gas emissions
the copper group’s 2014 greenhouse gas ghg emissions were 857 tonnes
of carbon dioxide equivalent per tonne of copper cathode produced compared
with 834 tonnes in 2013 the decrease in efficiency resulted from a planned
maintenance shutdown of the kennecott smelter which reduced copper
cathode production yearonyear despite the continued operation of the mine
and concentrator during the shutdown period as a result ghg emissions per
tonne of copper cathode produced were higher
review of operations
the copper group is focused on creating longterm value for shareholders in
the short term it aims to achieve this by improving earnings quality through
ongoing cost improvements and productivity gains in the medium term it
aims to develop attractive brownfield projects at kennecott and oyu tolgoi to
leverage the next copper market cycle in the longer term the group is
focused on two greenfield projects designed to deliver worldclass returns and
steady cash flows
in 2014 the group delivered significant improvements in productivity with a
seven per cent increase in mined copper from its operations at kennecott and
oyu tolgoi making rio tinto the world’s sixth largest supplier the group
produced 603 thousand tonnes of mined copper rio tinto share copper
operations also produced 487 thousand ounces of mined gold 4699 thousand
ounces of mined silver and 115 thousand tonnes of molybdenum as by
products
the copper group’s underlying earnings of us912 million were 11 per cent
higher than 2013 driven by increased gold and molybdenum sales
at kennecott the rampup of oyu tolgoi and delivery of further cash cost
savings the group generated sustainable cost reductions of more than
us900 million in 2013 and 2014 and is making good progress improving
operating costs in 2014 the copper group reduced working capital by
us500 million generated positive free cash flow for the first time since
2010 – delivering us800 million in free cash flow – and delivered underlying
ebitda margin improvement of 26 per cent compared with 2013 closing the
gap with its peer companies
the group’s impairment charge resulted from a review of the investment case
for the molybdenum autoclave process project at kennecott the review
concluded that the project which has been on care and maintenance since
early 2013 will be terminated the recoverable amount was determined based
on anticipated net disposal proceeds as a result a pretax impairment charge
of us559 million has been recorded against property plant and equipment
as part of ongoing work to focus its portfolio on highvalue worldclass assets
the group divested its ownership in the sulawesi nickel project in indonesia
and its 191 per cent stake in northern dynasty minerals owner of the pebble
copper and gold project in the bristol bay region of alaska
core operating assets
rio tinto kennecott rio tinto 100 per cent
kennecott supplies approximately 20 per cent of us refined copper
requirements and is one of the world’s few fullyintegrated mining
concentrating smelting and refining operations
in 2014 kennecott produced 2041 thousand tonnes of refined copper
2522 thousand ounces of refined gold and 115 thousand tonnes of
molybdenum production in 2014 was impacted by ongoing recovery from the
130 milliontonne landslide on the northeast wall of the bingham canyon
mine which occurred in april 2013 and a 65day planned smelter shutdown
completed in the fourth quarter of 2014 recovery work will continue in 2015
with production in the near and mediumterm impacted by continued removal
of slide material and constrained by ongoing management of pit wall stability
oyu tolgoi rio tinto 508 per cent interest in turquoise hill resources
located in mongolia’s south gobi desert oyu tolgoi is one of the world’s
largest coppergoldsilver mines in 2014 oyu tolgoi produced 148 thousand
tonnes of copper and 589 thousand ounces of mined gold 100 per cent basis
since the second half of 2014 deliveries to oyu tolgoi customers have
outstripped production and the operation ended the year with inventories at
normalised levels
escondida rio tinto 30 per cent interest
located in chile’s atacama desert escondida is the world’s largest copper
producing mine in 2014 escondida produced 11376 thousand tonnes of
mined copper 100 per cent basis copper production was higher yearon
year due to increased mill throughput and increased ore stacked for leaching
water constraints at escondida are expected to create some risk to production
volumes in 2015
30 riotintocom 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 ptfi a subsidiary
of usbased freeportmcmoran inc located in the province of papua
indonesia it is one of the world’s largest copper mines rio tinto’s share of
mined copper production at grasberg was 77 thousand tonnes in 2014
development projects
the copper group is focused on delivering highquality mediumterm projects
to extend mine life at its existing operations creating future options with
worldclass greenfield projects and developing innovations that drive safety
growth and productivity a phased development approach allows the group to
deploy capital in a way that maximises shareholder return minimises risk and
times new production to come online when the market requires
productivity and mine life extension
rio tinto kennecott
kennecott is at the early stages of its south pushback project which may
allow the copper group to extend the life of bingham canyon through
accessing additional copper units from approximately 510 million tonnes of
ore reserves
b

grasberg
ptfi continues to develop the largescale highgrade 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 240000 tonnes of ore per day following the anticipated
transition from the grasberg open pit in 2017
oyu tolgoi
the copper group is focused on unlocking the full value of oyu tolgoi and
remains committed to the underground development pending appropriate
investment conditions rio tinto continues to engage with the government
of mongolia to resolve a number of outstanding shareholder matters progress
project financing and meet certain conditions needed to proceed with the
proposed underground development project where a significant portion of
the value is contained
greenfield projects
la granja rio tinto 100 per cent
located in northern peru the la granja project is one of the world’s largest
known undeveloped copper resources
the project team is assessing a range of options to develop the large near
surface resource at la granja including staged development with early
production from leaching of both secondary sulphide and primary sulphide
mineralisation the team continues to successfully prove very good recoveries
from the leaching of chalcopyritedominant ore and has continued to build a
strong social consensus for the project
resolution copper rio tinto 55 per cent
the resolution copper project located in arizona us is one of the world’s
largest undeveloped copper deposits in 2014 drilling continued and the
project completed construction of the 10 mine shaft to final depth of 2116
metres drilling underground development and engineering studies continue
as the copper group works to optimise the business case
b this is only a portion of rio tinto kennecott’s current ore reserves see ore
reserves section of this report for rio tinto kennecott’s ore reserves including
breakout of all metals and classifications
resolution submitted a general mine plan of operations in 2013 in december
2014 president obama signed legislation that will allow the us federal
government to exchange 2400 acres of federally owned land immediately
adjacent to resolution’s operational site for 5300 acres of important wildlife
habitat conservation and recreational land owned by resolution both the land
exchange and proposed mine plan will now undergo a comprehensive
environmental and regulatory review that includes an assessment under the
us national environmental policy act this process will include public input
governmenttogovernment consultation with arizona native american tribes
and a us federal government appraisal of the exchange lands
growth and innovation
rio tinto copper is testing and evaluating technologies to drive improved safety
and productivity at its current mines and development projects the innovation
portfolio is being prioritised to ensure that the best projects are being pursued
and that there is a balance between short and longterm initiatives
in 2014 rio tinto opened the processing excellence centre after successful
trials at a number of copper and energy sites the centre is improving
concentrator performance by linking experts with operations across the
globe in realtime which has driven significant improvements at oyu tolgoi
and kennecott
during an industrialscale chalcopyrite heap leaching demonstration at
kennecott the group achieved expected copper extraction targets the growth
 innovation team is now conducting laboratory tests at its bundoora facility
near melbourne australia with the aim of enhancing leaching recovery further
this will allow the group to develop chalcopyrite deposits such as la granja
more efficiently
the copper group is working with a variety of partners in areas such as the
development of safer and more productive underground mining equipment
and processes as well as technologies for dynamic measurement of
underground rock mass and caving performance the goal of these projects is
to significantly improve safety and productivity during construction and
operation of underground mines
outlook
the copper market is expected to see a period of continued price weakness in
the short term as despite continued demand growth the market moves into a
surplus resulting from a number of new projects coming online however
beyond this challenging shortterm picture the medium and longterm
fundamentals remain robust with a substantial supply gap expected by the
end of the decade requiring further significant investment in new capacity the
continued urbanisation industrialisation and electrification of china and other
large markets creates a solid demand outlook while supply will be constrained
by the industry’s need to invest to offset grade declines and closures at
existing mines and by the many challenges of bringing on new projects
these market dynamics create opportunity for rio tinto copper the group
has a worldclass portfolio of lowcost assets and highquality growth
opportunities it has made material progress in reducing costs and is on
course to become a producer in the first or second quartile of the cost curve
and deliver superior profitability it is leveraging technology to make copper
group operations safer more productive and more sustainable the group is
pursuing highvalue growth opportunities at its existing operations in the
medium term and greenfield development projects in the longer term using
a phased approach to manage risk and time new production to come online
when the market requires finally the copper group is building strong
community partnerships and encouraging its employees to deliver results
through collaboration and sharing of best practices the group believes this
strategy will generate significant and sustainable shareholder value
riotintocom 31
strategic report directors’ report financial statements production reserves
and operations
additional information diamonds  minerals
financial performance
2014
us million
2013
us million
revenue 4150 4193
net cash generated from operating activities 1201 842
underlying earnings 401 350
underlying earnings excluding simandou 456 393
capital expenditure 508 1009
net operating assets 7308 7900
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 their quality of life demand growth for diamonds and
industrial minerals typically comes midtolate in the economic development
cycle following peak requirements for commodities such as iron ore and
copper the product group’s strategy is focused on operating safe lowcost
demandled businesses through its integrated marketing strategies and
insight the product group creates and grows global markets for its products in
order to deliver value for rio tinto and its shareholders
the product group’s strategy is focused on
– operating demandled integrated operations that can respond quickly to
the changing external environment
– creating and growing global markets through technical research and
development and market insight
– improving operating performance by reducing costs driving productivity
and streamlining the organisation
– strengthening its position in traditional segments and entering attractive
new markets
safety
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 fell to 048 in 2014 from 075 in 2013
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 employs 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
ebola which has had tragic human consequences is a critical issue for the
product group the priority for diamonds  minerals has been to ensure the
health and safety of employees contractors and their families in addition
diamonds  minerals has supported the government of guinea and
international organisations by donating more than us34 million worth of
equipment and inkind donations to facilitate the response to this disease
greenhouse gas emissions
overall greenhouse gas ghg emissions intensity increased slightly in 2014
this was largely due to lower production at rio tinto iron  titanium rtit
where a reduction in capacity utilisation of its smelters led to an increase in
ghg emissions per tonne of product this was reflected in a four per cent
increase in emissions intensity for rtit compared with 2013 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 diamonds  minerals group’s underlying earnings of us401 million were
15 per cent higher than 2013 excluding simandou exploration and evaluation
costs underlying earnings of us456 million were 16 per cent higher than
2013 this reflected favourable exchange rates higher diamond prices lower
exploration and evaluation costs higher sales volumes of titanium dioxide
feedstock borates and zircon and cash cost improvements partly offset by
lower prices for titanium dioxide feedstocks borates and zircon in absolute
terms cash operating costs were us223 million lower than 2013 including a
us152 million benefit from exchange rate movements net cash generated
from operating activities of us1201 million was 43 per cent higher than
2013 reflecting higher ebitda and improved working capital management
rio tinto diamonds rtd
rtd is a leading producer of rough diamonds with a product portfolio that
provides a presence in all major markets and market segments rio tinto’s
diamonds assets comprise the argyle diamond mine in australia rio tinto
100 per cent the diavik diamond mine in canada rio tinto 60 per cent
murowa diamonds in zimbabwe rio tinto 78 per cent and the bunder
diamond project in india rio tinto 100 per cent rtd markets its share of
rough diamond production through its centralised sales and marketing office
and has a niche cutting and polishing factory in australia for its highend
branded pink polished diamonds from the argyle mine which it sells to an
international customer base
rtd produced 139 million carats of rough diamonds in 2014 13 per cent
lower than in 2013 argyle production was negatively impacted by the move
from open pit to underground mining the processing of lower grade tailings as
underground production ramped up and a maintenance shutdown impacting
both underground crushers diavik production was in line with 2013 despite
lower grades thanks to improved mining rates and processing plant
improvements murowa production was seven per cent higher than in 2013
revenue in 2014 was six per cent higher than in 2013 reflecting higher sales
volumes at diavik and increased prices earnings of us104 million were
us51 million higher than 2013 the second crusher at argyle was
commissioned during the year and the rampup of the argyle underground
mine to full operation is on schedule to be completed by 2015 diavik has
been operating as a fully underground mine since 2012
rio tinto iron  titanium rtit
rtit is the largest producer of highgrade titanium dioxide feedstocks it
mines ilmenite at its whollyowned 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
rio tinto 80 per cent rtit produces highgrade titanium dioxide feedstocks
at its worldclass metallurgical complexes at rtft and rbm as well as
valuable coproducts including high purity iron steel metal powders zircon
and rutile
in 2014 titanium dioxide feedstock production fell by 11 per cent yearonyear
to 144 million tonnes rio tinto share due to challenging market conditions
for high grade titanium dioxide feedstock production continues to be aligned
with market demand one of nine furnaces remains offline at rtft pending a
rebuild which has been deferred until market conditions improve rtit’s
revenues fell by four per cent due to lower prices for titanium dioxide
feedstocks and zircon partly offset by higher sales volumes earnings fell by
six per cent to us248 million
rio tinto minerals rtm
rtm rio tinto 100 per cent supplies over 30 per cent of the world’s refined
borates from its worldclass deposit in boron california rtm also has borates
refineries andor shipping facilities in china france malaysia the netherlands
spain and the us
32 riotintocom borates production of 508000 tonnes boric oxide equivalent was three per
cent higher than in 2013 in response to higher sales demand global demand
for rtm refined borates improved slightly with revenue three per cent higher
than 2013 earnings of us121 million were eight per cent lower than 2013
due to a decrease in product prices and the absence of prior year tax benefits
during the year rio tinto minerals completed the modified direct dissolving of
kernite mddk project which allows for more efficient orebody utilisation
dampier salt dsl
dsl rio tinto 68 per cent 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 base chemical industry markets in asia salt production of
68 million tonnes rio tinto share was one per cent higher than 2013
development projects
the feasibility study to develop the a21 kimberlite pipe at diavik was
completed and approved in 2014 this development will provide an important
source of incremental production to maintain existing production levels a21 is
estimated to cost us350 million rio tinto share us210 million with first
production expected in 2018
work continued on the feasibility study for the zulti south mine expansion at
rbm which will maintain the lowcost rbm smelter capacity post2017 if the
project is approved in 2015 commissioning is scheduled for 2017 the mineral
sands exploration programme in mozambique and other brownfield studies at
the group’s operations also continued throughout the year
the simandou iron ore project in guinea is one of the largestknown
undeveloped highgrade 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 650kilometre transguinean railway and
a new deepwater port
in may 2014 rio tinto and its partners chinalco and the international finance
corporation signed the investment framework with the government of
guinea for the development of the simandou iron ore project this provides
the legal and commercial foundation for the project and formally separates
the infrastructure from the mine development the investment framework
was approved for ratification by the guinean national assembly in june 2014
followed by presidential promulgation and supreme court review and took
effect in august 2014
the project partners are continuing to work towards the completion of a
bankable feasibility study and the establishment of a funding consortium to
build the infrastructure these two elements will provide the basis for
disciplined capital allocation decisions
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 on the mine plan environmental and
forestry approvals required to execute a mining lease
the jadar project in serbia is potentially a worldclass lithiumborate deposit
discovered by rio tinto in 2004 if developed the deposit could supply a
significant proportion of global demand for lithium and borates findings so far
are encouraging and feasibility assessments are ongoing to build an economic
business case and advance the environmental and socialeconomic impact
assessments for the project lithium carbonate’s fastestgrowing application is
in batteries that provide clean power to industrial systems and electric and
hybrid vehicles
in 2011 diamonds  minerals reentered the potash business through an
exploration joint venture with north atlantic potash inc napi a subsidiary of
jscacronacronisaworldleaderinfertiliserproductionandholdsmultiple
potash exploration permits in saskatchewan canada rio tinto has completed
an extensive exploration programme on the joint venture properties with
promising results and is in discussions with napi and acron regarding the
future of the joint venture 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
outlook
diamonds  minerals’ businesses serve a range of different industries but
have in common a track record of creating and defining new and profitable
markets for the group’s products demand softened in these markets in 2013
and 2014 in response to broader economic trends the group’s key markets
are beginning to stabilise although the pace of recovery is slower than
previously thought and unlikely to fully manifest during 2015 however the
medium to longterm outlook continues to be positive across all products as
urbanisation and rising standards of living particularly in china 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 longterm industry fundamentals remain attractive rtm
will focus on increasing refined borates capacity to meet higherthangdp
demand growth while achieving worldclass 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 qmm mine and the upgraded slag ugs plant and deferral of a
furnace rebuild at rtft pigment and feedstock inventories within the supply
chain are now returning towards historical levels
the medium to longterm fundamentals for the diamond industry are positive
and expected to support sustainable future price growth the global mineral
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 2025
demand in mature markets is expected to continue to grow in line with gdp
riotintocom 33
strategic report directors’ report financial statements production reserves
and operations
additional information energy
financial performance
2014
us million
2013
us million
revenue 4308 5454
net cash generated from operating activities 355 919
underlying earningsloss 210 33
capital expenditure 224 732
net operating assets 3794 4872
strategy and strategic priorities
the energy product group aimed to safely deliver superior margins and growth
from a strong existing resource base to serve growing global energy demand
its strategic priorities were
– extract full value from the group’s assets
– leverage technology and deliver competitive projects
– maintain the group’s licence to operate
– build and steer a resilient highreturn portfolio
safety
the energy product group’s 2014 all injury frequency rate was 074 compared
to 067 in 2013 with a large number of hand injuries recorded during the year
energy strives to foster a culture of shared and personal accountability for
health and safety and to create a workplace where everyone goes home safe
and well at the end of every shift throughout 2014 the group’s health and
safety efforts focused on
– strengthening the management of critical risks specifically in areas of
process safety underground operations and vehicles and driving
– improving contractor safety performance through active engagement and
interaction with contract partners
– comprehensively refreshing the safety culture and systems at all sites to
raise personal awareness and commitment to improve hazard
management processes and to strengthen the implementation of lessons
arising from incidents
– reducing high frequency incidents such as hand injuries
greenhouse gas emissions
the energy group’s greenhouse gas emissions decreased to approximately
33 million tonnes of carbon dioxide equivalent in 2014 compared with
36 million tonnes in 2013 this reduction was mainly due to the divestment of
the clermont mine and the closure of the blair athol mine and the continued
efforts of the group to increase the energy efficiency of its operations through a
range of initiatives including equipment optimisation and engine improvements
over the past 15 years rio tinto has spent more than us100 million on
research and development into technologies that will reduce emissions from
coalfired power plants in 2014 the energy product group continued its
sponsorship of the otway project australia’s first industrialscale
demonstration of geological carbon dioxide capture and storage
review of operations
2014 was another challenging year for the energy product group as the
business environment for both coal and uranium remained very difficult the
group’s underlying loss of us210 million compared with underlying earnings
of us33 million in 2013
annual site production records at hail creek hunter valley operations and
bengalla cost improvements and benefits from a weaker australian dollar
were more than offset by lower prices which reduced earnings by
us434 million and lower uranium production energy continued to focus on
positioning its assets further down the cost curve through a range of cost
productivity and revenue enhancements an aggressive programme of cost
and productivity improvements delivered us795 million of pretax cash
savings in 2014 and 2013 compared with 2012 contributing to the product
group’s cash flow generation in 2014
energy’s focus has been on safely creating value reducing costs eliminating
waste and improving asset and labour productivity this work coupled with the
agility to adjust production mix in response to changing market conditions is
protecting value in very challenging times
the product group’s extensive operational and marketing expertise enabled
further volume cost and margin improvements to be secured energy retains
deep and enduring relationships with its customers built upon a foundation
of highquality products supplied reliably and consistently over long periods
of time on average over the past three years energy’s marketing team
has delivered a price premium to spot market benchmarks of approximately
eight per cent for coking coal ten per cent for thermal coal and 35 per cent
for uranium
in april 2014 the group’s two uranium operations – rössing and energy
resources of australia – each entered into a new marketing and sales
agreement with rio tinto uranium rtu under the new agreements rtu will
purchase uranium oxide from both operations and market the combined pool
directly to customers this new arrangement provides energy’s uranium
customers with the benefit of multisourced supply
in 2014 rio tinto sold its 501 per cent share in the clermont coal mine in
queensland to gs coal pty ltd for us1015 billion and its coal operations in
mozambique to international coal ventures private limited for us50 million
both before net debt and working capital adjustments
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 and kestrel 80 per cent coal mines as stated above
rio tinto sold its interest in the clermont mine in may 2014
in new south wales rtca manages coal  allied’s coal mines which include
hunter valley operations 80 per cent bengalla 32 per cent mount thorley
64 per cent and warkworth 445 per cent
lower prices for all types of coal saw rtca’s net earnings decline from
us367 million in 2013 to us21 million in 2014 in very difficult markets
rtca has worked hard to improve its operational performance its coal mines
remain cash flow positive with the majority placed in the lowest quartile of the
cost curve
significant productivity gains across the australian coal business delivered
annual site production records at hail creek hunter valley operations and
bengalla excluding production from the clermont mine which was divested
during the year thermal coal production increased by 15 per cent rio tinto
share in 2014 compared with 2013
the product group declared a significant increase in its hunter valley
managed thermal coal reserves in november 2014 compared with the
previous estimates reported in rio tinto’s 2013 annual report
rtca is using technology and innovation to boost its competitive edge the
rio tinto processing excellence centre located in brisbane is helping improve
yields at its sites an integrated operations centre planned to open in 2015 in
singleton is supporting the optimisation of mine performance and automated
drilling is being piloted at hunter valley operations
rtca is also demonstrating operational and commercial excellence by
adjusting semisoft coal production to deliver improved margins at its hunter
valley sites in response to deteriorating coking coal markets its hail creek
mine began producing a thermal coal product for targeted customers
rtca has been working for nearly five years to secure a longterm future for
mount thorley warkworth mine in 2014 it continued to seek approvals to
maintain operations at the 30 year old mine on land it owns within the
footprint of existing mining leases approval is critical for the future of the
operation and its 1300 employees and contractors as existing approvals
only allow the mine to maintain production and employment at current
levels until the end of 2015 two separate planning applications have been
submitted for the integrated operation and the nsw department of planning
and environment has recommended approval a decision on both applications
is expected in 2015
34 riotintocom zululand anthracite collieryriotinto74percent
zac is an anthracite coal mine in south africa which was held for sale until
1 april 2014 when it became a rio tinto managed operation
rio tinto coal mozambique formerly rio tinto 100 per cent
in october 2014 rio tinto completed the sale of rtcm which includes the
benga coal mine in the tete province of mozambique to international coal
ventures private limited
energy resources of australia rio tinto 684 per cent
era is a publiclylisted company which operates the ranger mine in the
northern territory of australia no uranium oxide was produced in the first
half of 2014 due to a leach tank failure on 7 december 2013 which triggered
the suspension of processing operations and a series of investigations a
governmentappointed taskforce was established to oversee the regulatory
response to the leach tank failure a progressive restart of the ranger
processing plant began on 5 june 2014 with the mill processing lower
grade stockpiled material following receipt of written approval from the
commonwealth minister for industry and the northern territory department
of mines and energy
era produced a total of 1757 thousand pounds rio tinto share of uranium
oxide in 2014 its 2014 fullyear earnings were unfavourably impacted by costs
associated with the leach tank failure and subsequent suspension of
processing plant operations uranium oxide was purchased to fulfil higher
price contracted sales partly mitigating effects of the suspension
progressive rehabilitation over the ranger project area advanced during 2014
a total of more than 33 million tonnes of material has been returned to pit 3
and rehabilitation of pit 1 is well advanced
the ranger 3 deeps project remains in prefeasibility on 3 october 2014 era
lodged a draft environmental impact statement for the proposed ranger 3
deeps underground mine with the northern territory environmental
protection authority and the commonwealth department of the environment
during 2014 era achieved cash savings of more than a23 million surpassing
its objective of saving a cumulative a150 million in operating costs during the
period 20112014
rössing uranium limited rio tinto 686 per cent
rio tinto’s share of uranium production at rössing was 2333 thousand
pounds in 2014 production was impacted by a leach tank failure in late 2013
and the introduction of a new operating model in mid2014 under this new
model rössing is tailoring production to meet only existing longterm
customer requirements
in june a planned shutdown of the processing plant allowed for major
maintenance work to be carried out the work was completed without any
safety incidents and plant operations were successfully restarted on
1 july 2014
in light of continued low prices for uranium rössing embarked on an
aggressive cash generation programme in 2014 the business exceeded its
savings target for the year delivering us14 million against a target of
us12 million from a range of initiatives
rio tinto canada uranium rio tinto 100 per cent
rio tinto canada uranium’s roughrider project is an exploration site located in
canada’s athabasca basin in northeast saskatchewan the basin supplies
approximately 20 per cent of the world’s uranium
in 2014 the canadian government and the european union signed a
comprehensive economic trade agreement which provides an exemption to
eligible companies from the nonresident ownership policy as it applies to
foreign ownership of uranium mines once ratified this change means
rio tinto could if economical to do so develop a uranium operation without
the need to first find a canadian majority partner
exploration and development studies on the project progressed during 2014
development projects
rio tinto’s premium coal assets in australia’s hunter valley present a number
of lowcapital highquality growth options
the mount pleasant project is the largest undeveloped deposit in the hunter
valley and has high quality coal a low strip ratio existing consents and
committed rail and port facilities located adjacent to bengalla mine mount
pleasant is an attractive lowcapital expansion option and is in the advanced
stages of study it has a capital intensity of between a100 and a150 per
saleable tonne with an expected capacity of 85 million tonnes per annum of
saleable product
in late 2014 the hunter blend project was launched the project aims to
enable rio tinto to operate its hunter valley coal mines plants and logistics
infrastructure as one integrated system to deliver greater value and synergies
than through the present standalone operations
the mount pleasant and hunter blend projects are both opportunities to
further improve the overall efficiency of rio tinto’s operations in the hunter
valley and to maximise the synergies that exist across the business whilst the
group’s world class resource base offers a range of further brownfield
opportunities these two projects when combined with the existing business
transformation programme effectively deliver 67 per cent volume growth and
a 40 per cent cost reduction against 2012 levels
rio tinto is continuing to assess options for open cut mining on the eastern
side of hail creek mine in queensland it is also exploring the potential for
underground mining government approvals and a prefeasibility study are in
progress a decision on the timing and nature of future development at hail
creekwillbemadeoncethesearecomplete
other options in the australian coal portfolio include the valeria and winchester
south projects valeria is a large predominantly semisoft and thermal coal
deposit in central queensland it is close to existing infrastructure with 40km of
rail needed to reach kestrel mine winchester south is a coking coal deposit in
central queensland
outlook
whilst the shortterm outlook for coal and uranium remains challenging the
longterm outlook is more positive energy demand continues to grow
globally it grew by 50 per cent between 1990 and 2011 and the international
energy agency expects it to grow by a further 40 per cent to 2035
all energy sources will be needed to meet increased demand however much
of it is expected to be met by coal – the cheapest and most readily available
source of energy high quality thermal coal is likely to be in demand for
efficiency and air quality reasons which aligns with rio tinto’s premium
resource and product profile
demand for uranium is expected to grow steadily in the longer term and
nuclear power remains the only baseload energy source that does not
produce greenhouse gases
geologically coking coal remains a relatively scarce commodity found in a
small number of discrete locations of which the bowen basin in australia is one
of the most significant longterm demand appears to be firm underpinned by
urbanisation and industrialisation in the major developing economies of china
and india causing steady growth in steel output
rio tinto is ideally positioned to continue supplying premium energy products
to traditional markets in japan taiwan and korea which are dependent on
imports for all of their primary energy needs while capturing growth
opportunities in emerging markets india’s coal imports have been increasing
and are rapidly becoming as significant as china while a number of asean
association of southeast asian nations countries are also looking to secure
reliable international coal supplies
riotintocom 35
strategic report directors’ report financial statements production reserves
and operations
additional information iron ore
financial performance
2014
us million
2013
us million
revenue 23281 25994
net cash generated from operating activities 10274 14008
underlying earnings 8107 9858
capital expenditure 4211 6814
net operating assets 20987 21062
strategy and strategic priorities
the iron ore product group’s vision is to remain the best iron ore producer in
the world by focusing on three strategic goals
– production at the right cost delivered through highperforming teams with
the support of unrivalled technology
– valuedriven growth through disciplined phasing and lowcost growth
options
– maximising portfolio value through specialist sales and marketing expertise
safety
in 2014 iron ore’s all injury frequency rate was 073 compared with 070 in the
previous year this result was reached amidst a challenging environment in
which iron ore completed 80 per cent of the infrastructure component of the
pilbara 360 million tonne per annum mta expansion programme and
recovered from a severe tropical cyclone sadly there was one fatality in
november 2014 at the iron ore company of canada train driver enrick
gagnon lost his life as a result of a train derailment on the quebec north
shore and labrador railway qnsl that was caused by a landslide
during 2014 iron ore initiated a health safety and environment system review
and continued with the rollout of improvements to safety interactions
prestart safety meetings and safety training programmes the group has
continued the implementation of its innovative think safety programme
which is focused on increasing employee engagement and leadership in
safety management
in western australia the group maintained a strong focus on the mental health
of employees including the development of a threeyear wellbeing strategy
this focuses on building both mental and physical wellbeing raising awareness
and better equipping leaders to provide support and recovery assistance when
required implementation of the strategy will commence in 2015
the pilbara utilities team received the 2014 groupwide chief executive safety
award which recognises the sites and teams with the best annual safety
performance over the prior three years
greenhouse gas emissions
during 2014 there was a significant change in the external legislative
environment for energy and climate change the australian government
repealed both the energy efficiency opportunities eeo act and the clean
energy act effective 1 july 2014 introducing a review of the renewable energy
target and commissioning a white paper on energy issues
throughout 2014 iron ore continued to implement high value opportunities
identified in the final round of eeo establishing more than 35 initiatives across
mines rail and ports for example at yandicoogina greenhouse gas emissions
have been reduced by approximately 8700 tonnes of carbon dioxide per year
through the use of a le tourneau 2350 loader which uses regenerative
technology to achieve a low fuel burn rate
iron ore met all legislative requirements in 2014 including reporting under the
national greenhouse and energy reporting scheme the clean energy act the
clean energy repeal bill and the eeo act until it was repealed in july
the product group’s total greenhouse gas emission intensity has improved
67 per cent on the baseline target set in 2008
greenhouse gas ghg intensity of saleable production at the iron ore
company of canada marginally improved during 2014 despite a product mix
that saw a greater fraction of total concentrate production converted to the
more ghgintensive pellet product although being more ghg intensive to
produce than concentrate pellet ultimately provides a lower ghg intensity
route to finished steel for the end user
review of operations
rio tinto operates a worldclass iron ore portfolio operations in the pilbara
region of western australia comprise 15 mines four independent port
terminals the largest privatelyowned heavy freight railway in australia and
supporting infrastructure including the operations centre in perth the iron
ore company of canada ioc operates a mine concentrator and pelletising
plant in the province of newfoundland and labrador together with port
facilities in septîles quebec rio tinto marine delivers shipping services to
the wider rio tinto group including iron ore
in 2014 iron ore achieved underlying earnings of us8107 million record
sales volumes continued cash cost savings and lower taxes following the
repeal of mineral resources rent tax in september 2014 were offset by
weaker iron ore prices down 30 per cent on average yearonyear reducing
earnings by us38 billion on 2013
iron ore met global production guidance in 2014 producing 2954 million
tonnes globally rio tinto’s share of production was 2336 million tonnes – an
increase of 12 per cent on 2013
quarterly production and sales records were consistently achieved through
the year this strong performance was delivered despite interruptions caused
by severe weather conditions in both the pilbara and canada in january 2014
all pilbara coastal and some mine operations were suspended as a result of
tropical cyclone christine and heavy rainfall that continued into february
north america’s extreme weather in q1 also significantly affected ioc’s
production and shipments in the first half of 2014
pilbara production improved as the year progressed contributing to the early
achievement of a 290 mta run rate production at ioc stabilised as phase two
of the concentrate expansion project cep was successfully completed
delivering 87 million tonnes of pellets and 60 million tonnes of concentrate
for sale for the year
steel demand in china while robust did not grow at the strong rates
witnessed for most of the past decade combined with strong growth in
seaborne iron ore supply this put downward pressure on the iron ore price
with the platts 62 per cent iron fines index averaging us9670 per dry metric
tonne a landed price in china that excludes moisture content iron ore’s
global shipments in 2014 were 303 million tonnes at an average realised free
on board fob price of us8430 per wet metric tonne for pilbara volume
rio tinto marine shipped 238 mt of dry bulk cargo on behalf of the wider
group an increase of 25 per cent on 2013 rio tinto is now the largest dry
bulk shipping business in the world in terms of volume with a contract fleet of
more than 200 vessels at any given time including 17 vessels owned by
rio tinto average freight rates in 2014 tracked below 2013 and forward
voyage rate curves are flat reflecting vessel oversupply and a drop in bunker
fuel prices
in the pilbara a new nameplate capacity of 290 mta capacity was achieved in
may 2014 two months ahead of schedule effective coordination between the
expansion and operations teams enabled an almost seamless transition to the
increased nameplate capacity overseen by the operations centre to ensure
optimal supply chain performance
“production at the right cost” improvement initiatives focused heavily on
reducing costs and driving productivity gains contributing us710 million in
pretax savings to the wider rio tinto group since 2012 these included
reducing the use of contractors external service providers and consultants
finding lowcost production improvements increasing the utilisation of assets
and maximising the value of new technologies people remained a key driver
in reducing costs and increasing productivity throughout 2014 an example of
this was the training transformation strategy which returned an overall
36 riotintocom 376000 productive hours to the business and delivered an overall saving of
us48 million through a focus on future innovation and technology solutions
and realtime field training
themineofthefuture
™
programme continued to deliver efficiencies in 2014
across production health safety and environmental performance in
conjunction with the technology  innovation group iron ore successfully
converted four drills at the west angelas mine to an autonomous drilling
system adding to the two units already in operation the autonomous
haulage system ahs continued to be deployed across the pilbara delivering
lower load and haul operating costs increased productivity and safer operating
environments at the hope downs 4 mine autonomous haulage exceeded the
iron ore pilbara site with the highest manned effective utilisation by 14 per
cent and decreased load and haul operating costs by approximately 13 per
cent hope downs 4 and nammuldi mines became the first fullyoperational
ahs sites with 19 komatsu 830e ahs haul trucks at hope downs 4 and 25
komatsu 930e ahs trucks at nammuldi a further 13 930e ahs trucks are
also in operation at yandicoogina iron ore continues to be the world’s largest
operator of ahs trucks and a proud leader in automated mining technologies
progress was also made towards autohaul
®
 the world’s first autonomous
heavyhaul rail system with the project moving through a number of testing
phases and the first autonomous train journey piloted in the fourth quarter
throughout the year the us300 million wickham town upgrade project
supporting the cape lambert rail and port operations workforce was largely
completed it included construction of more than 240 houses the wickham
lodge flyin flyout accommodation and the julutharndu maya central
facilities building as well as new parks roads and other town infrastructure
in 2014 a key focus for iron ore remained on supporting local communities
businesses and people within the company’s operational footprint sixty three
per cent of expenditure outlayed to businesses located in the pilbara was with
pilbara aboriginal businesses and their joint venture partners providing
integral services to various operations and projects and saw millions of dollars
reinvested into local economies iron ore remains one of the largest private
sector employers of aboriginal people with more than 1100 workers in 2014
iron ore continued to actively implement key participation agreements with
traditional owners in the pilbara which secures land access for the life of
mining operations these agreements incorporate mutual obligations to
deliver outcomes in employment financial compensation education and
training heritage surveys and practices environmental care and land use
ioc rio tinto share 587 per cent continued to be an important operation
within iron ore’s portfolio maintaining a strong position as a supplier of high
quality premium pellets and high quality low contaminant concentrate the
company is poised to realise the full potential of an enviable orebody and
additional capacity brought online through recently completed expansions
while the operation remains dedicated to the journey towards zero harm
development projects
in may iron ore announced that the pilbara network of mines rail and ports
had reached a run rate of 290 mta two months ahead of schedule following
completion of firstphase port and rail expansion works in late 2013 this
major milestone signalled a step change in production performance and paved
the way for secondphase developments to 360 mta
infrastructure to support the 360 mta expansion is 80 per cent complete with
all marine and wharf works commissioned a new shiploader at cape lambert
port b has been installed along with the early commissioning of a new stacker
and reclaimer first ore through a new car dumper was achieved ahead of
schedule in the third quarter and all rail works for the expansion to 360 mta
have been completed including autohaul
®
wayside rail works
iron ore’s breakthrough pathway to match the upgraded port and rail capacity
will see pilbara mine production capacity increase towards 350 mta through a
series of lowcost brownfield expansions us400 million of capital expenditure
was also approved for plant equipment and modification as well as additional
heavy machinery for use at various mines in the pilbara the rapid lowcost
growth pathway from existing mines such as west angelas deposit b
paraburdoo brockman 2 nammuldi and yandicoogina is well advanced with
around 40 mta approved and in implementation this will enable a target
production rate of more than 330 mta in 2015 and support delivery towards
350 mta in 2017 an investment decision regarding development of the
greenfield silvergrass mine has been deferred until 2016
the brownfield mine growth is being achieved at an average mine production
capital intensity of approximately us9 per tonne and the full expansion from
220 mta to 360 mta is expected to be delivered at an industryleading capital
intensity of us110120 per tonne
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
milestones from 2014 include first ore delivered from a new 21kilometre
conveyor system at western turner syncline to tom price in the first quarter
completion of this project contributed to the 360 mta expansion plan and
provides a safer more efficient alternative to the previous road haul operation
rio tinto has also approved development of western turner syncline phase
two which will increase production by an additional 7 mta
the nammuldi below water table process plant delivered first ore to the
stockyards in november and is expected to be in full production by the end of
the first quarter of 2015
first ore was also delivered through the new fines circuit and stacker at west
angelas deposit b in midnovember five weeks ahead of plan development of
deposit b included a new pit fines circuit stacker and a haul road connecting
to deposit a all other nonprocessing infrastructure is scheduled for
completion in the first quarter of 2015
marandoo phase two which includes construction of a new wet processing
plant to access ore reserves below the water table was completed in 2014 and
will extend the life of marandoo operations
at ioc the completion of stage two of the concentrate expansion project in
the first half helped remove pittoplant bottlenecks and aided extra capacity
to grow production the project commissioned an additional ball mill and
mining equipment and upgraded power distribution infrastructure providing
an additional 13 mt concentrate capacity
outlook
the demand outlook for iron ore remains sound with expected contestable
iron ore demand growth in excess of 100 mta by 2020 in the longer term
there is significant potential for growth in demand in emerging markets such
as asean and india due to population growth urbanisation and rising
incomes
supply growth is expected to outpace demand growth with approximately
300 mta of additional seaborne capacity currently under construction or in
rampup these volumes will be spread out across the remainder of this
decade and as a consequence supplyside exits from chinese domestic
suppliers and some highcost seaborne suppliers will continue approximately
125 mt of highcost supply from china and nontraditional seaborne suppliers
exited in 2014
with its lowcost position proximity to china and emerging markets and suite
of iron ore products rio tinto is well placed to take advantage of demand
growth for seaborne iron ore through its expansion options
riotintocom 37
strategic report directors’ report financial statements production reserves
and operations
additional information exploration
rio tinto has had a sustained commitment to exploration since 1946 with an
exceptional track record in mineral discovery mature operations such as
weipa the pilbara and rössing were tier 1 greenfield discoveries by rio tinto
exploration where value is still being realised after more than 40 years of
production
strategy
the goal of exploration is to create value for rio tinto through the discovery or
acquisition of welllocated highgrade tier 1 resources to supplement the
group’s existing highquality 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 providing significant value to the
product groups
additionally exploration is supporting an increasing array of projects across
the business this includes providing orebody knowledge expertise to the
product groups helping business development groups to evaluate merger and
acquisition opportunities and assisting the economics team with industry
analysis and intelligence to support supply forecasts in 2014 exploration also
reviewed the orebody knowledge content for all projects that were progressed
to the investment committee
the exploration process can take over 20 years to progress from target
generation to development decisions due to community sustainability and
investment requirements rio tinto’s core exploration capability and rigorous
global prioritisation process has consistently delivered tier 1 discoveries
tier 1 discoveries over the past decade include
year discovery commodity location
2005 la granja copper peru
2005 caliwingina iron ore australia
2008 sulawesi nickel indonesia
2008 mutamba titanium mozambique
2009 jadar lithiumborates serbia
2011 amargosa bauxite brazil
2013 kp405 potash canada
2014 yandi braid iron ore australia
at the end of 2014 the exploration group was active in 19 countries and
assessing opportunities in other countries across a range of commodities
including copper nickel iron ore bauxite coking coal 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
the exploration group is organised into regional multicommodity teams
headquartered in melbourne london salt lake city perth brisbane and beijing
supported by a team of technical and commodity professionals this structure
provides a global reach with a local presence that allows for effective community
engagement and development of the group’s social licence to operate
safety
at the end of 2014 the exploration group’s all injury frequency rate was 047 a
further improvement on the 049 rate at the end of 2013 a multiyear change
programme rolled out across the exploration group has helped to sustain the
significant safety improvement gained in 2013 and as a result rio tinto
exploration was awarded the “2014 chief executive safety award – most
improved” this programme also contributed to measureable improvements in
operational performance across all regions
performance
during 2014 commercial activities provided access to quality projects and
supported the progression of projects through the exploration project pipeline
exploration joint ventures were established in canada the us chile mexico
and australia in addition exploration divested part of its interest in the
tamarack project in minnesota us thereby securing funding to increase the
pace of the multiyear drilling programme required to continue testing for
extensions to the nickelcopperprecious metal resource
resource knowledge of the roughrider uranium project in saskatchewan has
increased with further drilling and resource modelling in 2015 the exploration
group will focus on identifying potential for additional resources in the orbit
surrounding the project in addition rio tinto’s saskatchewan regional tenure
has been prioritised and rationalised following further drilling at the sanxai
bauxite project in laos ongoing exploration provided greater certainty around
resource size whilst infrastructure studies targeting a range of options have
been progressing the amargosa bauxite project in brazil has progressed with
drilling and mapping advancing a number of brownfield areas in the amargosa
orbit as well as adding new prospects in the region
brownfield projects generated good drilling results at iron ore projects in
the pilbara coking coal projects in the bowen basin and in the weipa orbit
in australia in the bingham orbit drilling continued to extend the
mineralisation envelope
exploration activities are underpinned by data and information management
the focus on data accuracy and availability has continued to drive
efficiency improvements
research and development projects have progressed with new analytical
techniques for mineral geochemistry supporting exploration targeting progress
continued on the development of the vk1 airborne gravity gradiometer with a
significant improvement in detection levels achieved in 2014
in addition to exploration’s projects the group’s major evaluation projects in
2014 were
project commodity country
la granja copper peru
resolution copper us
pilbara iron ore australia
bowen basin coking coal australia
hunter valley thermal coal australia
zulti south mineral sands south africa
simandou iron ore guinea
weipa bauxite australia
in 2014 the group reduced its exploration and evaluation expenditure to
us747 million
a
 this represented a 21 per cent decrease compared with
2013 expenditure of us948 million of the 2014 spend us209 million
relates to centrallycontrolled exploration and evaluation activity in total
rio tinto’s exploration and evaluation activity covered ten commodities in
2014 across a range of greenfield and brownfield environments
outlook
in 2015 the exploration group will continue to work on a prioritised portfolio of
greenfield and brownfield projects the downturn in commodity prices is
expected to produce further costeffective commercial opportunities by
providing access to high quality projects however challenges around
timeframes to access ground the need to increasingly explore for orebodies
beneath cover rocks and the decreasing grade and quality of potential
orebodies are expected to continue the exploration group will focus on project
generation in a number of key geographies as well as testing of targets within
the portfolio for 2015 exploration projects at a more advanced stage include
project commodity country type stage
tamarack nickel us greenfield project of merit
roughrider uranium canada greenfield order of magnitude
sanxai bauxite laos greenfield project of merit
amargosa orbit bauxite brazil greenfield order of magnitude
bowen basin coking coal australia brownfield project of merit
pilbara iron ore australia brownfield project of merit
a an additional us18m loss on an undeveloped evaluation project was recorded
separately in loss relating to interests in undeveloped projects
38 riotintocom technology  innovation
rio tinto’s technology  innovation group ti partners with the product
groups to achieve operating excellence ti has a recognised track record of
value creation and protection while embedding fundamental changes that will
keep rio tinto competitive for the long term gross costs in 2014 were
us340 million compared with us370 million in 2013 and us415 million in
2012 the total number of employees in ti increased from 730 at yearend
2013 to 919 at yearend 2014 primarily attributed to the transfer of iron ore
project teams into ti
strategy
ti delivers value through three levers
– project shaping and delivery ensuring the group “does the right projects”
and “does the projects right”
– productivity focusing on asset performance technology deployment and
global processes to sustainably improve operations maximise margins and
capture value
– innovation creating stepchange improvements to address the significant
challenges facing the mining industry
safety
ti is committed to the safe operation of its managed facilities and the safe
deployment of its personnel the all injury frequency rate for ti in 2014 was
057 compared with 063 in 2013 the improvement resulted from several
changes including improved supervision and leadership in the field improved
hse resourcing of construction projects focus on specific construction injury
risks and work planning and attention to critical controls in the workplace in
2014 the cornerstone project at rio tinto kennecott us under the leadership
of rio tinto projects won the chief executive safety award for the best
project this annual award recognises the project that has achieved
outstanding safety performance and embodies a strong safety culture
performance
project shaping and delivery
the strategic planning team works with product groups to identify valuable
development options in 2014 the team developed and successfully piloted a
project shaping process this considers the full spectrum of options and
stakeholder interests early in the capital project life cycle so that attractive
projects get the best start and noneconomic ones are culled early the
process will continue to be rolled out across the group in 2015
rio tinto projects was established in 2014 by combining the ti and iron ore
project teams rio tinto now has a single projects organisation responsible for
executing capital development projects and using a consistent accountability
model in 2014 rio tinto projects worked on delivering the following
– pilbara 360 project australia – continuing in 2015
– concentrate expansion project at the iron ore company of canada
– exploration decline at energy resources of australia
– modernisation of the isal aluminium smelter iceland
– ap60 project at the arvida aluminium smelter canada
– modified direct dissolving of kernite project at boron operations us
– cornerstone project – continuing in 2015
– kitimat modernisation project canada – continuing in 2015
rio tinto projects also contributed to studies for the south of embley bauxite
project mount pleasant coal project hail creek mine expansion zulti south
mine expansion simandou iron ore project and oyu tolgoi copper expansion
project phase 2
the technical assurance team provides independent assessments to the
rio tinto investment committee and board to ensure investment decisions are
thoroughly reviewed and technically sound technical assurance has
developed and applied more rigorous project review due diligence and post
investment review processes to rio tinto’s governance this has been
effective in helping prioritise 2014’s reduced capital spend and will continue to
support future capital allocation
productivity
ti’s productivity team continues to help operations attain the best operating
performance from an asset key initiatives in 2014 included
– productivity programmes to improve the performance of mines and
processing plants for example improving throughput in a number of
operations improving haul truck payloads and reducing train loading
times in the pilbara increasing concentrator throughput at oyu tolgoi
improving recoveries at escondida through process modelling and de
bottlenecking the beneficiation plant at weipa ti’s integrated value
chain engagement ivce programme undertaken by the brockman iron
ore mine since 2012 has delivered seven million tonnes of additional
saleable ore and an additional 45 million tonnes of material movement
without introducing new assets many other operations have benefited
from the ivce programme
– asset management including maintenance tactics shutdown strategies
and defect elimination protocols – to enhance the reliability utilisation and
life of operating assets
– process development using sophisticated laboratory and pilot plant
facilities and worldclass modelling capabilities to provide support to
operations and projects examples include a stepchange in leach
extraction from copper sulphides and lowcost tailings dewatering
– technical risk mitigation supporting projects like pilbara 360 the
kennecott landslide recovery and tailings dam design and operations
innovation
automation programmes continued to progress under the mine of the
future
™
programme with 57 autonomous trucks in operation in the pilbara at
year end and the world’s first autonomous heavyhaul railway autohaul
®

under construction in 2014 ti deployed three new technologies under the
mine of the future
™
programme
– processing excellence centre pec following successful trials that
delivered significant value at rio tinto copper process plants the pec was
officially opened in march this stateoftheart facility provides advanced
remote technical support to operations the excellence centre platform
will be further developed across the group
–rtvis
™
 this visualisation software allows novel analysis of inground data
improving understanding of the orebody at an operation application of
rtvis
™
at the yandicoogina mine has seen a reclassification of more than
one million tonnes of material to a high silica ore product for blending at
west angelas the highgrade recovery programme enabled by rtvis
™
created a two per cent increase in highgrade ore recovery
– autonomous drilling system ads west angelas is now the world’s first
fulltime autonomous drill mine with six rigs in operation functionality of
the system is being extended to allow use by rio tinto energy ads has
demonstrated a ten per cent increase in use of equipment availability and
significant improvement in labour productivity at west angelas
in addition the rio tinto chinalco innovation joint venture rtci was
established in november combining rio tinto’s global leadership in mining
innovation with the resources and expertise of chinalco’s worldclass research
and development and engineering teams will provide a solid basis to develop
andor commercialise nextgeneration technologies
outlook
in 2015 ti will continue to build on its 2014 successes by
– implementing the project shaping process and improving capital
project performance
– ramping up the delivery of industryleading productivity improvements
– moving to the next phase of mine of the future
™
by harnessing “big data”
and predictive analytics further equipment automation further
implementation of operation centres excellence centres and
implementation of other stepchange innovations
riotintocom 39
strategic report directors’ report financial statements production reserves
and operations
additional information financial overview
the key metrics for group financial management and planning are
summarised below
2014
us million
2013
us million
2012
us million
underlying earnings
a
9305 10217 9269
net earningsloss
a
6527 3665 3028
net cash generated from
operating activities 14286 15078 9430
net debt 12495 18055 19192
total capital
b
67089 71557 76932
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 noncontrolling interests in subsidiaries
b total capital is defined as equity attributable to owners of rio tinto plus equity
attributable to noncontrolling interests plus net debt
decreased underlying earnings reflect the unfavourable impact of lower prices
in the group’s main commodities other than aluminium and diamonds this
was offset by the favourable impact of improved sales volumes operating cash
cost improvements and continued overall strengthening of the us dollar
against local currencies
net earnings of us65 billion reflect noncash exchange losses of
us19 billion impairment reversals of us10 billion offset by impairment
charges of us11 billion a us04 billion writeoff of deferred tax assets
following the repeal of the mineral resources rent tax by the australian
senate and losses on disposal of businesses during the period of us03
billion
net cash generated from operating activities which include dividends from
equity accounted units reflect the negative impact of lower commodity prices
partially offset by the favourable impact from higher volumes and cost
reduction initiatives and a reduction in net interest paid as a result of lower
net debt
net debt decreased from us181 billion at 31 december 2013 to
us125 billion at 31 december 2014 as operating cash inflows divestment
proceeds and proceeds from the disposal of the group’s st james’s square
properties more than offset the outflows relating to capital expenditure and
the increased dividend payment gearing ratio decreased from 252 per cent at
31 december 2013 to 186 per cent at 31 december 2014 interest cover
remained unchanged from the prior year at 13 times 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
in addition to the information provided on the product groups on pages 28 to
37 further information on their financial performance can be found in notes 2
and 3 to the financial statements on pages 123 to 126 and the financial
information by business unit on pages 178 to 182
40 riotintocom 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 2014 financial statements and notes
thereto the financial statements as included on pages 103 to 194 have been prepared in accordance with ifrs as defined in note 1
rio tinto group
income statement data
fortheyearsending31december
amounts in accordance with ifrs
2014
usm
2013
usm
2012
usm
2011
usm
2010
usm
consolidated sales revenue 47664 51171 50942 60529 55171
group operating lossprofit
a
11346 7430 1925 14037 19608
profitloss for the year from continuing operations 6499 1079 3020 6800 15195
loss after tax from discontinued operations – – 7 10 97
profitloss for the year 6499 1079 3027 6790 15098
basic earningslosses per share
b
profitloss from continuing operations us cents 3531 1984 1634 3039 7310
loss after tax from discontinued operations us cents – – 04 05 49
profitloss for the year per share us cents 3531 1984 1638 3034 7261
diluted earningslosses per share
b
profitloss from continuing operations us cents 3512 1973 1634 3020 7267
loss after tax from discontinued operations us cents – – 04 05 49
profitloss for the year per share us cents 3512 1973 1638 3015 7218
dividends per share 2014 2013 2012 2012 2010
dividends declared during the year
us cents
–interim 960 835 725 540 450
–final 1190 1085 945 910 630
uk pence
–interim 569 543 464 331 282
–final 780 658 603 573 391
australian cents
–interim 1031 930 685 498 493
–final 1530 12014 917 842 619
dividends paid during the year us cents
–ordinary 2045 1780 1635 1170 900
weighted average number of shares – basic millions 18484 18473 18491 19231 19610
weighted average number of shares – diluted millions
b
18587 18577 18491 19355 19726
balance sheet data
at 31 december
amounts in accordance with ifrs 2014 usm
2013
usm
2012
usm
2011
usm
2010
usm
total assets 107827 111025 118437 120152 112773
share capitalpremium 9053 9410 10189 10024 10105
total equitynet assets 54594 53502 57740 58884 64512
equity attributable to owners of rio tinto 46285 45886 46553 52199 58247
a group operating profit or loss 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 the effects of antidilutive potential have not been included when calculating diluted loss per share for the year ended 31 december 2012
riotintocom 41
strategic report directors’ report financial statements production reserves
and operations
additional information 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
janduplessis
chairman
4 march 2015
42 riotintocom contents
directors’ report
dual listed structure and constitutional documents 44
operating and financial review 44
risk identification assessment and management 45
share capital 45
purchases 46
substantial shareholders 46
dividends 46
secretaries 46
corporate governance 46
indemnities and insurance 47
employment policies and communication 47
political donations 47
government regulations 47
environmental regulations 47
greenhouse gas emissions 48
exploration research and development 48
auditors 48
fees for audit and nonaudit services 48
financial instruments 48
board of directors 49
executive committee 52
corporate governance 53
remuneration report 64
riotintocom 43
strategic report directors’ report financial statements production reserves
and operations
additional information directors’ report
the directors present their report and audited consolidated financial
statements for the year ended 31 december 2014
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 220 to 222 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 42 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 2014 were minerals and metals
exploration development production and processing
pages 1 to 39 of the strategic report provides a comprehensive review of the
development and performance of rio tinto’s operations for the year ended
31 december 2014 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 2014 and until the
date of this report have been
– on 13 january 2014 rio tinto acquired 510983220 common shares of
turquoise hill under turquoise hill’s rights offering at a total cost of
c129278754660 or c253 per share together with additional
antidilution share warrants the purchase represented approximately
508 per cent of the common shares offered under the rights offering and
enabled rio tinto to maintain its existing percentage shareholding in
turquoise hill the rights offering was fully subscribed turquoise hill used
a portion of the funds it received under the rights offering to repay all
amounts outstanding under the us18 billion interim funding facility and
the us600 million secured bridge funding facility each provided to
turquoise hill by rio tinto
– on 28 january 2014 rio tinto mining and exploration limited rtmel
received 44126780 common shares of minera irl limited irl
representing approximately 1944 per cent of the issued and outstanding
common shares of irl the shares formed part of the consideration agreed
to in the 2006 option agreement on the ollachea gold project between
rtmel and irl the consideration for each share was c01790 the
shares were issued from irl’s treasury and were not purchased by rtmel
via a market transaction should rtmel not sell any of the shares for a
period of one year rtmel shall be entitled to a cash incentive payment
– on 12 february 2014 rio tinto entered into an option agreement with
lng canada a joint venture comprising shell canada energy phoenix
energy holdings limited an affiliate of petrochina investment hong
kong limited kogas canada lng ltd an affiliate of korea gas
corporation and diamond lng canada ltd an affiliate of mitsubishi
corporation to acquire or lease a wharf and associated land at its port
facility at kitimat british columbia canada lng canada is proposing to
construct and operate a natural gas liquefaction plant and marine terminal
export facility at kitimat
– on 7 april 2014 rio tinto announced its intention to gift its 191 per cent
shareholding in northern dynasty minerals ltd northern dynasty owner
of the pebble project to two local alaskan charitable foundations the
decision followed the strategic review announced in 2013 of rio tinto’s
interest in northern dynasty which concluded the pebble project did not
fit with rio tinto’s strategy the shares in northern dynasty were divided
equally between the alaska community foundation to fund educational
and vocational training and the bristol bay native corporation education
foundation which supports educational and cultural programmes in
the region
– on 30 april 2014 rio tinto filed a complaint in the united states district
court for the southern district of new york against vale sa beny
steinmetz bsg resources limited bsg resources guinea ltd aka bsg
resources guinée ltd bsgr guinea ltd bvi bsg resources guinée sarl
aka bsg resources guinea sarl aka vbgvale bsgr guinea frederic
cilins michael noy avraham lev ran mamadie touré and mahmoud
thiam the complaint relates to the loss of half of rio tinto’s mining
concession in the simandou region of southeast guinea in 2008 rio tinto
asked the court to award compensatory consequential exemplary and
punitive damages to rio tinto in an amount to be determined at trial
– on 13 may 2014 rio tinto announced that its pilbara iron ore system of
mines rail and ports had reached a run rate of 290 million tonnes a year
two months ahead of schedule
– on 26 may 2014 the government of guinea and its partners rio tinto
chinalco and the ifc signed the investment framework for blocks 3 and 4
of simandou the signing provided the continued legal and commercial
foundation for the project
– on 27 may 2014 the group announced that it had appointed alfredo
barrios as chief executive of its aluminium business to succeed jacynthe
côté with effect from 1 june 2014
– on 2 june 2014 rio tinto completed the sale of its 501 per cent interest
in the clermont joint venture to gs coal pty ltd a company jointly owned
by glencore and sumitomo corporation for us1015 million under the
terms of the sale glencore took over management of clermont mine
which produces thermal coal in central queensland
– on 30 july 2014 rio tinto announced that it had reached an agreement to
sell rio tinto coal mozambique which comprises the benga coal mine and
other projects in the tete province of mozambique to international coal
ventures private limited for us50 million before net debt and working
capital adjustments on 8 october 2014 rio tinto announced that it had
completed the sale
– on 18 august 2014 the group announced that following recent
developments in papua new guinea including the new mining legislation
passed by the autonomous bougainville government it had decided to
review all options for its 5383 per cent stake in bougainville copper
limited
– on 2 september 2014 talon metals corp a company listed on the
toronto stock exchange announced an independent mineral resource
estimate prepared in accordance with canadian national instrument
43101 ni 43101 on the tamarack nickelcopperplatinum project
tamarack project located in minnesota us talon has the right to acquire
an initial 30 per cent stake in the tamarack project from kennecott
exploration company a subsidiary of the group
44 riotintocom – on 7 october 2014 the group announced that in july 2014 glencore had
contacted it regarding a potential merger of rio tinto and glencore and
that the rio tinto board after consultation with its financial and legal
advisers had concluded unanimously that a combination was not in the
best interests of rio tinto’s shareholders and that the board’s rejection
was communicated to glencore in early august
– 17 november 2014 rio tinto announced that it had signed a heads of
agreement with sinosteel corporation sc and it intended to advance
discussions with sc for a second extension to the channar mining iron ore
joint venture in western australia’s pilbara region
– on 27 november 2014 rio tinto announced that it had formally approved
the development of a fourth pipe known as a21 at the diavik diamond
mine
– on 28 november 2014 rio tinto coal australia declared a significant
increase of its managed thermal coal reserves in the hunter valley of new
south wales australia compared with the previous estimates reported in
rio tinto’s 2013 annual report
– on 12 february 2015 the group announced a capital return of
us20 billion which comprises a targeted a500 million c us04 billion
offmarket share buyback tender of rio tinto limited shares and the
balance of approximately us16 billion for an onmarket buyback of
rio tinto plc shares
– on 27 february 2015 the group announced that it would be streamlining
its product groups and corporate functions as part of the continued focus
on efficiency and costs with immediate effect under the new
arrangements rio tinto’s worldclass portfolio of assets have been
condensed into four product groups aluminium copper  coal diamonds
 minerals and iron ore
details of events after the balance sheet date are further described in note 43
to the financial statements
risk identification assessment and management
the group’s principal risks and uncertainties are set out on pages 14 to 17
the group’s approach to risk management is discussed on page 62
share capital
details of the group’s share capital as at 31 december 2014 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 220
and 221 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 220 under the heading “dual listed companies structure”
details of certain restrictions on holding shares in rio tinto are described on
page 221 under the heading “limitations on ownership of shares” there are
no other restrictions on the transfer of ordinary rio tinto shares save for
– restrictions that may from timetotime 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 those 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 2014 shareholders authorised
– the purchase by rio tinto limited and its subsidiaries and the onmarket
repurchase by rio tinto plc of up to 141340869 rio tinto plc shares
representing approximately ten per cent of rio tinto plc’s issued share
capitalatthattime
– the offmarket purchase by rio tinto plc of up to 141340869 rio tinto plc
shares acquired by rio tinto limited or its subsidiaries under the above
authority and
– the offmarket or onmarket buyback by rio tinto limited of up to
435 million rio tinto limited shares representing approximately ten
per cent of rio tinto limited’s issued share capital at the time
riotintocom 45
strategic report directors’ report
directors’ report
financial statements production reserves
and operations
additional information directors’ report continued
purchases
rio tinto plc rio tinto limited
total number
a
of shares
purchased
average price
b
paid per
share us
total number
c
of shares
purchased as
part of
publicly
announced
plans or
programmes
total number
a
of shares
purchased
average price
b
paid per share
us
total number
c
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
programmes
us
e
2014
1 jan to 31 jan – – – 10436 6062 – –
1 feb to 28 feb – – – 579000 6246 – –
1marto31mar – ––– –– –
1 apr to 30 apr 667292 5657 – 1099277 6102 – –
1mayto31may – ––– –– –
1 jun to 30 jun 12751 5344 – – – – –
1julto31jul – ––– –– –
1 aug to 31 aug 58003 5558 – 53827 6068 – –
1 sep to 30 sep 777165 5229 – 933259 5601 – –
1 oct to 31 oct 649261 4845 – 1726644 5139 – –
1 nov to 30 nov 198482 5169 – – – – –
1decto31dec – ––– –– –
total 2362954
d
5248 – 4402443 5636 – –
2015 – – – – – – –
1janto31jan – ––– –– –
1febto16feb – ––– –– –
notes
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 166 per cent of rio tinto plc issued share capital at 31 december 2014
e rio tinto announced a us20 billion buyback programme on 12 february 2015 at 16 february 2015 no rio tinto plc or rio tinto limited shares had beenpurchased
under this programme
during 2014 in order to satisfy obligations under employee share plans
rio tinto plc issued 1450659 shares from treasury and allotted 971 newly
issued shares the trustees of rio tinto plc’s employee share trusts purchased
onmarket 961451shares and 27493 adrs the trustee of rio tinto limited’s
employee share trusts purchased 2483214 shares onmarket in total
2298707 rio tinto plc shares 5504 adrs and 1229122 rio tinto limited
shares were delivered to plan participants
also during the year the companies’ registrars purchased 1374010 rio tinto
plc shares and 1919229 rio tinto limited shares onmarket to satisfy
obligations to shareholders under the dividend reinvestment plans
for the period 1 january 2015 to 16 february 2015 rio tinto plc issued
316583 shares from treasury in connection with employee share plans and
allotted 253 newly issued shares during this period 791957 rio tinto plc
shares 350 adrs and 581972 rio tinto limited shares were delivered to
plan participants
awards over 1919507 rio tinto plc shares and 1515972 rio tinto limited
shares were granted under employee share plans during 2014 as at
16 february 2015 awards were outstanding over 6434325 rio tinto plc
shares 124530 adrs and 5074494 rio tinto limited shares upon vesting
awards may be satisfied by the issue of new shares the purchase of shares
onmarket or in the case of rio tinto plc by issuing treasury shares
on 12 february 2015 rio tinto announced a us20 billion buyback
programme comprising a targeted a500 million c us04 billion offmarket
share buyback tender of rio tinto limited shares and the balance of
approximately us16 billion for an onmarket buyback of rio tinto plc shares
substantial shareholders
details of substantial shareholders can be found on page 222
dividends
details of dividends paid and the progressive dividend policy can be found on
page 224
directors
the names of the directors who served during the year together with their
biographical details and other information are shown on pages 49 to 51
all directors will stand for election or reelection at the 2015 annual general
meetings with the exception of lord kerr and michael fitzpatrick who will
retire at the conclusion of the rio tinto limited annual general meeting to be
held on 7 may 2015
a table of directors’ attendance at board and committee meetings during 2014
is on page 55
secretaries
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 51
corporate governance
a full report on corporate governance can be found on pages 53 to 63 and
forms part of this directors’ report
46 riotintocom 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 of the companies the
company secretary of rio tinto plc and the joint company secretaries of
rio tinto limited 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 23
political donations
no donations were made during 2014 for political purposes in the eu australia
or elsewhere as defined by the uk companies act 2006
government regulations
our operations in over 40 countries are subject to extensive regulations
imposed by local state provincial and federal governments these regulations
govern many aspects of our operations – how we explore mine and process
ore conditions of land tenure and use health safety and environmental
requirements how we operate as a company including laws regarding
securities taxation intellectual property competition and foreign investment
provisions to protect data privacy conditions of trade and export and
infrastructure access in addition to these laws several operations are also
governed by the provisions of specific agreements which have been made with
governments some of these agreements are enshrined in acts of parliament
the geographic and product diversity of our operations reduces the likelihood
of any single government regulation having a material effect on the group’s
business our many internal controls – codes of conduct standards and
procedures coupled with our high standards of practice also mitigate against
the impact of regulation
in australia and namibia rio tinto’s uranium operations are subject to specific
regulations governing the mining and export of uranium
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 mongolia starting from 1 january 2015 we are potentially subject to legal
requirements under the socalled “glass account law” on publicly disclosing
certain financial information related to the company’s procurement tender
process and debts the law applies to companies in which the government
owns at least onethird of its common shares the government owns
34 per cent of oyu tolgoi llc the company already broadly discloses much
of the information covered in the new law but the practical impact to the
business is still unclear as the government is yet to provide detailed guidance
on minimum compliance standards
in south africa our operations are subject to and have complied with black
economic empowerment legislation which required companies to transfer for
fair value 26 per cent of the group’s south african mining assets to historically
disadvantaged south africans by 2014 rio tinto also complies with the mining
legislation’s transformation imperatives which includes empowerment of south
africa’s historically disadvantaged employees and communities
environmental regulations
rio tinto is subject to various environmental regulations including
regulations that cover air land water ecology and noise in the countries
where it has operations rio tinto measures its performance against
environmental regulation to which its operations are subject by tracking and
rating incidents according to their environmental impact issues of grouplevel
importance are reported to the executive committee and the sustainability
committee prosecutions and other breaches are also used to gauge
rio tinto’s performance
in 2014 there were 12 oneoff or repeated environmental incidents reported
to the executive committee with impact to the environment or of concern to
local communities five resulted from air discharges four from water
discharges one from spillage into a water body one related to soil runoff and
one related to injury to fauna
they were
– several releases of coal dust and sulphur dioxide beyond specified limits
from a plant in the netherlands
– elevated potroom particulate emission at an aluminium smelter in canada
– complaints of blast dust cloud drifting over private land adjacent to a coal
mine in australia
– multiple releases of fluorine gas from scrubber and exhaust fan
malfunctions at an aluminium smelter in canada
– several releases of dust emissions beyond specified limits from a plant
in france
– release of caustic spent liquor and other substances due to water
discharge overflow at an alumina refinery in australia
– exceedances of total suspended solids and ph requirements during heavy
rain at a refinery in australia
– release of effluent from a settling tank into surface water from a plant in
the netherlands
– release of oil into a river outlet at an aluminium smelter in canada
– a diesel spill into a river as a result of a train derailment in canada
– presence of adult salmon in an industrial lagoon in violation of wildlife
regulations at a smelter in canada
– soil runoff into a rice field following insufficient rehabilitation of an
exhausted exploration borrow pit in guinea
during 2014 six operations incurred fines amounting to us319513
2013 us190279
australian corporations that exceed specific greenhouse gas emissions or
energy use thresholds have obligations under the australian national
greenhouse and energy reporting act 2007 nger all rio tinto entities
covered under this act met their annual nger reporting obligations by the
required 31 october 2014 deadline
a number of australian rio tinto entities were also subject to the clean
energy act 2011 and the energy efficiency opportunities act 2006 for the first
half of 2014 and both these acts were repealed retrospectively with effect
from 1 july 2014 all compliance requirements under these acts were satisfied
within the stipulated timeframes
further information on the group’s environmental performance is included in
the sustainable development section of this annual report on pages 20 to 26
and on the website
riotintocom 47
strategic report directors’ report
directors’ report
financial statements production reserves
and operations
additional information directors’ report continued
greenhouse gas emissions
greenhouse gas emissions in million tco
2
e
ab
2014 2013
scope 1
c
219 236
g
scope 2
d
125 144
total emissions
e
339 374
g
ratios
gh intensity index
f
820 832
g
gh intensity tco
2
et of product 0082 0095
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
httpwwwriotintocomsd2014pdfsclimatechange pdf and
httpwwwriotintocomsd2014pdfsglossarypdf
b rio tinto’s greenhouse gas emission inventory is based on definitions provided by
the world resource instituteworld 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 24
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 97 per cent of
rio tinto’s emissions from managed operations
g number restated to ensure comparability over time amendment due to changes in
measurement and calculation methodologies or immaterial updates to data
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 38 to 39 amounts charged for the year
net of any gains on disposal generated a net loss before tax for exploration
and evaluation of us783 million 2013 us1109 million research and
development costs were us112 million 2013 us231 million
auditors
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 2015 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 185 in
the financial statements
no person who was an officer of rio tinto during 2014 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 nonaudit services
the amounts payable to the group’s auditors pwc were
2014
usm
2013
usm
audit fees
a
147 153
assurance services
b
21 42
taxation services 09 09
all other fees
c
04 13
181 217
a audit fees relating to statutory audits
b assurance services in 2014 are mainly related to half year review procedures
sustainability assurance and limited assurance over the 2014 taxes paid report
c all other fees include services in connection with the divestment programme and
other corporate projects
further information on auditor’s remuneration see note 39 to the
financial statements
duringtheyeartheauditcommitteereviewed 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 the
results of this survey and review were presented to the audit committee which
concluded that pwc continued to provide a highquality 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 58 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 sarbanesoxley 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 57 to 59 the directors are satisfied that the
provision of nonaudit 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 2014 financial statements
48 riotintocom 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 casa age 61
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 nonexecutive director of
sabmiller plc since 2014 and chairmanelect nonexecutive director and
senior independent nonexecutive director of marks and spencer group plc
since 2008 and 2012 respectively jan stepped down from the board of marks
and spencer group plc in march 2015
sam walsh ao c
chief executive bcom melbourne age 65
appointment director of rio tinto since 2009 he was appointed chief
executive in 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 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 trustee of the royal opera house
covent garden foundation since 2014 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 2013 nonexecutive director
of seven west media limited from 2008 until 2013
chris lynch c
chief financial officer bcom mba age 61
appointment director of rio tinto since 2011 nonexecutive and chief
financial officer since 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 vicepresident 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 2014
robert brown a n and i
nonexecutive director bsc age 70
appointment director of rio tinto since 2010
skills and experience bob is a canadian citizen and contributes his
considerable experience in large highprofile 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 nonexecutive director of bce
inc and bell canada since 2009 nonexecutive director and chairman of aimia
inc since 2005 and 2008 respectively nonexecutive director of fier cpvc
montreal lp from 2005 until 2014
megan clark ac s n and i
nonexecutive director bsc phd age 56
appointment director of rio tinto since november 2014
skills and experience megan an australian citizen was chief executive of the
commonwealth scientific and industrial research organisation csiro from
2009 until 2014 prior to that megan held various mineral exploration mine
geology and strategy roles with western mining corporation was a director at
nm rothschild and sons australia and was vice president technology and
subsequently vice president health safety environment community and
sustainability with bhp billiton from 2003 to 2008 she holds a phd in
economic geology from queen’s university canada and is a fellow of the
australian academy of technological sciences and engineering the australian
institute of mining and metallurgy and the australian institute of company
directors in 2014 she was appointed a companion of the order of australia
external appointments current and recent member of the global foundation
board since 2014 member of the monash university council since 2014
member of the advisory board of the world economic forum’s 2015 global
risk report member of the australian advisory board of bank of america
merrill lynch since 2010 chief executive and director of csiro from 2009 to
2014 member of the prime minister’s science industry and engineering
council from 2009 until 2014
michael fitzpatrick a r n and i
nonexecutive director beng ba oxon age 62
appointment director of rio tinto since 2006
skills and experience michael an australian citizen contributes wideranging
investment and local knowledge of australian business he is chairman of
treasury group limited a sydneybased 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 nonexecutive director of
latam autos limited since november 2014 nonexecutive director of
carnegie wave energy limited since 2012 nonexecutive director and
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
riotintocom 49
strategic report directors’ report
board of directors
financial statements production reserves
and operations
additional information board of directors continued
ann godbehere a n and i
nonexecutive director fcpa fcga age 59
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 nonexecutive director of
ubs group ag since 2014 and nonexecutive director of ubs ag since
2009 nonexecutive director of british american tobacco plc since 2011
nonexecutive director of atrium underwriting group limited from 2007
until 2014 nonexecutive director of arden holdings ltd from 2007 until
2014 nonexecutive director and chairman of the audit committee of
prudential public limited company since 2007 and 2009 respectively
richard goodmanson r s n and i
nonexecutive director b econ bcom mba mce age 67
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 fritolay inc a subsidiary 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 nonexecutive director of qantas
airways limited since 2008
lord kerr of kinlochard s n and i
nonexecutive director gcmg ma oxon age 73
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 trustee of the national gallery in london from 2002 until 2010 trustee
of the rhodes trust from 1997 until 2010
anne lauvergeon s n and i
nonexecutive director phd age 55
appointment director of rio tinto since march 2014
skills and experience anne a french citizen started her professional career in
1983 in the steel industry and in 1990 was named adviser for economic
international affairs at the french presidencyanddeputychiefofitsstaffin
1991 in 1995 she became a partner of lazard frères  cie subsequently
joining alcatel telecom as senior executive vice president in 1997 where she
was responsible for international activities and the group’s industrial
shareholdings in the energy and securities sectors she served as chairman
and chief executive officer of cogema from 1999 until 2011 and chief
executive officer of areva group from 2001 until 2011
external appointments current and recent chairman of sigfox since 2014
nonexecutive director of american express company since 2013 non
executive director of eads nv since 2013 nonexecutive director of total sa
since 2000 chairman and chief executive officer of french advisory company
alp nonexecutive director of gdf suez from 2001 until 2012 chief
executive officer of areva group from 2001 until 2011 and nonexecutive
director of vodafone plc from 2005 until 2014
michael l’estrange ao s n and i
nonexecutive director ba ma oxon age 62
appointment director of rio tinto since september 2014
skills and experience michael an australian citizen joined the australian
government’s department of prime minister and cabinet in 1981 from 1989
to 1994 he worked in a range of policy advisory positions before he was
appointed the inaugural executive director of the menzies research centre in
canberra in 1995 in 1996 he was appointed by the prime minister as
secretary to cabinet and head of the cabinet policy unit he served in that role
until 2000 when he became australia’s high commissioner to the united
kingdom he returned to australia as secretary of the department of foreign
affairs and trade from 2005 to 2009 in 2007 he was appointed as an officer
in the order of australia michael served as head of college of the national
security college at the australian national university from 2009 until 2014 and
he is a professor at the college
external appointments current and recent director of the university of notre
dame australia since 2014 and head of college of the national security
college at the australian national university from 2009 until 2014
hon paul tellier a r n and i
nonexecutive director lll blitt oxon lld cc age 75
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 was president and chief
executive officer of the canadian national railway company from 1992 until
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 member of the advisory board of general motors
of canada since 2005 trustee of the international accounting standards
foundation from 2007 until 2012 cochair of the prime minister of canada’s
advisory committee on the renewal of the public service from 2006 until
2014 strategic adviser to société générale canada from 2005 until 2013
director of bce inc bell canada enterprises from 1999 until 2010 director
of bell canada from 1996 until 2010 director of mccain foods limited from
1996 until 2014
50 riotintocom simon thompson s n and i
nonexecutive director ma oxon age 55
appointment director of rio tinto since april 2014
skills and experience simon a british citizen was an executive director of
anglo american plc chairman and chief executive of the base metals division
chairman of the exploration division and chairman of tarmac prior to his
career with anglo american he held investment banking positions at s g
warburg and n m rothschild  sons ltd
external appointments current and recent chairman of tullow oil plc since
2012 nonexecutive director of amec foster wheeler plc since 2009 and
senior independent director since 2014 nonexecutive director of sandvik ab
since 2008 nonexecutive director of newmont mining corporation from 2008
to 2014
johnvarleyarnandi
nonexecutive director ba ma oxon age 58
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 28year 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 nonexecutive director of blackrock
inc since 2009 nonexecutive director and senior independent director of
astrazeneca plc since 2006 and 2012 respectively chairman of marie curie
cancer care since 2011 and chairman of business action on homelessness
since 2006
directors who left the board
vivienne cox
nonexecutive director ma oxon mba insead age 55
appointment director of rio tinto from 2005 until april 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 2013 nonexecutive director of bg group plc
since 2012 nonexecutive director and senior independent nonexecutive
director of pearson plc since 2012 and 2013 respectively nonexecutive
director of the uk department for international development since 2010
nonexecutive director of the climate change organisation since 2010
nonexecutive director and nonexecutive 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 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 2013
company secretaries
eleanor evans
llb lond solicitor age 48
skills and experience eleanor joined the group as company secretary of
rio tinto plc and joint company secretary of rio tinto limited in 2013
prior to joining rio tinto eleanor was general counsel and company secretary
at amec foster wheeler 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 a trustee of the stepchange
foundation uk a charity and is an advisory board member of women in
mining uk
tim paine
bec llb fgia fcis age 51
skills and experience tim joined the group as joint company secretary of
rio tinto limited in 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
riotintocom 51
strategic report directors’ report
board of directors
financial statements production reserves
and operations
additional information executive committee
hugo bague
ma linguistics age 54
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 hewlettpackard 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 nonexecutive 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
alfredo barrios
phd energy economics bsc physics msc management age 49
alfredo was appointed chief executive aluminium in june 2014 he joined the
group after a wideranging career in leadership positions with bp plc his most
recent role was executive director and executive vice president downstream at
tnkbp based in moscow where he was directly responsible for the refining
trading supply logistics and marketing businesses prior to this he led bp’s
operations in spain and portugal where he was responsible for establishing
and developing the fuels value chain organisation combining this with the
role of bp head of country spain
alfredo has held board positions in a number of companies including clh
spain from 2007 until 2011 where he was chairman of the audit committee
and oao ngk slavneft russia from 2012 until 2013 he was president of the
spanish national oil industry association aop from 2009 until 2011
alan davies
bbus acctcy llb llm fca age 44
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
and was also previously chief financial officer of the iron ore business alan
assumed responsibility for the uranium business on 27 february 2015 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 2012
andrew harding
beng mining engineering mba age 48
andrew harding was appointed chief executive iron ore in 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 worldclass oyu tolgoi coppergold 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 2013
jeansébastien jacques
msc age 43
jeansébastien was appointed chief executive copper  coal in february
2015 having previously been chief executive copper since 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 jeansébastien 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
jeansébastien was appointed chairman of the international copper association
in october 2014 having served as vice chairman since 2013 he was a director
of turquoise hill resources ltd during 2013 a director of bougainville copper
limited from 2012 until 2013 and a director of palabora mining company
limited from 2011 until 2013
harry kenyonslaney
bsc geology age 54
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 will be leaving rio tinto in march
2015 following the announcement made on 27 february 2015
harry has been a director of the world coal association since 2012 and was
appointed chairman in 2014 he became a director of the coal industry
advisory board to the iea in 2013
greg lilleyman
beng construction age 48
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 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 from 2012 until 2013 a board member of the energy 
minerals institute from 2011 until 2013 and a director of the chamber of
minerals and energy of western australia from 2008 until 2013 holding the
position of president from 2011 until 2013 since 2012 he has been a board
member of the curtin university foundation
debra valentine
ba history jd age 61
debra was appointed group executive legal  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 dc debra served
as general counsel at the us federal trade commission from 1997 to 2001
she has been a member of the board of the extractive industries transparency
initiative since 2012 the north american advisory council at chatham house
since 2013 the ukjapan 21
st
century group since october 2014 and the
‘your life’ corporate advisory board since november 2014
executive director members
sam walsh and chris lynch were also members of the executive committee
in 2014 through their positions as chief executive and chief financial officer
respectively their biographies are shown on page 49
52 riotintocom 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 2014
in compiling this report the directors have referred to the september 2012
editionoftheukcorporategovernancecodethecodetheasxcorporate
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 2014 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 nominatingcorporate
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 59 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 58 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 daytoday 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 shortterm incentive plan detailed on page 76
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 75
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 49 to 51 details of
changes to the board during 2014 and in the year to date are set out in the
directors’ report on page 46
director independence
the tests of independence of a nonexecutive director vary between the
jurisdictions where rio tinto has listings the nominations committee has
adopted a formal policy for the determination of the independence of the
nonexecutive directors
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 nonexecutive directors are and remain independent lord kerr and
michael fitzpatrick are not standing for reelection in 2015
riotintocom 53
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information corporate governance continued
richard goodmanson who has been a nonexecutive director since 2004 has
agreed to stand for reelection to the board at the annual general meetings in
2015 the board believes that richard makes an outstanding contribution to
the board and particularly as chairman of the sustainability committee
richard provides continuity to the board given his significant knowledge of the
business and the board has confirmed that he continues to satisfy the tests for
independence in carrying out his role
executive directors’ other directorships
executive directors may be invited to become nonexecutive 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 details of the chief executive’s external appointments are
set out on page 49
election and reelection
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 reelection at the
annual general meetings each year
nonexecutive directors are normally expected to serve at least six years and
would not normally serve more than nine years
on 29 may 2014 rio tinto announced the appointment of michael l’estrange
as an independent nonexecutive director effective 1 september 2014 on
20 november 2014 rio tinto announced the appointment of dr megan clark
as an independent nonexecutive director effective immediately both will offer
themselves for election at the annual general meetings in 2015 and further
details about them are set out in the notices of annual general meetings
governance processes
in 2014 there were nine scheduled board meetings details of the directors’
attendance at all of the board and committee meetings held in 2014 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 twoday 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 rio tinto company secretary the directors are also able to obtain
independent professional advice at the group’s expense
the chairman and nonexecutive directors meet typically at the start of each
board meeting without the executive directors present to create an
opportunity for nonexecutive 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 nonexecutive 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
2014 the board visited our coal mining operations in the hunter valley
australia these events are arranged by the rio tinto 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
2014 are set out on pages 9 and 10
annual performance evaluation
an annual exercise is undertaken to evaluate the effectiveness of the board
board committees and individual directors
for 2014 the board and committee audit nominations remuneration
and sustainability evaluation process was conducted by the rio tinto
company secretary
the process involved agreeing with the chairman board and committee
chairmen a series of questions for discussion and interviews with directors
seeking their views with regard to progress on the actions arising from the
2013 evaluation and generally upon the performance of the board and its
committees in 2014
the findings from the evaluation reports for the board and its committees and
recommended actions were discussed with the chairman and the chairmen of
the committees ahead of a full review at the february 2015 meetings of the
board and its committees
the nonexecutive directors led by the senior independent director were
responsible for the performance evaluation of the chairman nonexecutive
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 february
the chairman continues to be responsible for the assessment of each
individual director’s performance and contribution
54 riotintocom directors’ attendance at board and committee meetings during 2014
board
scheduled
g
audit
committee
g
remuneration
committee
g h
sustainability
committee
g
nominations
committee
g
chairman’s
committee
g
jan du plessis 99 – 99 – 55 1313
chris lynch 99 – – – – 1013
sam walsh 99 – – – – 1113
robert brown
a
99 22 – 44 55 –
megan clark
b
11 – – – – –
vivienne cox
c
33 – – 22 11 –
michael fitzpatrick 99 66 89 – 55 –
ann godbehere 99 66 – – 55 –
richard goodmanson 99 – 89 55 55 –
lord kerr 99 – – 55 55 –
anne lauvergeon
d
66 – – 33 44 –
michael l’estrange
e
33 – – 11 22 –
paul tellier 99 66 99 – 55 –
simon thompson
f
56 – – 33 34 –
john varley 99 66 99 – 55 –
a stepped down from the sustainability committee and joined the audit committee on 15 october 2014
b joined the board on 20 november 2014
c stood down from the board on 15 april 2014
d joined the board on 15 march 2014
e joined the board on 1 september 2014
f joined the board on 1 april 2014 and had a prior conflict for meetings in september 2014
g the number of meetings attendedmaximum number the director could have attended
h this included three meetings convened at short notice
riotintocom 55
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information corporate governance continued
governance structure
the board has established subcommittees 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 those for the audit sustainability and nominations committees were
issued in february 2015 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
audit committee
disclosure
committee
investment
committee
executive
committee
closure
committee
ore reserves
steering committee
risk management
committee
board committees management committees
board of directors
chief executive
sustainability
committee
remuneration
committee
nominations
committee
chairman’s
committee
56 riotintocom board committees
audit committee
members of the committee are ann godbehere chairman robert brown
michael fitzpatrick paul tellier and john varley robert brown was appointed
to the committee on 15 october 2014
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 and are
available to view on the website the committee is responsible for
– financial reporting
– internal control including internal control over financial reporting
– internal audit and assurance
– the external auditors appointment and relationship
– the effectiveness of the risk management framework and
– 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 2014 the committee’s deliberations included the following matters
which it considered to be significant
– impairments in the 2013 accounts and the continued monitoring of
management’s determination of cashgenerating 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 justification for exclusion of certain items from underlying earnings
– the group’s tax exposure the consequences of the repeal of the
mineral resources rent tax and the appropriateness of provisions for
uncertain tax positions and
– accounting for divestments announced in 2013 and 2014 with
contractual obligations which remain with the group following
completion of the divestments
the committee also considered
– the impact on internal financial controls of the overall cost reduction
programme which has been implemented across the group
– the impact of the group’s finance transformation programme which
includes the centralisation and outsourcing of certain finance activities
excluding key controls to a third party provider group audit  assurance
has performed a series of pointintime reviews of the effectiveness of the
finance transformation governance structure and the transition of certain
processes to the outsourcing provider and reported to the committee on
the findings from these reviews
– closure provisions
– the group’s resources and reserves report in the 2013 annual report and
received updates during the year
to date in 2015 the committee has reviewed amongst others the
following matters which it considered to be significant in relation to the
2014 financial statements
– carrying values in the draft 2014 annual report including assessment of
impairment charges particularly at the kitimat modernisation project and
the molybdenum autoclave process map and impairment reversals at
pacific aluminium
– closure provisions and an increase to the provision adjusted through fixed
assets at rio tinto kennecott the committee noted that this significant
adjustment is primarily a result of updating the existing estimate to an
order of magnitude level reflecting the latest data and business plan
– management’s key accounting judgments and policies and the application
of these in the accounts including
– the justifications for exclusion of certain items from underlying
earnings and
– the group’s tax exposure the recoverability of deferred tax assets and
the appropriateness of provisions for uncertain tax positions
– the group’s resources and reserves report in the 2014 annual report
key judgments considered
in preparing the financial statements a number of 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
– assessment of the carrying value and annual impairment reviews
of assets dependent on the approval of major capital spend oyu tolgoi
and simandou major assets under construction kitimat modernisation
project and map and for impairment reversals derived from the
sustainability of improved business performances aluminium group
including pacific aluminium due to the size and degree of subjectivity
related to the recoverable amount for these assets and the complex
judgments about the expected future performance of the business
– valuation reports and indicators for the above assets to corroborate the
internally prepared valuations for listed subsidiaries turquoise hill
resources and energy resources of australia the committee considered
the carrying value of these separate businesses against external market
data including market capitalisation and broker reports
– the assumptions on discount rate longterm pricing and risk factors for
future growth projects were considered and challenged by the committee
by understanding how they compare with external market data
– for oyu tolgoi the timing of the underground development is an
important factor in determining potential impairment and the committee
reviewed and challenged the likely timing in light of the progress of
discussions with the government of mongolia and changes in government
in late 2014 the committee satisfied itself with regard to the carrying
value for oyu tolgoi and the likely impact of further delays to the project
on the carrying value as noted in note 6 on page 128
– closedown restoration and environmental obligations
– estimates of risk free discount rates in light of the ongoing impact of
fiscal interventions the committee also focused on the different
remediation or closure outcomes which could realistically arise when
assessing the adequacy of the provisioning for these obligations both
involve complex judgments
riotintocom 57
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information corporate governance continued
– recoverability of potential deferred tax assets
– appropriateness of continued recognition of deferred tax assets
particularly tax losses in france recovery of which is restricted
by legislation
– defined benefit pension plan surpluses and deficits during 2014 the board
received an update on the status of funding investment and governance of
pensions and other retirement benefits provided to current and former
employees of the company the committee received reports in 2014 and
2015 on pwc’s audit procedures over the group’s pension and post
retirement defined benefit assets and liabilities the committee reviewed
the disclosures on pensions in note 45 on pages 168 to 173
in addition the committee critically assessed the projections of future cash
flows under different scenarios and compared these with cash balances and
committed facilities available in order that 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 six times in 2014 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 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 board
deemed to be financially literate by virtue of their business experience
the committee applies policies for the preapproval of permitted services
provided by the group’s external auditors pwc all of the engagements for
services provided by pwc were either within the preapproval policies or
separately approved by the committee the committee members are
satisfied that the provision of nonaudit 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 404 and 302 of the sarbanesoxley
act 2002
the external auditors attended all six committee meetings during the year in
advance of the committee meetings the audit partners brief the chairman of
the committee on key matters private discussion sessions were routinely held
between pwc and the committee without management present to discuss the
status of the audit and nature of interaction with management
during the year the committee reviewed the effectiveness of pwc for group
audit and local statutory audit work the evaluation managed by the group’s
financial controllers 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 the results of this survey and review were assessed
by the committee which concluded that pwc continued to provide a high
quality audit and effective and independent challenge to management the
committee was satisfied with the external audit process and that the
independence of the external auditors was in no way compromised
pwc have been the external auditors since before the formation of the dlc
structure in 1995 and acted as external auditors to a number of the
company’s legacy entities prior to the formation of the dlc in the uk the
audit engagement partner richard hughes was appointed in 2011 and in
australia the audit engagement partner paul bendall was appointed in 2012
they are due to transition off the audit after the december 2015 and 2016
yearend audits respectively
the committee considers its recommendations to the board on the
appointment and reappointment of auditors annually and specifically has
responsibility for establishing formal and transparent arrangements with pwc
the committee has reviewed the timetable for tendering and has taken into
account all relevant regulation and guidance new eu regulations and the
recent ruling by the competition and markets authority will impose mandatory
rotation requirements from 2016 which require that the group’s auditors must
be changed by 2021 in light of these requirements it is likely that the audit
will be tendered in 2017 or 2018 with the new auditors appointed for the 2019
or 2020 financial year
the committee believes that the requirements of good governance and the
needs of rio tinto are best served by tendering in the above timeframe for the
following reasons
– rio tinto is undergoing significant business process change through the
cost saving programme which includes outsourcing of certain activities
including the finance transformation programme and is currently
implementing a new financial reporting consolidation system a measured
rotation timetable maintains stability in the independent oversight
provided by the external auditors while the business fully implements the
changes to maximise efficiency and effectiveness
– rio tinto draws on expertise from a number of accounting firms and
therefore a rotation of external audit services will require careful planning
of transition periods to ensure that all services are fully contracted
throughout the rotation process
rio tinto ensures independence through other means including detailed
review challenge and reporting of all work performed by accounting firms a
summary is presented annually to the audit committee of the fees incurred
and nature of work performed further information on fees paid to pwc in 2014
for audit and nonaudit services are set out on page 48 of the directors’ report
the committee meets privately with the head of group audit  assurance
from time to time without management present and the chairman of the
committee has regular discussions with him
other
in 2014 the committee also
– conducted an ongoing review and monitoring of the group’s control
environment and risk management processes and effectiveness
– reviewed group audit  assurance findings and approved the internal
audit plan and associated resources for 2015
– monitored internal control over financial reporting sox testing results
– monitored the effectiveness of the group’s internal controls and internal
control systems
– reviewed reports from the head of group compliance
– monitored the effectiveness of the group’s risk management system with
the head of group risk
– reviewed legal and tax disputes reports from the group executive
legal  regulatory affairs and the head of tax respectively
– considered the requirement for the annual report and accounts taken as a
whole to be fair balanced and understandable
– reviewed the controls and processes in place over reporting of cost
savings achieved under the group’s cost reduction programme
– considered the findings from the 2013 evaluation of the committee’s
performance and supported the recommended action
– conducted ongoing monitoring of nonaudit activities performed by the
group’s external auditors and approval of their audit engagement
contracts and remuneration
58 riotintocom – considered proposals from various regulators including the financial
reporting council and competition and markets authority on auditor
independence and the audit committee’s responsibilities in this regard
– underwent training and development on relevant accounting topics
in the first part of 2015 the committee
– evaluated at the request of the board the 2014 annual report and
accounts to assess whether they are taken as a whole fair balanced
and understandable
– considered findings from the 2014 evaluation of the
committee’s performance
during the remainder of 2015 the committee will follow its annual schedule of
meetings and topics for discussion and will report on the same in 2016
sustainability committee
members of the committee are richard goodmanson chairman anne
lauvergeon michael l’estrange lord kerr simon thompson and megan
clark anne lauvergeon was appointed to the committee with effect from
15 march 2014 simon thompson was appointed to the committee with effect
from 1 april 2014 robert brown stood down from the committee and michael
l’estrange was appointed to the committee on 15 october 2014 megan clark
was appointed to the committee with effect from 20 november 2014 vivienne
cox stood down from the committee with effect from 15 april 2014
key responsibilities
the committee assists the board with overseeing strategies designed to
manage social and environmental risks overseeing management processes
and standards and achieving compliance with social and environmental
responsibilities and commitments the committee reviews the effectiveness of
management policies and procedures relating to safety health employment
practices relationships with neighbouring communities environment human
rights land access political involvement and sustainable development the
committee’s terms of reference are available to view on the website
governance processes
in 2014 the committee met five times the chairman of the board chief
executive and other senior management regularly attend 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 all independent in accordance with the
independence policy adopted by the board
2014 activities
in 2014 the committee
– reviewed key risks associated with process safety and communities and
social performance and management’s plans for tackling them
– reviewed work plans formulated for health safety environment
communities and employment practices and assurance over selected
areas within the committee’s terms of reference
– undertook reviews around major risk areas including mine closures and
legacy matters and energy environment and climate change
– received updates on findings following the pit wall slide at bingham
canyon and the fatality at gove and
– considered the findings from the 2013 evaluation of the committee’s
performance and implemented the recommendations
we draw to your attention the sustainable development report on pages 20 to
26 of this report
remuneration committee
members of the committee are john varley chairman jan du plessis
michael fitzpatrick richard goodmanson and paul tellier
key responsibilities
the remuneration committee assists the board with fulfilling its oversight
responsibility to shareholders in particular the committee seeks to spend
compensation resource fairly and responsibly to ensure that remuneration
policy and practices are properly linked to corporate and individual performance
and to the delivery of the group’s strategy on behalf of our owners the
committee’s terms of reference are available to view on the website
the report of the remuneration committee on pages 64 to 100 has been
recommended by the committee for approval by the board and was approved
by the board on 4 march 2015 on page 75 we have included sections dealing
with the responsibilities of the remuneration committee and how it spent its
time in 2014
governance processes
the committee met nine times in 2014 including three ad hoc meetings
called at short notice the committee carries out its business following an
agreed annual cycle of meetings and topics for consideration
in addition to the matters noted on page 75 the committee considered the
findings from the 2013 external evaluation of the committee’s performance in
early 2015 the committee considered the findings from the 2014 evaluation
of the committee’s performance
as set out in the committee chairman’s annual statement on pages 64 to 65
we are committed to a continuing dialogue with our owners
chairman’s committee
members of the committee are jan du plessis chairman sam walsh and
chris lynch
key responsibilities
the committee acts on behalf of the board between scheduled board
meetings either in accordance with authority delegated by the board or as
specifically set out within its terms of reference it supports the functioning of
the board and ensures that the business of the board and its committees is
properly planned and aligned with management when mandated by the
board the chairman’s committee will consider urgent matters between board
meetings and deals with the implementation of board decisions on
transactions and other corporate matters other than for the chairman of the
board the committee performs the annual review of nonexecutive directors’
fees and makes a recommendation to the board
nominations committee
members of the committee comprise jan du plessis chairman and all
nonexecutive directors
key responsibilities
the committee is responsible on behalf of the board for regularly assessing
the balance of executive and nonexecutive directors and the composition of
the board in terms of the diversity and capacity required to oversee the
delivery of rio tinto’s strategy
the committee develops and agrees in advance the desired profiles of
potential candidates for board membership it oversees the recruitment
process and engages external search consultants to manage searches on its
behalf including constructing shortlists comprising candidates from diverse
backgrounds following a final review of shortlisted candidates the committee
makes recommendations for new board members to the board for approval
the committee engages egon zehnder from time to time egon zehnder
conducts searches for a number of rio tinto positions and not only at board
and executive committee level egon zehnder has no other connection with
the company
on behalf of the board the committee also reviews proposals for
appointments to the executive committee and monitors executive
succession planning
the committee’s terms of reference are available to view on the website
riotintocom 59
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information corporate governance continued
governance processes
the committee meets as required and in 2014 met five times the members
of the committee are independent in accordance with the independence
policy adopted by the board
the committee in its proceedings takes account of the group’s diversity 
inclusion policy and progress in the diversity and inclusion arena discussed
further below
in 2014 the committee
– continued regular executive and nonexecutive succession planning reviews
– considered the findings from the 2013 evaluation of the committee’s
performance and supported the recommended actions
– reviewed the mix of skills required for nonexecutive directors and briefed
the search firm accordingly
– recommended to the board the appointment of michael l’estrange and
megan clark as nonexecutive directors
– received and considered a leadership assessment and development report
on senior management talent from egon zehnder and discussed the same
with them
– considered under the direction of john varley as senior independent
director the chairman’s appointment as nonexecutive director and
chairmandesignate of sabmiller plc and its impact on his commitment
to rio tinto
– considered and recommended the appointment of alfredo barrios as
aluminium product group chief executive
– reviewed the proposal to amend the service contracts of the chief
executive and chief financial officer to twelve months’ notice
in 2015 the committee will continue its regular executive and nonexecutive
succession planning reviews in early 2015 the committee considered the
findings from the 2014 evaluation of the committee’s performance
board diversity
more information about the board’s process for the selection appointment
and election of directors is available in the “corporate governance” section of
the website
the nominations committee regularly reviews the structure size and
composition of the board
in leading a global mining and metals company the board seeks to continually
evolve its membership by seeking nonexecutive directors with diverse and
complementary skills and perspectives as well as experience which reflects
the geographic spread of the group’s operations core skills required for non
executive membership of the board are maintained these skills may
depending upon the circumstances comprise international business financial
or public policy experience strategic acumen or mining or metals industry
experience the board aspires to increase other aspects of diversity including
gender and nationality of directors in order to bring a diversity of skills
experience and perspective to the governance of the group the board
recognises that the evolution of the mix of skills and diversity is a longterm
process and weighs the various factors relevant to board balance and diversity
when vacancies arise
in 2012 the board established two objectives relating to board diversity
– the nominations committee will undertake a review of board diversity
– for each director selection and appointment process the external search
firm supporting the nominations committee will put forward at least one
credible and suitably experienced female candidate
these objectives were met in 2013 and 2014
diversity and inclusion
our commitment to diversity and inclusion
we are a global company and wherever we operate and across every part of
our business we strive to create an inclusive culture in which difference is
recognised and valued by bringing together men and women from diverse
backgrounds and giving each person the opportunity to contribute their
skills experience and perspectives we believe that we are able to develop
the best solutions to challenges and deliver sustainable value for rio tinto
and its stakeholders
the board received a presentation in 2014 on diversity and inclusion across
the whole group
what diversity and inclusion means for rio tinto
– embracing workforce diversity – age gender race national or ethnic origin
religion language political beliefs sexual orientation and physical ability
– valuing diversity of perspective – leveraging the diverse thinking skills
experience and working styles of our employees and other stakeholders
– building a flexible organisation – providing opportunities for work
arrangements that accommodate the diverse needs of individuals at
different career and life stages
– respecting stakeholder diversity – developing strong and sustainable
relationships with diverse shareholders communities employees
governments customers and suppliers
how we support diversity and inclusion
we use the following to drive action and build awareness about diversity
and inclusion
– governance models
– policies practices and targets
– leadership and cultural competence
– stakeholder relationships
– education and communication
we prioritise long and shortterm programmes based on need and impact
read a summary of our diversity and inclusion policy in the “corporate
governance” section of our website
our current focus
our goal is to have a workforce that is representative of the countries and
communities in which we operate currently our focus is to improve the
representation of women and of people from nationalities which are under
represented in our workforce and to continue to build an inclusive culture in
which all talent can thrive
some of the activities and initiatives relating to diversity that we undertook
during the year are
– the development of executivesponsored diversity and inclusion plans
within the product groups and geographies which align with business goals
and the group diversity and inclusion strategy the aim being to increase
the diversity in our workforce at all levels and build a more inclusive
culture progress is evaluated each year by the executive committee and
group diversity council and began in 2013
– embed diversity and inclusion scorecards to accompany the above plans
with metrics in three areas
1 who we are demographics
2 how we behave performance and development
3 what we stand for values
to be applied across rio tinto to help baseline trend and track progress
as well as to address areas where we may be underperforming
60 riotintocom – active involvement with women in mining groups professional women’s
associations and other targeted recruiting efforts to raise awareness about
rio tinto and to increase the attraction development and retention of
talented women wherever we operate
– expansion of our diversity champions network group to include additional
geographies and operations and the establishment of several new
business unit diversity councils and committees across rio tinto these
are increasing leadership engagement crosscompany collaboration and
the sharing and replication of best practices
– the expansion of training programmes aimed at countering unconscious
bias these have targeted senior leaders hiring managers and recruiters to
help minimise the impact of bias in recruitment and development
practices as well as to improve the crosscultural interactions and
relationshipbuilding needed to globalise our business
– the continuation of a threeyear commitment by the chairman to
mentoring highpotential female board candidates through the ftse100
crosscompany mentoring programme
the chief executive became the chairman of the group diversity council in
january 2015
proportion of women employees and board members
in 2014 the proportion of women on the board was 214 per cent ie 3 out
of 14 in senior management 155 per cent and in the overall workforce
187 per cent
measurable objectives and progress
we established the following fiveyear measurable objectives for workforce
diversity at the start of 2011
measurable objective progress during 2014
women to represent 20 per cent of our
senior management by 2015
women represented 155 per cent of
our senior management in 2014
women to represent 40 per cent of our
2015 graduate intake
women represented 318 per cent of
our 2014 graduate intake
15 per cent of our 2015 graduate
intake to be nationals from regions
wherewearedeveloping
new businesses
178 per cent of our 2014 graduate
intake were nationals from regions
wherewearedeveloping
new businesses
subsidiary board diversity
in addition to the measurable objectives described above women also
represented 106 per cent of the directors of our principal controlled subsidiary
undertakings during 2014 15 female 126 male
other disclosures
policies and standards
rio tinto’s commitment to integrity is set out in our global code of business
conduct the way we workthiscontainsprinciplesandstandardsofconduct
which reaffirm the group’s commitment to integrity it is inspired by our four
core values respect integrity teamwork and accountability it is available on
the website
it is supported by a number of policies and standards core policies are
adopted after wide consultation externally and within the group once
adopted they are communicated to business units worldwide together with
related standards guidance notes and resources to support implementation
business unit management are required to devote the necessary effort to
implement and report on these policies and standards
rio tinto policies and standards include policies on a variety of important
topics they apply to all rio tinto managed businesses where the group does
not have operating responsibility for a business rio tinto’s policies and
standards are communicated to its business partners and they are encouraged
to adopt similar policies of their own
rio tinto employees are required to undertake training about the
requirements of the way we work and other core policies
“whistleblowing” programme
the board has adopted a confidential and independently operated
whistleblowing programme called speakout this offers an avenue where
employees contractors suppliers and customers of rio tinto managed sites
can report concerns anonymously if they so choose subject to local law this
can include any significant concerns about the business or behaviour of
individuals including suspicion of violations of financial reporting safety or
environmental procedures or business integrity issues generally the
programme features web submission a case management tool to better
manage cases and a reporting tool to allow for improved analysis of case
statistics and reporting rio tinto is also looking at ways to increase the
positive awareness of speakout the audit committee receives a report
twice annually on speakout activity as does the sustainability committee
with regard to calls to speakout impacting sustainable development issues
dealing in rio tinto securities
rio tinto operates rules which restrict the dealing in rio tinto securities by
directors and employees with access to “inside information” these rules
require those people to seek clearance before any proposed dealing and place
restrictions on when some people can deal
communication with stakeholders
rio tinto recognises the importance of effective timely communication with
shareholders and the wider investment community
the disclosure committee is responsible for determining whether information
relating to rio tinto may require disclosure to the markets
rio tinto makes immediate disclosure unless an exemption applies allowing a
delay to the relevant listing authorities in accordance with their rules of any
information that a reasonable person would expect to have a material effect on
its share price all information released to the markets is posted on the media
section of the website
in addition to statutory documents rio tinto’s website features information on
corporate governance and general investor information annual and half year
results as well as any major presentations are webcast and the materials are
available on the website presentation material from investor seminars is also
made available on the website
the annual general meetings present an opportunity to provide a summary
business presentation to inform shareholders of recent developments and to
give them the opportunity to ask questions generally the chairs of all board
committees will be available to answer questions raised by shareholders and all
directors are expected to attend where possible in 2014 all of the directors
attended the annual general meetings rio tinto’s external auditors pwc
attend the annual general meetings and are available to answer questions
about the conduct of the external audit and the preparation and content of the
independent auditors’ report any questions received and answers provided
ahead of the annual general meetings are made available to shareholders who
also have the opportunity to meet informally with directors after the meetings
the main channels of communication with the investment community are
through the chairman chief executive and chief financial officer who
have regular meetings with the companies’ major shareholders the
senior independent director has a specific responsibility to be available to
shareholders who have concerns and where contact with the chairman
chief executive or chief financial officer has failed to resolve their concerns
or for whom such contact is inappropriate in his capacity as remuneration
committee chairman the senior independent director meets shareholders to
discuss remuneration issues as described in his annual statement on pages
64 to 65
riotintocom 61
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information corporate governance continued
during 2014 these meetings with the investment community focused on the
issues of strategy board succession corporate governance executive
remuneration and the operational and financial performance of the group
regular investor seminars provide a twoway communication opportunity with
investors and analysts on 24 november 2014 a corporate governance forum
was hosted in sydney to provide investors with an opportunity to engage with
the chairman and the chairs of the board committees a similar event will be
held in london on 17 march 2015 feedback from such engagement is
routinely communicated to the board surveys of major shareholders’ opinions
are presented to the board by the group’s investor relations advisers on a
regular basis
risk management
rio tinto’s overriding objective is to generate attractive sustainable returns to
shareholders through a strategy of investing in longlife lowcost expandable
operations in the most attractive industry sectors the directors recognise that
creating shareholder return is the reward for taking and accepting risk
a description of the principal risks and uncertainties that could affect rio tinto
is found on pages 14 to 17
risk policy and standard
the board recognises that risk is an integral component of the business and
carefully considers the level of risk it is prepared to tolerate the group fosters a
riskaware corporate culture in all decisionmaking and is committed to
managing all risk in a proactive and effective manner through competent risk
management that ensures that risks are managed within agreed thresholds to
support this commitment risk is analysed in order to inform the management
decisions taken at all levels within the organisation the principles of the risk
analysis are set out in the risk policy which is on the website
risk approach
the risk policy and standard is supported by an integrated framework of risk
governance and reporting specifying how the group organises the handling of
risk together with the policy the framework provides an ongoing process for
identifying evaluating and managing the significant risks faced by the group
clear accountability for risk management is defined throughout the group and
is a key performance area of line managers
to support risk understanding and management at all levels the group risk
function provides the necessary infrastructure information collation for the
senior executive and coordination between other riskfocused functions
group risk supports the risk management committee in its review of risk
whilst the audit committee is responsible for oversight of the effectiveness of
the group’s risk management systems the responsibility for identifying and
managing risks rests with the chief executive and all of rio tinto’s managers
and business leaders who operate within a groupwide framework that
ensures that risks are managed within agreed thresholds
internal controls
the directors are responsible for the group’s system of internal controls and
for reviewing annually the effectiveness of the internal control system this
includes reviewing financial operational and compliance controls and risk
management procedures and their effectiveness the directors have
completed their annual review and assessment for 2014
internal control systems
two of the group’s management committees the executive committee and
the disclosure committee regularly review reports related to the group’s
control framework in order to satisfy the internal control requirements of the
code the asx principles the nyse standards and section 404 of the
sarbanesoxley act 2002 the group audit  assurance function performs
reviews of the integrity and effectiveness of control activities and provides
regular reports to the audit committee sustainability committee and other
management committees
each year the leaders of the group’s businesses and functions complete a
representation letter confirming that adequate internal controls are in place
are operating effectively and are designed to capture and evaluate failings and
weaknesses if any exist and that action is taken promptly as appropriate
in 2014 information was reported by management to the audit committee to
enable it to assess the effectiveness of the company’s risk management and
internal control systems in addition as part of their role the board and its
committees routinely monitor the group’s material business risks
due to the limitations inherent in any risk management system the process
for identifying evaluating and managing the material business risks is
designed to manage rather than eliminate risk and to provide reasonable but
not absolute assurance against material misstatement or loss certain risks
for example natural disasters cannot be managed to an acceptable degree
using internal controls such major risks are transferred to third parties in the
international insurance markets to the extent considered appropriate the
group has material investments in a number of jointly controlled entities and
associates where rio tinto does not have managerial control it cannot
guarantee that local management of mining and related assets will comply
with rio tinto standards or objectives
auditors and internal assurance
external auditors
as indicated in the report of the audit committee on pages 57 to 59 rio tinto
has adopted policies designed to uphold the independence of the group’s
external auditors by prohibiting their engagement to provide other accounting
and other professional services that might compromise their appointment as
independent auditors
the engagement of the external auditors to provide statutory audit services
other services pursuant to legislation taxation services and certain other
services is preapproved any engagement of the external auditors to provide
other permitted services is subject to the specific approval of the audit
committee or its chairman for other services because of their knowledge
experience andor for reasons of confidentiality it can be more efficient or
necessary to engage the external auditor rather than another party
at half year and year end the chief financial officer and the external auditors
submit to the audit committee a schedule of the types of services that were
performed during the period the audit committee may impose a financial
limit on the total value of other permitted services that can be provided any
nonaudit service provided by the external auditors where the expected fee
exceeds a predetermined level must be subject to the group’s normal
tender procedures
in exceptional circumstances the chief financial officer is authorised to engage
the external auditors to provide such services without going to tender but if
the fees are expected to exceed certain predetermined limits then the
chairman of the audit committee must give prior approval of the engagement
further information on audit and nonaudit fees of the group’s external auditors
is set out in note 39 to the financial statements and in the directors’ report
62 riotintocom group audit  assurance
group audit  assurance is an internal function which provides independent
and objective assurance on the adequacy and effectiveness of the group’s
systems for risk management internal control and governance together
with recommendations to improve the effectiveness of the relevant systems
and processes the function has an internal audit methodology which is
aligned with international auditing standards set by the institute of internal
auditors iia
the function operates independently of management under a mandate
approved by the audit committee and has full access to all functions records
property and personnel of the group the head of group audit  assurance
administratively reports to the chief financial officer and has direct
communication lines with the chairs of both the audit committee and
sustainability committee and regularly attends their meetings
a riskbased approach is used to focus assurance activities on highrisk areas
and audit plans are presented annually to the audit committee and
sustainability committee for approval
in respect of its internal audit function rio tinto utilises the services of
external service providers the function has a policy which addresses conflicts
of interest in relation to engagements of the service provider that are
requested by management the policy complies with the iia’s standards on
independence certain services are preapproved under the policy as they
would not be in conflict with the internal auditor’s role there is a list of
prohibited services which may not be undertaken without approval of the head
of group audit  assurance and guidance on the consideration of services
which may give rise to a conflict of interest
financial reporting
financial statements
the directors are required to prepare financial statements for each financial
period which give a true and fair view of the state of affairs of the group as at
the end of the financial period and the profit or loss and cash flows for that
period this includes preparing financial statements in accordance with uk
company law which give a true and fair view of the state of the company’s
affairs and preparing a remuneration report which includes the information
required by regulation 11 schedule 8 of the large and medium sized
companies and groups accounts and reports regulations 2008 and the
australian corporations act 2001
in addition the code requires that the board provides a fair balanced and
understandable assessment of the company’s position and prospects in its
external reporting the directors were responsible for the preparation and
approval of the annual report for the year ended 31 december 2014 they
consider the annual report taken as a whole to be fair balanced and
understandable and provides the information necessary for shareholders to
assess the company’s performance business model and strategy
the directors are responsible for maintaining proper accounting records in
accordance with uk and australian legislation they have a general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the group and to prevent and detect fraud and other
irregularities the directors are also responsible for ensuring that appropriate
systems are in place to maintain and preserve the integrity of the group’s
website legislation in the uk governing the preparation and dissemination of
financial statements may differ from current and future legislation in other
jurisdictions the work carried out by the auditors does not involve
consideration of such developments and accordingly the external auditors
accept no responsibility for any changes should any be made to the financial
statements after they are made available on the website
the directors senior executives senior financial managers and other
members of staff who are required to exercise judgment in the course of the
preparation of the financial statements are required to conduct themselves
with integrity and honesty and in accordance with the ethical standards of
their profession and the business
the directors consider that the 2014 annual report presents a true and fair
view and has been prepared in accordance with applicable accounting
standards using the most appropriate accounting policies for rio tinto’s
business and supported by reasonable judgments and estimates the
accounting policies have been consistently applied the directors have
received a written statement from the chief executive and the chief financial
officer to this effect in accordance with the internal control requirements of
the code and the asx principles recommendation 73 this written
statement confirms that the declarations in the statement are founded on a
sound system of risk management and internal controls and that the
system is operating effectively in all material respects in relation to financial
reporting risks
disclosure controls and procedures
the group maintains disclosure controls and procedures as such term is
defined in us exchange act rule 13a15e management with the
participation of the chief executive and chief financial officer has evaluated the
effectiveness of the design and operation of the group’s disclosure controls
and procedures pursuant to exchange act rule 13a15b as of the end of the
period covered by this report and has concluded that these disclosure controls
and procedures were effective at a reasonable assurance level
management’s report on internal control over financial reporting
the management of rio tinto plc and rio tinto limited is responsible for
establishing and maintaining adequate internal control over financial
reporting the companies’ internal control over financial reporting is a process
designed under the supervision of their common chief executive and chief
financial officer to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of the group’s
published financial statements for external reporting purposes in accordance
with international financial reporting standards ifrs
the group’s internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect transactions and dispositions of assets
provide reasonable assurances that transactions are recorded as necessary to
permit preparation of financial statements in accordance with ifrs and that
receipts and expenditures are being made only in accordance with
authorisations of management and directors of each of the companies and
provide reasonable assurance regarding prevention or timely detection of
unauthorised acquisition use or disposition of the group’s assets that could
have a material effect on our financial statements
due to inherent limitations internal control over financial reporting cannot
provide absolute assurance and may not prevent or detect all misstatements
whether caused by error or fraud if any within each of rio tinto plc and
rio tinto limited
management conducted an assessment of the effectiveness of internal control
over financial reporting as of 31 december 2014 based on the internal control
– integrated framework issued by the committee of sponsoring organizations
of the treadway commission coso issued in 2013 and concluded that it
was effective
there were no changes in the internal controls over financial reporting that
occurred during the period that have materially affected or are reasonably
likely to materially affect the internal controls over financial reporting of each
of rio tinto plc and rio tinto limited
riotintocom 63
strategic report directors’ report
corporate governance
financial statements production reserves
and operations
additional information remuneration report annual statement by the remuneration
committee chairman
dear shareholders
on behalf of the board i am pleased to introduce our 2014 directors’
remuneration report the remuneration report for which we seek your
support at our annual general meetings agms in london in april and in
perthinmay
the remuneration report is designed to demonstrate the link between our
group’s strategy its performance and the remuneration outcomes for our
executives particularly the executive directors
with a view to delivering sustainable returns to shareholders over time
rio tinto takes a longterm approach to its activities and this means
concentrating on developing longlife lowcost expandable operations that
are capable of providing competitive returns throughout business cycles our
executives’ performance objectives are set accordingly
the remuneration report has been prepared in accordance with applicable
legislation and corporate governance guidance in the uk and australia
australian legislation requires disclosures in respect of “key management
personnel” being those persons having authority and responsibility for
planning directing and controlling the activities of the group the key
management personnel are in addition to the directors the nondirector
members of the executive committee the executive committee comprises
the executive directors product group chief executive officers and group
executives throughout this remuneration report the members of the
executive committee are collectively referred to as “executives” they are
listed on pages 49 and 52 which also show the positions held during the year
and dates of appointment
shareholders will be aware that we have to comply with uk and australian
legislation in the remuneration arena and that the rules are different we have
structured the voting arrangements such that all shareholders vote on all
three resolutions that we are putting to our agms
this remuneration report is divided into two parts the statement of
remuneration policy which summarises our compensation policies and
practices the remuneration policy and the annual report on remuneration
which shows how the remuneration policy has been applied the
implementation report
the remuneration policy is once again subject to a binding vote at our 2015
agms for uk law purposes the implementation report including this
statement is subject to an advisory vote for uk law purposes the
remuneration report as a whole is subject to an advisory vote at the 2015
agms for australian law purposes
for the purposes of uk regulations on remuneration reporting the
remuneration policy will if the resolution is passed become effective in
respect of payments to directors from the date of the second of our agms
7 may 2015
the board presented to shareholders a policy for the remuneration of its
directors for the first time at the 2014 agms following approval at the 2014
agms the remuneration policy for the purposes of the uk regulations
became effective in respect of payments to directors from 8 may 2014 while
the board intended the remuneration policy put to shareholders at the 2014
agms to apply for three years it has taken the decision to present you with an
updated remuneration policy which will be subject to a binding vote at the
2015 agms this is because the board has decided to seek approval for the
proposed change to the contractual notice periods for the chief executive and
the chief financial officer announced subject to shareholder consent on
23 october 2014 by way of an update to the remuneration policy
furthermore the board has decided to update the risk management section
of the report to incorporate its policy relating to malus and claw back for
performance related payments both sections being the only sections
containing material changes to the remuneration policy are identified in
italics in this report other minor clarification and contextual changes have
been made to reflect the revised remuneration policy becoming effective in
2015 but these are not marked a version that shows the comparisons
between our 2013 and 2014 policy reports is however available on the
company’s website at riotintocom
in the absence of circumstances which may necessitate a change to the
remuneration policy it is our intention that the policy will next be put before
shareholders for a vote at our agms in 2018 the contextual changes referred
to above are designed to avoid the need to update the remuneration policy
before then
although as a matter of uk law the remuneration policy only applies to the
remuneration of our directors it is the committee’s intention that the broad
policy principles will continue to inform the way in which our nondirector key
management personnel on the executive committee are remunerated
the remuneration policy describes among other things our executive
remuneration structure the details of the discretions available to the
committee our approach to remuneration on recruitment the details of
executives’ service contracts and how we treat leavers
remuneration for executives comprises fixed compensation in the form of
base salary participation in a pension plan superannuation fund andor a cash
allowance to contribute to a pension fund the receipt of certain benefits and
performancerelated remuneration each element is described in the
remuneration policy
the majority of the remuneration of executives will normally be performance
related and is provided in the form of variable short and longterm incentives
in relation to the shortterm incentive plan stip the committee each year
sets performance criteria relative to three benchmarks threshold target and
outstanding target performance is intended to be stretching and is typically
equivalent to budget for the year
i want to remind you of our policy relating to the disclosure of measures
weightings and targets in relation to the longterm incentive plan ltip
these will all be disclosed in advance at the beginning of each fiveyear
performance period in relation to the stip we will when it comes to
disclosure distinguish between safety financial and individual goals in the
area of safety goals we have disclosed and will continue to disclose the
measures weightings and targets at the beginning of each year in the area of
financial and individual goals we have disclosed and will continue to disclose
at the beginning of each year the measures and weightings only because we
regard the targets as commercially sensitive however as we said in the
remuneration report last year we intended to disclose and have in this
implementation report disclosed the targets and outcomes for 2014
retrospectively in the rare instances where this may not be prudent on
grounds of commercial sensitivity i will seek to explain why and give an
indication of when they would be disclosed
the chart on page 85 demonstrates the usual timeframe for the delivery of the
components of remuneration using 2014 as an example this emphasises the
longterm nature of our remuneration arrangements
64 riotintocom you will see several mechanisms in the remuneration report that are
intended to create alignment of interest between shareholders and executives
we have for our executives a mandatory conversion of 50 per cent of any
annual shortterm bonus payment into shares with vesting deferred for three
years the performance measures under our longterm remuneration plans
are structured to support and incentivise the creation of longterm
shareholder value in addition should circumstances warrant we have
reserved to the committee such discretions as enable it to safeguard against
the return experience of shareholders being materially misaligned with the
reward experience of executives we want the remuneration outcomes
properly to reflect the group’s overall performance we also have meaningful
share ownership requirements for our executives as described in the
implementation report
there are many examples in the remuneration policy and practice of how our
dialogue with shareholders has influenced the committee’s decisions in 2013
we added a new performance measure to our performance share plan psp
namely the relative ebit margin improvement measure we did this because
many of our owners had expressed a wish that our psp should incorporate
some diversification beyond total shareholder return tsr we extended the
performance period of the psp from four to five years and have materially
reduced the payout for threshold performance we have ceased using share
options as a mechanism for longterm reward we adjusted our safety
measures in our stip targets to reflect lost time injuries and all injury
frequency rates meanwhile as you will see in the implementation report our
decisions relating to base pay changes for executive directors and executives
are now broadly guided by pay changes for the wider employee population
2014 performance and remuneration
in terms of stip for 2014 the committee determined that the underlying
“unflexed” earnings target set by the board had not been met however the
“unflexed” free cash flow target and “flexed” earnings and free cash flow
targets have been exceeded “flexed” targets are designed to take into
account the impact of uncontrollable fluctuations in exchange rates quoted
metals and other prices during the year and as such may be higher or as was
the case in 2014 – a year in which many commodity prices fell sharply lower
than “unflexed” targets set by the board this is reflected in the financial
component of the stip awards at group and product group level
disappointingly the group did not attain its goal of zero fatalities however
the group’s all injury frequency rate reduced from 065 in 2013 to an alltime
low of 059 in 2014 bettering the group target of 061 this has led to a total
safety score for the group excluding the impact of fatalities of 138 per cent
out of a maximum of 200 per cent reductions have been applied as required
for executives with portfolios where a fatality has occurred
the net effect of these outcomes also taking into account the achievement of
individual objectives is that stip awards for executive committee members
have been made in a range from at or about target to above target levels
the committee considered the group’s overall performance in the context of
the ltip awards that were due to vest at the end of 2014 these were the 2011
award under the psp which had an indicative vesting of 735 per cent of face
value and the 2012 grant under the share option plan which has an
indicative vesting of 100 per cent of face value the committee concluded that
the vesting of awards based upon the achievement of the tsr measures was
justified
as previously announced jacynthe côté chief executive of the aluminium
group left the group on 1 september the details of her departure terms are
summarised on page 84
2015 decisions
the committee has reviewed the base salary levels for executives and for the
executive directors and the majority of the executive committee made
adjustments in line with the base salary budgets applying to the broader
employee population
the base salary increases for alan davies and jeanse ´bastien jacques are
specific adjustments which reflect the additional responsibilities and broader
portfolios transferred to them from the former energy product group
announced on 27 february 2015 details are set out on page 82 of the
implementation report
the quantum of ltip awards to be granted to executives in march 2015 is
broadly similar to those made in 2014
safety cost and capital expenditure reductions and cash flow management
will continue to feature prominently in the individual objectives for executives
in 2015
further details are provided in the implementation report
governance and owners’ views
it has been and continues to be our intention to be alert to evolving best
practice and to the views and guidance given to us in the conversations we
have with our owners
we are committed to a continuing dialogue with shareholders including
listening to their views about this report which are most welcome
yours sincerely
john varley
remuneration committee chairman
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financial statements production reserves
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additional information remuneration report remuneration policy
remuneration policy introduction
this remuneration policy applies to our executive and nonexecutive directors
and to the chairman it also sets out in conformance with australian law the
broad policy principles which generally apply to the nondirector members of
the executive committee the policy applying to our chairman and non
executive directors is set out at the end of the remuneration policy
shareholders should note that this remuneration policy is binding only in so
far as it relates to directors
our remuneration policies principles and practices
our first objective is to spend remuneration resource wisely in pursuit of
the implementation of the group’s strategy we want our pay policies to
be regarded as fair by shareholders and employees alike although we
have remuneration structures which are fit for purpose the committee
retains appropriate discretions enabling it if it thinks fit to override
inappropriate mechanistic outcomes but always within the confines of the
remuneration policy
rio tinto operates in global and local markets where it competes for a limited
pool of talented executives highquality people who are capable of achieving
stretching performance targets are essential to generating superior returns
for the group our compensation strategies aim to provide this support by
enabling the group to attract and retain people whose contribution will
increase shareholder value over time
we aim to engage our people over the long term by fostering diversity
providing challenging work and development opportunities and encouraging
strong delivery by good performance this people strategy is underpinned by
our values of respect integrity teamwork and accountability and by our
commitment to provide sustainable growth and development for both
rio tinto and its employees
our policy is based on the principle of aligning remuneration outcomes with the
successful delivery of strategy the remuneration strategy and the policies which
support it together with a description of how we believe they will help rio tinto
achieve its vision are set out below and under the heading “executive
remuneration structure – policy table” complementary remuneration structures
are designed for other employees drawing on these strategies and policies
competitive performancerelated remuneration
we aim to provide competitive rewards that attract retain and motivate
executives of the high calibre required to lead the group while ensuring that
rewards remain appropriate and proportionate when compared both to market
practice and to remuneration arrangements for other employees in the group
– the majority of remuneration is linked to demanding performance targets
over both the short and long term to ensure that executive rewards are
directed at delivering good performance for shareholders
– for the purposes of assessing the appropriate level of executive
remuneration the committee refers to the ftse30 excluding financial
services companies as the initial comparator group the ftse30 is
considered the most relevant comparator group as it largely comprises
organisations broadly comparable to the group in terms of global reach
revenue market capitalisation and complexity references are also made
to other relevant supplementary comparator groups including a cross
section of comparable international industrial organisations and other
international mining companies
– typically we aim to position base salaries at the median of these
comparator groups while our incentive plans are designed with the
potential to deliver total remuneration outcomes across the full market
range according to business and individual performance
– benchmarking is undertaken periodically but not annually and our
intention is to apply judgment in evaluating market data we will take
salary increases in the broader employee population into account in
determining any change to the base pay of executives we normally use
threeyear average exchange rates in order to mitigate the impact of
exchange rate volatility to help determine the appropriate positioning of
executive remuneration against internal and external comparators
– we regularly consult with shareholders on the design of our policies and
programmes most recently on the subjects of the safety measure
component of the stip the ceasing of the use of share options as a
mechanism for longterm reward and the performance conditions and the
performance period for the performance share plan psp
– employee share plans provide the opportunity for employees to participate
in the voting on executive remuneration employees who are shareholders
– 25 per cent of the workforce at the date of this report – are able to vote
on the remuneration report employees have not been consulted on the
remuneration policy but are free to ask any questions they wish and to
offer any opinions they have through our normal employee
communications channels
safety
we have a strong focus on safety in the stip targets
– as an organisation we strive for superior longterm shareholder value
creation in a healthy safe and environmentally appropriate way these are
important elements of our licence to operate
– safety key performance indicators determine a significant portion of the
stip for executives
– any fatality will have a material impact on the stip score for the relevant
executives further details on the approach to fatalities are provided in the
implementation report
66 riotintocom longterm focus
consistent with our strategy of investing in and operating longlife lowcost
expandable operations in the most attractive industry sectors we seek to
provide incentive plans that focus on longerterm performance
– our incentive plans are designed to promote and reward decisionmaking
with a positive longterm impact while avoiding excessive risk
– fiftypercentofthestipforexecutivesisdeferredintoshareswhichvest
after three years through the bonus deferral plan bdp
– the performancebased options and shares awarded prior to 2013 have a
three and fouryear performance period respectively the performance
period for performance shares awarded under the psp from 2013 is five
years however as a transitional measure awards granted in 2013 will
potentially vest 50 per cent after four years and 50 per cent after five years
– options are no longer granted but existing options may be exercised
subject to their vesting conditions up to ten years after their grant
– the committee intends to keep the group’s longterm incentive
arrangements under review
shareholder alignment
our share ownership policy requires executives to build up and maintain a
meaningful shareholding as described in the implementation report under the
heading “share ownership policy for executives”
we reward executives for delivering shareholder value by using relative tsr as
one of the measures for our ltip
– for awards granted from 2013 under the psp a relative ebit margin
improvement measure has complemented the existing relative tsr
measures and incentivises executives to deliver longterm shareholder
value while maximising operational performance in the medium term this
comprises onethird of the total value opportunity under the psp awards
– the reward opportunity under the remaining portion of the psp awards is
delivered based on relative tsr performance against both the hsbc
global mining index and the broader market of large global companies as
measured through the morgan stanley capital world index msci
– the choice of both the hsbc global mining index and msci reflects the
fact that rio tinto competes in a global market for investors as well as
within the mining sector and is consistent with rewarding executives for
providing stable returns over the long term relative to the broader market
and the mining sector
risk management – malus and claw back
a
the committee has authority under the “malus” provisions of the psp to
reduce or cancel awards made from 2013 in the event of gross misconduct
which may have a material effect on the value or reputation of the group a
materially adverse error in the group’s or a product group’s financial
statements exceptional events that have a materially detrimental impact
on the value of any group company or for any other reason that the
committee decides in a particular case
the committee also has authority under the “claw back” provisions of the
psp to recover the value of any vested awards made from 2013 in the event of
deliberate misconduct by a participant that may have a material impact on the
value or reputation of a rio tinto group company or for any other reason that
the directors decide in a particular case
malus and claw back can be applied by the committee in relation to the stip
and its deferral into bdp the committee evaluates the outcomes of the stip
for fairness with the original targets and with shareholder experience and may
make discretionary adjustments for executives using “malus” principles as
necessary any such adjustments are disclosed in the implementation report
for the relevant financial period
the committee retains discretion with respect to the vesting of bdp awards
made from 2013 onwards prior to their vesting dates such that if an executive
resigns or is dismissed for misconduct or for any other reason that the
committee decides in the event of an executive terminating their
employment bdp awards may be “clawed back” and consequently lapse
the committee reserves rights to exercise discretions more generally as
described under the heading “discretions”
a material changes to the remuneration policy such as those relating to malus and
claw back below are identified in italics in this report
executive remuneration structure – policy table
the committee seeks to achieve a remuneration mix which best reflects the
longterm nature of the business the total remuneration package is therefore
designed to provide an appropriate balance between fixed and variable
components with an emphasis on longterm variable pay the remuneration
structure for executives including the relationship between each element of
remuneration and group performance is summarised below further details
on the key performance indicators used to assess group performance are
provided in the strategic report under the heading “key performance
indicators” shareholders should note that the following remuneration
structure is binding only in so far as it relates to directors
any commitment made before this remuneration policy takes effect or before
an executive became or becomes a director will be honoured even if it is not
consistent with this remuneration policy or any subsequent policy
remuneration arrangements – fixed link to group performance and strategy
base salary – base salary provides the main fixed element of the remuneration package
– base salaries are reviewed annually with a maximum increase of nine per cent or
inflation if higher per annum an increase may be higher than this for executives
who are not directors in the circumstances described below
– any increase is generally aligned with the average base salary increases
applying to the broader employee population unless there were significant
changes to an individual’s role andor responsibilities during the year any
increases are determined with reference to underlying group and individual
performance global economic conditions role responsibilities an
assessment against relevant comparator groups and internal relativities
– an increase above the maximum noted above for executives who are not
directors may be made in the event of internal promotion or increase in
responsibility or where the executive’s salary is significantly below
market positioning
– we pay competitive salaries to hire
motivate and retain highly
competent people
– benchmarking is undertaken periodically but not annually and our intention
is to apply judgment in evaluating market data
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additional information remuneration report remuneration policy continued
remuneration arrangements – fixed link to group performance and strategy
pension or
superannuation
– employment benefits typically include participation in a pension plan
superannuation fund or a cash allowance to contribute to a personal pension or
superannuation fund
– we provide locally competitive post
employment benefits in a costefficient
manner in order to hire and retain
– the maximum level of company contribution to an individual executive director’s
schemes annually is 35 per cent of base salary
other benefits – other benefits include private healthcare cover for the executive and their
dependants company car or allowance car parking life insurance accident
insurance provision of companyprovided transportchauffeur professional advice
participation in local flexible benefit programmes and certain other minor benefits
including modest retirement gifts in applicable circumstances occasional spouse
travel in support of the business and any rio tinto business expenses which are
deemed to be taxable where the company has paid the tax on their behalf
– we provide competitive other benefits
in a costefficient manner to hire and
retain
– secondment relocation and localisation benefits for example housing tax
equalisation cost of living allowance the payment of school fees periodic visits
home for the executive and their family and where relevant localisation payments
may also be made to and on behalf of executives living outside their home country
examples of these types of payments are set out in the implementation report
– other benefits are paid at cost and given the nature and variety of the items there
is no formal maximum level of company contribution
remuneration arrangements – performancerelated at risk
short term incentive
plan stip
– if target performance is achieved under the stip the bonus opportunity is up to
120 per cent of base salary for executive directors and up to 100 per cent of base
salary for other executives the award for achieving threshold performance is 50 per
cent of the target bonus opportunity and the maximum bonus award for
outstanding performance is 200 per cent of base salary these percentages with
the exception of the maximum percentage are subject to the exercise of discretion
by the committee
– stip focuses participants on achieving
demanding annual performance goals
which are based on the group’s kpis in
pursuit of the creation of sustainable
shareholder value
– we demand that sustainable business
practices are adhered to particularly in
the context of safety
– when reviewing the outcome of the
awards under the stip the committee
will when evaluating overall safety
financial group and individual
performance consider the overall
fairness against original expectations and
shareholder experience
– any discretionary adjustments for
directors will be disclosed in the
implementation report for the financial
period
– a scorecard of key performance indicators kpis is established for each executive
at the commencement of the financial year the measures and the relative
weightings are selected by the committee in order to drive business performance
for the current year including the achievement of financial safety and other
individual business outcomes that are priorities for the financial year in question
– the measures weightings and targets are reviewed annually and are included
either prospectively or retrospectively each year in the implementation report the
committee retains flexibility to determine the measures weightings and targets as
appropriate based on the outcomes of its annual review
– we expect to disclose the measures weightings and targets for safety goals at the
beginning of each year in the area of financial and individual goals we will at the
beginning of each year disclose the measures and weightings only because we
regard the targets as commercially sensitive however we intend to disclose targets
and outcomes retrospectively in the rare instances where this may not be prudent
on grounds of commercial sensitivity we will seek to explain why and give an
indication of when they will be disclosed
– threshold target and outstanding performance levels are established for all stip
measures to help drive high levels of business and individual performance
– the central case or “base” plan delivers what the board considers to be target
performance target performance is intended to be stretching probability factors
are then applied based upon a range of potential operating and cost scenarios to
establish the threshold and outstanding performance levels these threshold
below target target and outstanding above target levels are determined by the
committee at the beginning of each performance year
– the committee seeks to ensure in making its yearend determination of stip
awards that actual performance is directly comparable to the targets set at the
beginning of the year this sometimes results in adjustments to the targets being
made by the committee in particular to take account of events outside
management’s control to ensure a likeforlike comparison both upward and
downward adjustments can be made with reference to principles agreed by the
committee to ensure the outcomes are fair
– safety kpis comprise a significant portion of the stip for executives and any fatality
will have a material impact on the stip score for the relevant executives
bonus deferral plan
bdp
– fifty per cent of the stip is delivered in deferred shares under the bdp with the
remainder delivered in cash
– the bdp ensures ongoing alignment
between executives and shareholders
through deferral of 50 per cent of stip
awards into rio tinto shares
68 riotintocom remuneration arrangements – performancerelated at risk link to group performance and strategy
– the bdp vests in the december of the third year after the end of performance year
to which it relates
– the number of bdp shares which are awarded is increased by reference to the
dividends paid in the deferral period before vesting
– bdp shares vest on a change of control
performance share
plan psp
– a new plan was approved by shareholders at the 2013 agms
– awards under the new psp have a maximum face value of 438 per cent of base
salary ignoring dividend equivalents as described below
– the awards have been calculated independently by our consultants towers
watson since 1 august 2013 and deloitte llp previously to have an expected value
of approximately 50 per cent of face value expected value is face value adjusted for
the probability of the performance target being met
– threshold performance as explained in the implementation report would result in
the vesting of 225 per cent of the face value of an award
– the maximum expected value that can be awarded under the psp is 219 per cent of
base salary ie 438 per cent x 50 per cent the threshold value is a maximum of
986 per cent of base salary ie 438 per cent x 225 per cent
– actual award levels may vary for each executive and are included in the
implementation report
– conditional share awards vest subject to the achievement of stretching
performance conditions comparing rio tinto’s performance against
– onethird tsr relative to the hsbc global mining index
– onethird tsr relative to the morgan stanley capital world index msci and
– onethird improvement in ebit margin relative to the global mining
comparators which will be listed in the implementation report each year
– each component of the award will be assessed independently details of the tsr
and ebit margin measures targets and vesting schedules will be set out in the
implementation report each year with respect to the ebit margin measure in
order to ensure that outcomes are fair and that business performance has been
appropriately taken into account the committee will consider on a discretionary
basis any specific significant unusual “below the line” items eg impairments
reported by rio tinto or its peers during the performance period to ensure genuine
comparability when determining any level of vesting indicated by thirdparty data
the application of any such discretion will be disclosed
– the outperformance required for maximum vesting under all components of the
award is considered by the committee to be very stretching
– if but only if vesting is achieved participants in the psp shall be entitled to receive
a number of additional shares whose market value reflects the aggregate cash
amount of dividends that would have been received had the shares which have
vested at the end of the performance period been held throughout the performance
period
– awards and performance conditions can be adjusted to take account of variations of
capital and other transactions subject to this policy performance conditions may
be amended in other circumstances if the committee considers that a changed
performance condition would be a fairer measure of performance
– if there is a change of control awards will vest to the extent performance conditions
are then satisfied if the change of control happens during the first 36 months from
the date of grant of the award the number of shares that can vest will be reduced
pro rata over that 36 months period the committee may alternatively with
agreement of an acquiring company replace awards with equivalent new awards
over shares in the acquiring company
– the committee retains the discretion where circumstances warrant to amend or
waive performance conditions under the plan rules
– as described under the malus and claw back provisions set out earlier in this policy
report the committee retains the discretion to reduce or cancel awards before they
vest malus or to recover the value of awards after vesting claw back
– the psp incorporates a simple
structure to align executive reward with
shareholder returns and business
strategy to help drive performance
over a longterm horizon
– award levels are set to incentivise
executives to meet the longterm
strategic goals of the group to provide
retention for the executive team and to
contribute towards the competitiveness
of the overall remuneration package
– tsr rewards the delivery of superior
returns to shareholders over the
long term
– ebit margin improvement rewards
sustained operational performance of
our business and the costcompetitive
operation of our mining assets a core
part of our strategy
– how performance is generated is as
important as what level of performance
is delivered before vesting the
committee must satisfy itself that
relative tsr and ebit margin
performances are an appropriate
reflection of the underlying
performance of the business and can
adjust vesting accordingly
– awards will normally have a fiveyear
performance period to provide long
term alignment with the interests
of shareholders
– as a transitional measure awards
granted in 2013 will vest 50 per cent
after four years and 50 per cent after
five years
– the committee will seek to ensure that outcomes are fair and that they take account
of the overall performance of the company during the performance period
the longterm incentive awards made prior to 2013 and under which payments are still intended to be made should the relevant performance conditions be
satisfied can be paid out under this policy the details of the awards granted prior to 2013 which have yet to vest including the details of the performance
conditions are provided in the implementation report
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additional information remuneration report remuneration policy continued
total remuneration opportunity
the following charts provide an indication based on 2015 remuneration and the upcoming 2015 psp awards of what can be achieved under the remuneration
policy for the executive directors at below threshold a threshold b target c and outstanding d performance levels together with the proportion of the
package delivered through fixed and variable remuneration the psp stip deferred shares and stip cash are all performancerelated remuneration uk legislation
requires that these charts are given in relation to the first year in which the remuneration policy applies
sam walsh chief executive
potential value of 2015 remuneration package
a’000
chris lynch chief financial officer
potential value of 2015 remuneration package
£’000
key
psp
stip – deferred shares
a15940
a10063
a6512
a3390
stip – cash
superannuation
benefits
base salary
a below threshold performance minimum
threshold performance
ontarget performance
outstanding performance maximum
b
c
d
ab c d d c b a
key
 psp
 stip – deferred shares
 stip – cash
 pension
 benefits
 base salary
a below threshold performance minimum
b threshold performance
c ontarget performance
d outstanding performance maximum
1373
2059
£1151
£2461
£3952
£6418
proportion of the 2015 remuneration package value delivered
through fixed and variable remuneration

proportion of the 2015 remuneration package value delivered
through fixed and variable remuneration

key
13 28 59
29 9 31 15 7 9
43 12 12 4 9 20
55 12 12 3 6 12
psp
stip – deferred shares
stip – cash
superannuation
fixed

benefits
base salary
a below threshold performance minimum
threshold performance
ontarget performance
outstanding performance maximum
b
c
d
ab c d d c b a
key
 psp
 stip – deferred shares
 stip – cash
 pension
 benefits
 base salary
a below threshold performance minimum
b threshold performance
c ontarget performance
d outstanding performance maximum

fixed 73 9 18
34 4 8 10 10 34
21 3 5 13 13 45
13 2 3 13 13 56
the following table provides the basis for the values included in the charts above
fixed stated in ‘000 – shown as column a above
base
salary
a
superannuation
or pension
b
benefits
c
total
fixed
sam walsh a1992 a450 a948 a3390
chris lynch £836 £208 £107 £1151
a base salary is the latest known salary
b superannuation for sam walsh is measured on a basis consistent with the single figure superannuation figure as set out in the implementation report but assumes that sam’s
accrued benefit at 31 december 2014 will receive investment earnings at the rate of six per cent the final value for 2015 will depend on the actual investment earnings received
and may therefore be significantly different
c benefits are as measured at the benefits figure in the single figure tables in the implementation report excluding amounts considered to be oneoff in nature oneoff items for
sam in 2014 of a82000 included a relocation related benefit for the removal of household goods into storage in australia and immigration related services note that this number
for sam includes expatriate benefits which are not capped and are subject to exchange rate fluctuations
70 riotintocom performancerelated at risk
threshold stip and ltip
a
performance – shown as
column b above
– a stip award of 50 of the target stip
opportunity ie 60 of base salary
– threshold vesting of the psp award at
225 of face value calculated as 968
of base salary
target stip and ltip
performance – shown as
column c above
– a stip award of 100 of the target stip
opportunity ie 120 of base salary
– expected value of the psp award of
50 of face value calculated as 215
of base salary
outstanding stip and ltip
performance maximum –
shown as column d above
– a maximum stip award of 200 of
base salary
– full vesting of the psp award calculated
as 430 of base salary
a longterm incentives consist of share awards only measured at 2015 face value
this does not constitute an estimate of the value of awards that may potentially
vest with respect to year end 31 december 2015 no assumption has been made for
increase in share price or payment of dividends
context for outstanding performance
demanding performance targets are designed to ensure that the level of
remuneration is aligned with performance delivered for shareholders
outstanding business and individual performance is required to achieve the
maximum level of remuneration this comprises
– outstanding performance against all financial health and safety and
individual stip measures
– tsr outperformance against both the hsbc and msci indices by six per
cent per annum over five years and
– ebit margin improvement equal to or greater than the second ranked
company in the comparator group over five years
the intention of the committee is that if these levels of reward are achieved by
our executives then shareholders will benefit over time from superior share
price performance
discretions
the committee recognises the importance of ensuring that the outcomes of
the group’s executive pay arrangements described in this remuneration
policy properly reflect the group’s overall performance and the experience of
its shareholders and other stakeholders over the performance period
the committee undertakes to owners that it will exercise discretion diligently
and in a manner that is aligned with our strategy to create longterm
shareholder value accordingly when reviewing the operation of short and
longterm incentive plans and the outcome of awards made under these
plans the committee will when evaluating safety financial group and
individual performance consider the overall shareholder experience during the
performance period in question
it is the committee’s intention that the mechanistic outcome of performance
conditions relating to awards made under such plans will routinely be subject
to review to avoid outcomes which could be seen as contrary to shareholders’
expectations to the extent provided for in the terms of any performance
condition or in accordance with any relevant amendment power under the
plan rules the committee may adjust andor set different performance
measures if events occur such as a change in strategy a material acquisition
or divestment a change in control or unexpected event which cause the
committee to determine that the measures are no longer appropriate or in the
best interests of shareholders and that the amendment is required so that the
measures achieve their original purpose committee discretion should not
operate as an automatic override and it must be exercised judiciously
to the extent that discretion is applied in any year the committee undertakes
that this will be clearly explained and disclosed to shareholders in the
implementation report
recruitment remuneration
our approach to recruitment remuneration for executives both external and
internal is set out below shareholders are reminded that the following principles
are binding only in so far as they relate to the recruitment of directors
we aim to position base salary at an appropriate level taking into consideration a
range of factors including an executive’s current remuneration experience
internal relativities an assessment against relevant comparator groups and cost
other elements of remuneration will be established in line with the remuneration
policy set out earlier in this policy report in the executive remuneration structure
table as such annual variable remuneration for new appointees will comprise a
maximum award of 200 per cent of base salary under the stip and a maximum
award of 438 per cent of base salary under the psp
in the event that an internal appointment is made existing commitments will
be honoured
if the committee concludes that it is necessary and appropriate to secure an
appointment relocationrelated support and international mobility benefits
may also be provided depending on the circumstances any relocation
arrangements will be set out in the implementation report
any compensation provided to an executive recruited from outside the group
for the forfeiture of any award under variable remuneration arrangements
entered into with a previous employer is considered separately to the
establishment of forward looking annual remuneration arrangements our
policy with respect to such “buyouts” is to determine a reasonable level of
award on a likeforlike basis of primarily equitybased but also potentially
cash or restricted stock taking into consideration the quantum of forfeited
awards their performance conditions and vesting schedules the committee
will obtain an independent external assessment of the value of awards
proposed to be bought out and retains discretion subject to the above to
make such compensation as it deems necessary and appropriate to secure the
relevant executive’s employment the committee’s intention is that buyout
compensation should include where appropriate performancetested equity
no form of “golden hello” will be provided upon recruitment
executives’ service contracts and termination
b
the committee will seek to honour any commitments made in respect of
termination of employment in the executive directors’ service contracts
predating this remuneration policy which are described in this section this
section also sets out rio tinto’s policy on termination payments and notice
periods shareholders are reminded that such policy is binding only in so far as
it relates to directors
for new appointments where the company terminates by making a payment
in lieu of notice the committee will for executive directors to the extent
permitted by relevant law have regard to the executive director’s ability to
mitigate his loss in assessing the payment to be made
the executive directors may have or may be offered service contracts which
can be terminated by either party with up to 12 months’ notice in writing or
immediately by paying the base salary only in lieu of any unexpired notice an
initial notice period of up to 24 months during the first two years of
employment reducing to up to 12 months thereafter may sometimes be
necessary to secure an external appointment in some circumstances it may
also be appropriate to use fixedterm contracts for executive directors
on 23 october 2014 the company announced its intention to change the
contractual notice periods for the executive directors subject to approval of
this remuneration policy at the 2015 agms both executive directors will
transfer from their current fixed term contracts to openended contracts with
no predetermined end date and a 12month notice period
other executives can be offered service contracts which can be terminated by
the company with up to 12 months’ notice in writing and by the employee
with six months’ notice in writing or immediately by the company by paying
the base salary only in lieu of any unexpired notice
the current contract terms of both directors and the other executives are
included in the implementation report
b material changes to the remuneration policy such as those relating to executive
service contracts above are identified in italics in this report
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executives may be required to undertake garden leave during all or part of
their notice period and may receive their contractual salary stip and benefits
during the notice period or the cash equivalent where applicable tax
equalisation and other expatriate benefits will continue in accordance with the
executive’s prevailing terms and conditions
in the case of dismissal for cause the company can terminate employment
notice deferred bonus shares and outstanding awards under the ltip may be
forfeited in these circumstances
accrued but untaken annual leave and any long service leave will be paid out
on termination in accordance with the relevant country legislation and
applicable practice applying to all employees for eligible leavers as defined
below in australia the value of the leave is calculated on the basis of base
salary target stip and car allowance no stip is included where the executive
is not an eligible leaver
if termination is a result of redundancy the terms of the relevant local policy
may apply in the same way as for other local employees
on termination the company will pay relocation or expatriation benefits as
agreed on the original expatriation andor in accordance with its applicable
policies on travel and relocation for example sam walsh is provided with
expatriation benefits and allowances and on termination of his employment by
the company repatriation expenses would be paid
on termination other than for cause the company may make a payment in
consideration for entry by the departing executive director into appropriate
restrictive covenants to protect rio tinto and its shareholders the amount of
such payment will be determined by the committee based on the content and
duration of the covenant
following termination executive directors may be eligible to exercise long
term incentives awards under the conditions described in the sections
following they and their dependants may also be eligible for postretirement
benefits such as medical and life insurance the company may also agree to
continue certain other benefits for a period following termination where the
arrangements are provided under term contracts or in accordance with the
terms of the service contract for example payment for financial advice tax
advice and preparation of tax returns for a tax year in some cases they may
receive a modest retirement gift
the company may pay such amount as it determines is reasonable to settle
any claims which in the committee’s view are legitimate which the executive
director may have in connection with the termination of his employment the
company may also pay reasonable legal and other professional fees including
outplacement support to or in respect of a director in connection with the
termination of his employment these may include legal fees incurred by him
in negotiating a settlement agreement with rio tinto in assessing what is
reasonable the company will take account of prevailing rates for such advice
and support and determine appropriate level of contribution based on the
complexity of the issues
treatment of stip and ltip on termination
the stip and share plan rules govern the entitlements that executive
participants may have under those plans upon termination of employment
the concept of an “eligible leaver” is defined in the relevant plan rules in
general terms an eligible leaver is an executive who leaves the group by
reason of illhealth injury disability as determined by the executive’s
employer retirement redundancy transfer of the undertaking in which the
executive works change of control of the executive’s employing company or
death and usually there is a discretion for the remuneration committee to
treat an executive as an eligible leaver
short term incentive plan stip
if an eligible leaver leaves the group during a performance year the
committee may determine in its absolute discretion to award a pro rata
portion of the stip based on the amount of the year served and based on
actual assessment of performance against targets any cash payment will be
made at the normal stip payment date and no portion of the award will be
deferred into shares
if an executive provides the company notice of their resignation during the
performance year but will not leave the group until after the end of the
performance year the committee may determine in its absolute discretion
to make an award under the stip in these circumstances the executive will
only be eligible to receive the cash portion of the award and will forfeit the
deferred shares portion any cash payment will be made at the normal stip
payment date
no stip award will be made where an executive who is not an eligible leaver
leaves the group resigns or is terminated for cause prior to the end of the
performance year
bonus deferral plan bdp 2013 onwards
for grants made to executives from and including 2013 awards will normally
be retained and vest at the scheduled vesting date save where the committee
determines otherwise there will be no pro rata reduction of awards and any
dividend equivalent shares will be calculated on the vested shares
if the executive resigns or is dismissed for misconduct or for any other reason
that the committee decides the awards will lapse
bdp pre2013
for grants made to eligible leavers before 2013 awards will normally vest at
thescheduledvestingdatesavewherethecommitteedeterminesotherwise
there will be no pro rata reduction of awards and any dividend equivalent
shares will be calculated on the vested shares
if an executive leaves the group for any other reason awards will lapse
for any bdp award where required by law or regulation and where the
remuneration committee so decides cash may be provided in lieu of shares
psp 2013 onwards
for grants made to executives from and including 2013 awards will normally
be retained and vest at the scheduled vesting date unvested awards remain
subject to the satisfaction of the performance conditions any dividend
equivalent shares will be calculated on the vested shares at vesting
if the executive leaves the group during the first 36 months from the date of
grant of the award the number of shares that can vest will be reduced pro rata
over that 36month period
awards will vest immediately on death but if an executive dies during the first
36 months from the date of grant of the award the number of shares that can
vestwillbereducedprorataoverthat36monthperiod
if the executive resigns or is dismissed for misconduct or for any other reason
that the committee decides the awards will lapse
psp pre2013
for grants made to eligible leavers before 2013 awards will normally be
retained and vest at the scheduled vesting date although the committee may
determine that awards should vest early unvested awards remain subject to
the satisfaction of the performance conditions
72 riotintocom awards vest immediately on death the number of shares vesting is
determined on the assumption that performance conditions are met at median
level or at the level to which they are actually satisfied at the date of death if
higher if an executive leaves the group for any other reason awards will lapse
for any psp award where permitted and where the remuneration committee
so decides awards may be made in cash in lieu of shares
share option plan sop pre2013
for grants made to eligible leavers before 2013 awards will normally be
retained if the executive is an eligible leaver vested awards will lapse one year
from the date the executive leaves the group and unvested awards will lapse
oneyearfromthevestingdateorsuchlongerperiodaspermittedbythe
committeeatthedateofthisreporttherearenoawardsunderthesop
which remain subject to the satisfaction of performance conditions
awards vest in full on death
if an executive leaves the group for any other reason unvested awards and
vested awards that have not been exercised will lapse
management share plan msp
awardsunderthemspareonlymadetoexecutivespriortotheirappointment
as an executive committee member all retained awards will be reduced pro
rata to reflect the proportion of the period between the date of grant of the
award and the normal vesting date which has not elapsed at the time
employment ceased any dividend equivalent shares or cash equivalent will be
calculated on the vested shares awards vest on death subject to the pro rata
reduction described above
for grants made to executives from and including 2013 awards will normally
be retained and vest at the committee’s discretion at the scheduled vesting
date although awards of us taxpayers may vest on leaving
if the executive resigns or is dismissed for misconduct or for any other reason
that the committee decides the awards will lapse
all msp awards granted prior to 2013 have vested
chairman and nonexecutive directors’ remuneration
chairman
it is rio tinto’s policy that the chairman should be remunerated on a
competitive basis and at a level which reflects his contribution to the group as
assessed by the board
the committee determines the terms of service including remuneration of
thechairmanthechairman’sfeesaresetbythecommitteethechairman
has no part in the setting of his fees and is not present at any discussion at the
committee about his fees
the chairman receives a fixed annual fee and does not receive any additional
fee or allowance either for committee membership or chairmanship or for
travel the chairman does not participate in the group’s incentive plans
the chairman is provided with a car and driver any use for transport
between home and the office and other personal travel is a taxable benefit
to the chairman and the company pays any tax arising on the chairman’s
behalf the chairman pays a fixed annual fee to the company for the
personal travel element
other benefits provided include private healthcare cover accident insurance
note this is neither contractual nor a taxable benefit other minor benefits
including modest retirement gifts in applicable circumstances occasional
spouse travel in support of the business and any rio tinto business
expenses which are deemed to be taxable where the company has paid the
tax on his behalf rio tinto does not pay retirement or postemployment
benefits to the chairman
nonexecutive directors
fees paid to nonexecutive directors reflect their respective duties and
responsibilities and the time required to be spent by them so as to make a
meaningful and effective contribution to the affairs of rio tinto
the nonexecutive directors’ fees and other terms are set by the board upon
the recommendation of the chairman’s committee which comprises the
chairman chief executive and chief financial officer
nonexecutive directors receive a fixed annual fee comprising a base fee
committee membership or committee chairmanship fee or senior independent
director fee as applicable and allowances for attending meetings which
involve medium or longdistance air travel they do not participate in any of
the group’s incentive plans
where the payment of statutory minimum superannuation contributions
for australian nonexecutive directors is required by australian
superannuation law these contributions are deducted from the director’s
overall fee entitlements
nonexecutive directors may on occasion receive reimbursement for costs
incurred in relation to the provision of professional advice these payments if
made are taxable benefits to the nonexecutive directors and the tax arising is
paid by the company on the director’s behalf
otherbenefitsprovidedincludeaccident insurance note this is neither
contractual nor a taxable benefit other minor benefits including modest
retirement gifts in applicable circumstances occasional spouse travel in
support of the business and any rio tinto business expenses which are
deemed to be taxable where the company has paid the tax on their behalf
rio tinto does not pay retirement or postemployment benefits to non
executive directors
appointment
the appointment of nonexecutive directors including the chairman is
handled through the nominations committee and board processes the
current fee levels are set out in the implementation report
details of each element of remuneration paid to the chairman and non
executive directors are set out in the implementation report in table 1b on
page 94
the chairman’s letter of appointment from the company stipulates his duties
as chairman of the group his appointment may be terminated without liability
on the part of rio tinto in accordance with the group’s constitutional
documents dealing with retirement disqualification from office or other
vacation from office otherwise his appointment may be terminated by giving
12 months’ notice there are no provisions for compensation payable on
termination of his appointment other than if his appointment as chairman is
terminated by reason of his removal as a director pursuant to a resolution of
shareholders in general meeting in which case the company shall be liable to
pay any fees accrued to the date of any such removal
the nonexecutive directors’ letters of appointment from the company
stipulate their duties and responsibilities as directors each nonexecutive
director is appointed subject to their election and annual reelection by
shareholders nonexecutive directors’ appointments may be terminated by
giving three months’ notice there are no provisions for compensation
payable on termination of their appointment the letters of appointment are
available for inspection at rio tinto plc’s registered office and at its annual
general meeting
in accordance with the provisions of the group’s constitutional documents the
maximum aggregate fees payable to the nonexecutive directors including
the chairman in respect of any year including fees received by the non
executive directors for serving on any committee of the boards and any travel
allowances received by the nonexecutive directors for attending meetings
will not exceed £3000000 nonmonetary benefits are not included in this
limit
riotintocom 73
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remuneration report
policy report
financial statements production reserves
and operations
additional information remuneration report implementation report
implementation report introduction
this implementation report is presented to shareholders for approval at the
agms it outlines how our remuneration policy was implemented in 2014 and
how it is intended to be operated in 2015
remuneration for executives set out in the single total figure of remuneration
tables on pages 86 and 87 is shown gross of tax and in the relevant currency
of award or payment the information reported for executives in table 1a on
pages 92 and 93 is reported in accordance with australian statutory disclosure
requirements and is shown gross of tax and in us dollars where applicable
amounts have been converted using the relevant average exchange rates
included in the notes to table 3 on page 92
a

in addition to executive remuneration this report covers the remuneration of
the chairman and the nonexecutive directors in table 1b on page 94 all
figures are shown gross of tax and in us dollars
remuneration committee responsibilities
the committee’s responsibilities are set out in its terms of reference which are
available in the corporate governance section of the rio tinto website the
responsibilities of the committee include
– determining the group’s remuneration structure and policies and
assessing their cost including pension and superannuation arrangements
for executives
– determining the mix and use of short and longterm incentive plans
for executives
– overseeing the operation of the group’s short and longterm incentive
plans as they relate to executives including the approval of awards the
setting of performance criteria where applicable and the determination of
any vesting
– determining contractual notice periods and termination commitments and
setting any retention and termination arrangements for executives
– determining awards under the group’s allemployee share plans and
– determining the terms of service upon appointment and any subsequent
changes for the chairman and executives
the committee considers the level of pay and conditions throughout the
group when determining executive remuneration and ensures that the
same principles are used when designing the broader employee
remuneration policies
the members of the committee are john varley chairman jan du plessis
michael fitzpatrick richard goodmanson and paul tellier
the membership and meeting attendances are detailed in the corporate
governance section on page 59 the committee is supported by executives
and members of senior management who attend meetings to provide
information as requested by the committee these included sam walsh chief
executive hugo bague group executive organisational resources john
beadle global head performance and reward and eleanor evans company
secretary none of the attendees mentioned above was present when matters
associated with their own remuneration were considered by the committee
a uk and australian remuneration figures are generally not comparable due to the
different methodologies required to calculate various parts of the remuneration
packages most notably ltip arrangements and the value of pension or
superannuation
independent advisers
the independent advisers engaged by the committee during 2014 were towers
watson towers watson reports to the committee and not to management
to ensure that “remuneration recommendations” being advice relating to the
elements of remuneration for key management personnel as defined under
the australian corporations act were made free from undue influence by key
management personnel to whom they may relate the committee established
a protocol for the engagement of and interaction with remuneration
consultants and has monitored compliance with its requirements throughout
2014 declarations were given by towers watson to the effect that its
remuneration recommendations were made free from undue influence by key
management personnel to whom they related the board has received
assurance from the committee and is therefore satisfied that the
remuneration recommendations received from towers watson were made
free from undue influence
towers watson is a member of the remuneration consultants’ group and as
such voluntarily operates under the code of conduct the code in relation to
executive remuneration consulting in the uk the code is based upon
principles of transparency integrity objectivity competence due care and
confidentiality towers watson has confirmed that it adhered to the code
throughout 2014 for all remuneration services provided to rio tinto the code
is available online at remunerationconsultantsgroupcom
towers watson is the only remuneration consultant which provided
remuneration recommendations to the committee during 2014 the
committee is content that towers watson in providing remuneration advice
to the committee did not have any connections with rio tinto that impaired
its independence
during 2014 as part of its engagement towers watson provided
remuneration recommendations to the committee its services included
committee meeting attendance and advice in relation to management
proposals towers watson was paid us349905 for these services
towers watson provided general and technical executive remuneration
services these services included the provision of benchmarking data the
giving of advice about remuneration of employees other than key
management personnel across the group and advice in relation to
preparation of the 2014 remuneration report towers watson was paid
us147547 for these services
other services and publications were received from a range of advisers in
relation to remuneration data
74 riotintocom how the committee spent its time in 2014
during 2014 the committee met nine times it fulfilled its responsibilities as
set out in its terms of reference
in particular its work in 2014 and in the early part of 2015 has included
– reviewing and determining any base salary adjustments for executives
– reviewing and determining threshold target and outstanding performance
targets for the 2014 stip
– reviewing actual performance against the targets for the 2014 stip and
assessing applicable adjustments
– reviewing and determining the outcomes for ltip awards vesting at the
end of 2014
– reviewing and determining ltip grants for the executives in 2015
– reviewing the proposed change to the notice periods in the service
contracts for the chief executive sam walsh and the chief financial officer
chris lynch
– reviewing and determining the terms of appointment for the new chief
executive aluminium group alfredo barrios
– determining the terms of departure for the outgoing chief executive
aluminium group jacynthe côté
– reviewing the annual reports on the group’s global benefit plans
– reviewing progress towards compliance with the group’s share
ownership requirements
– an initial review of 2015 stip targets and
– preparing the remuneration report including this implementation report
the performance targets under the ltip and the company’s approach to
establishing the performance targets under the stip are detailed in the
executive remuneration structure table on pages 67 to 69 the committee’s
approach to the commercial sensitivity of certain targets is discussed below
performance review process for executives
rio tinto conducts an annual performance review process for all of its
executives in the case of members of the executive committee the chief
executive conducts the review in the case of the chief executive his
performance is assessed by the chairman of the board
the key objectives of the performance review process are to
– improve organisational effectiveness by creating alignment between the
executive’s objectives and rio tinto’s strategy and
– provide a consistent transparent and balanced approach to measure
recognise and reward executive performance
all such reviews took place in 2014 or early 2015
share ownership policy for executives
thegrouprecognisestheimportanceof aligning executives’ interests with
those of shareholders and they are therefore expected to build up and
maintain a meaningful shareholding the committee intends that executives
shouldaimtoreachashareownershipdefinedbelowinriotintoshares
equivalent in value to
share ownership requirement
chief executive 4 x base salary
other executives 3 x base salary
the committee expects that this shareholding will be built up over a fiveyear
period by holding shares and share options that vest under the ltips for new
hires longer periods may be accepted given the fiveyear vesting periods for
the psp
shares will be treated as “owned” if they are not subject to restriction and as
such include shares directly held by the executive and any shares where there
is a beneficial interest a beneficial interest includes any shares where the
executive receives the benefit of ownership such as a right to receive
dividends without directly owning the shares a value for vested but
unexercised share options is included with a 50 per cent discount for the
likely effects of taxation on the basis that executives with unexercised vested
options have a strong financial alignment with the share price and therefore
with shareholder interests
shareholding requirements also exist for senior management below the
executive committee
details of executives’ beneficial interests in rio tinto shares are set out in
table 2 on page 95 and the details of awards of shares and options under long
term incentive plans are set out in table 3 on pages 96 to 100
executives’ external and other appointments
executives may be invited to become nonexecutive directors of other
companies it is rio tinto’s policy that such appointments can broaden the
experience and knowledge of executives to the benefit of the group this
policy limits each executive’s external appointment to one ftse100 company
directorship or equivalent consequently where there is no likelihood that
such an appointment will give rise to a conflict of interest the board will
normally provide consent to the appointment the executive is typically
permitted to retain any fees earned
details of all executives’ external appointments can be found on pages
49 to 52
riotintocom 75
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and operations
additional information remuneration report implementation report continued
performance and impact on 2014 stip
group financial and safety measures are included in the stip for executive
directors and group executives the stip measures for the product group
chief executive officers pgceos include product group financial and safety
measures in addition to the group financial measures
safety measures for all executives in 2014 were split equally between all injury
frequency rate aifr and lost time injuries ltis 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
the committee selected the current financial measures of underlying earnings
and free cash flow because they are kpis used in managing the business
underlying earnings is the key financial performance indicator used across the
group it gives insight into cost management production growth and
performance efficiency we are focused on aggressively reducing our costs
and increasing productivity to improve earnings and deliver greater value for
shareholders operating free cash flow is a complementary measure to
underlying earnings it also provides insight into how we are managing costs
and increasing efficiency and productivity across the business in measuring
financial performance against the annual plan half is measured against the
original plan and half is “flexed” to exclude the impact of uncontrollable
fluctuations in exchange rates quoted metal and other prices earnings and
free cash flow results are therefore compared against equally weighted
“flexed” and “unflexed” targets
the aggregate scores for group safety and financial measures are set out in
the table below the outcomes for the executive directors with commentary
on key highlights on performance against individual objectives are provided
onpages83and85additionaldetailsforotherexecutivesareprovidedon
page 87
group measures
weight

score
out of 200
weighted
score
group safety
a
200 138 276
underlying earnings 125 81 100
underlying earnings – “flexed” 125 133 165
free cash flow 125 200 250
free cash flow – “flexed” 125 200 250
group financial 500 153 765
safety and financial measures
b
700 1487 1041
individual measures
c
300 – –
total
c
1000 ––
a this excludes the impact of adjustments for fatalities in 2014 which vary
by executive
b the weighted score represents the total group safety and financial measures score
out of a maximum of 200 per cent weighted based on the total stip opportunity of
70 per cent allocated to the safety and financial measures this excludes the impact
of adjustments for fatalities in 2014 which vary by executive
c the outcomes against individual measures and the total score out of 200 per cent
for executives are included in the following pages
safety performance
regrettably we did not meet our goal of zero fatalities in 2014 two people
lost their lives while working at rio tinto managed operations the fatalities
were caused by a train derailment due to a landslide at iron ore company of
canada and an equipment incident during maintenance activities at the gove
alumina refinery in australia
our commitment to safety is the foundation of how we operate as we work to
achieve our vision of everyone going home safe and healthy after each
working day we believe we can prevent fatalities injuries and illness by
effectively identifying and controlling risks in our business we have a long
history of good safety performance and strive to improve on this yearonyear
in 2014 we updated our safety strategy to confirm our focus on injury
reduction and strengthen our emphasis on fatality elimination and
catastrophic event prevention this helps us drive effective risk management
identify critical risks verify that we have the necessary controls in place and
provide our people with appropriate training
the remuneration committee sought guidance from the sustainability
committee on safety performance for 2014 as per our normal procedures
both committees noted the continued improvement in aifr with the group’s
aifr reducing from 065 in 2013 to an alltime low of 059 in 2014 this
bettered the group target for 2014 of 061 but fell below the level of 051
which would have represented “outstanding”
there were 381 lost time injuries in 2014 compared to 500 in 2013 this
bettered the group target of 407 lost time injuries but fell below the level of
361 lost time injuries which would have represented “outstanding”
the combined performance meant that the overall group result for safety was
between target and outstanding with differentiated levels of safety
performance across the product groups the total safety score for the group
was 138 per cent out of a maximum of 200 per cent reductions have been
applied as required for executives where a fatality has occurred
group financial performance
highlights of 2014 include
– achieved us15 billion of sustainable operating cash cost improvements
and exploration and evaluation savings in 2014 contributing to a total of
us48 billion since 2012
– set production records for iron ore and hunter valley thermal coal
and delivered a strong operational performance in bauxite copper
and aluminium
– reduced capital expenditure by us48 billion to us82 billion in
2014 reflecting completion of existing major projects and continued
capital discipline
– decreased net debt by us56 billion in 2014 to us125 billion at
31 december 2014 with gearing of 19 per cent this compares with
us181 billion and 25 per cent gearing at 31 december 2013
– achieved underlying earnings of us93 billion nine per cent lower than
2013 despite the us41 billion posttax impact of lower prices
additional details on our progress against strategy are provided on pages
8 to 10
the group exceeded the earnings and cash flow targets set by the board and
this is reflected in the financial component of the stip awards both at the
group and product group level
76 riotintocom the group’s underlying earnings and free cash flow generated from operating
activities for 2014 were us93 billion and us69 billion respectively against
targets of us105 billion and us30 billion respectively the “flexed”
earnings and free cash flow targets which take into account the impact of
uncontrollable fluctuations in exchange rates quoted metal and other prices
were us81 billion and us13 billion respectively
the committee seeks to ensure in making its year end determination of stip
awards that actual performance is directly comparable to the targets set at
the beginning of the year this resulted in the committee making adjustments
to the targets to take account of events outside management’s control and to
ensure a likeforlike comparison both upward and downward adjustments
were made to the targets by reference to principles agreed by the committee
which have been consistently applied over several years to ensure the
outcomes are fair
the group’s performance against the financial targets was 153 per cent out of
a maximum of 200 per cent this comprised an “unflexed” earnings result of
close to target a “flexed” earnings result above target and “outstanding” free
cash flow results on both a “flexed” and “unflexed” basis
stip individual measures for 2014
individual measures were set by the chairman for the chief executive and by
the chief executive for other executives based on the following categories
1 business transformation
2 cost reduction
3 performance delivery
4 leadership and engagement
details of the outcomes against the individual measures are provided in the
following pages
performance and impact on ltip vesting outcome for the period
ended 31 december 2014
the performance shares under the psp awarded in 2011 had a fouryear
performance period that ended on 31 december 2014 conditional share
awards vest subject to the tsr performance condition which compares
rio tinto’s tsr against the hsbc global mining index and the morgan stanley
capital world index msci both indices are weighted equally
rio tinto outperformed the hsbc global mining index by 78 per cent per
annum compared to the level of outperformance required for maximum
vesting against this index of eight per cent per annum the vesting outcome
against this index was therefore 147 per cent compared to the maximum of
150 per cent the level of vesting against the msci was nil as rio tinto
underperformed this index
this award therefore has a vesting of 735 per cent of face value 49 per cent
of maximum
share options under the sop granted in 2012 had a performance period that
ended on 31 december 2014
options vest subject to the tsr performance condition which compares
rio tinto’s tsr against the hsbc global mining index rio tinto outperformed
the index by 303 per cent during the performance period compared to the
level of outperformance required for full vesting of 158 per cent
this award therefore had a vesting of 100 per cent of face value the exercise
price for rio tinto plc options granted in 2012 is £35179 there were no
options granted over rio tinto limited shares in 2012 to any executive
committee members options can be exercised from 19 march 2015 until
19 march 2022
the committee considered the group’s overall performance in the context of
the ltip awards that were due to vest at the end of 2014 and concluded that
the vesting of awards based upon the achievement of the tsr measures set
by shareholders was justified
further details of the ltip outcomes for the period ended 31 december 2014
and in prior years are provided on pages 89 and 90
sam walsh chief executive
single total figure of remuneration
the table below provides a summary of actual remuneration in respect of
2014 and prior years in accordance with uk legislation stated in australian
dollars the currency of sam walsh’s arrangements this is in addition to the
australian statutory disclosure requirements set out in us dollars in table 1a
on pages 92 and 93 the remuneration details set out in table 1a include
theoretical accounting values relating to various parts of the remuneration
packages most notably ltip arrangements and require a different
methodology for calculating the superannuation value accordingly the
figures below are not directly comparable with those in table 1a
stated in a’000 2014 2013 2012
base salary paid
a
1940 1889 1643
stip payment – cash 1721 1371 1075
stip payment – deferred shares
b
1721 1370 1075
total shortterm pay 5382 4630 3793
value of ltip awards vesting
c
3161 3121 2225
superannuation
d
841 1322 745
other benefits
e
1030 997 232
single total figure of remuneration 10414 10070 6995
percentage change in total
remuneration 2014 versus 2013
2013 versus 2012 34 440 –
percentage of total remuneration
provided as performancerelated pay
stip and ltip 634 582 625
percentage of total remuneration
provided as nonperformancerelated
pay base salary pension and other
benefits 366 418 375
percentage of maximum stip
awarded
f
884 721 650
percentage of maximum stip
forfeited 116 279 350
percentage of target stip awarded 1473 1202 1083
percentage of psp award vesting 735 75 925
percentage sop award vesting – – 100
a salary paid in the financial year to 31 december salaries are reviewed with effect
from 1 march the salary and single figure of remuneration for 2012 relates to
sam’s position as pgceo iron ore
b value of stip deferred under the bdp
c based on the value of the ltip awards which vested in respect of the performance
period that ended 31 december the rio tinto ltd share price used to calculate the
value of the award vesting on 16 february 2015 of a6355 was sourced from
investis ltd the performance conditions for awards vesting for the period ending
31 december 2014 are detailed in the notes to table 3 on pages 96 to 100
d superannuation reflects the value of the superannuation accrued during the year
assuming that it was to come into payment immediately this differs from the value
reported in table 1a which is calculated using an ias19 methodology and
assumptions on rates of investment return inflation and salary increases
e includes international assignment benefits of a810000 for 2014 2013
a786000 allowance for professional tax services car allowance company
provided transport other contractual payments or benefits and for 2012 activities
in relation to rio tinto’s sponsorship of the medals for the 2012 london olympics
f the maximum potential stip award is 200 per cent of base salary
riotintocom 77
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additional information remuneration report implementation report continued
base salary
the committee has increased sam’s base salary by 23 per cent with effect
from 1 march 2015 consistent with the salary budget for other australian
contracted employees in the group
2015 2014  change
base salary stated in a’000 1992 1948 23
stip individual objectives for 2014
sam’s performance against his individual objectives is summarised below
category performance
business
transformation
– continued delivery of the transformation
programme at multiple levels
– established a strong platform to engage with all
leaders and employees and drive transformation
and cultural change
– increased discipline in capital management and
prioritisation focus on costs and continued
delivery of record production output
– strengthened key governance models such as the
investment and evaluation committees
capital and cost
reductions
– reduced capital expenditure by us48 billion to
us82 billion in 2014
– achieved working capital improvements of
us15 billion principally from lower inventories
and lower receivables
– achieved us15 billion of sustainable operating
cash cost improvements and exploration and
evaluation savings in 2014 contributing to a total
of us48 billion since 2012
performance
delivery
– delivered good results from the aluminium
business having taken a more aggressive
transformation approach
– executed the curtailment of the gove refinery in
an effective and responsible manner
– delivered value and optionality through the pilbara
expansion programme
– finalised the simandou investment framework
and the ebola outbreak has been well managed
leadership and
engagement
– engaged with a wide range of key stakeholders
increased level of engagement with investors
and interactions with key government leaders
at many levels
– continued to strengthen the executive committee
the committee with input from the chairman of the board assessed sam’s
performance against his individual objectives as 190 per cent out of 200 per
cent for his individual contribution to the business during the year
stip outcomes for 2014
the following table summarises the stip outcomes for 2014
measures
weight

score
out of
200
weighted
score
safety
a
20 690 138
group financial
a
50 1530 765
safety and financial 70 1290 903
individual 30 1900 570
total  of target out of 200 100 – 1473
a refer to page 76 for further details of group safety and financial performance the
group safety score of 138 per cent has been reduced by 50 per cent to 69 per cent
for the impact of fatalities in 2014
as a result sam received a stip award of 1473 per cent of target equivalent
to 1768 per cent of base salary 50 per cent to be delivered in cash in march
2015 and the remainder to be delivered in deferred shares vesting in
december 2017
ltip outcome for the period ended 31 december 2014
sam received 45387 shares in rio tinto limited on 16 february 2015 from the
vesting of the psp awarded in 2011 he also received a cash payment of
a277051 equal to the aggregate net dividends that would have been paid on
the shares that vested had he owned them during that fouryear period no
dividends were paid in respect of the shares that lapsed
in 2012 sam elected to receive his full ltip award under the psp and as a
result he has no options under the sop that were granted in 2012 and which
had a performance period that ended on 31 december 2014
further details of the awards vesting in 2015 and in prior years are provided on
page 89 and in table 3 on page 97
ltip award granted in 2014
the details of sam’s 2014 ltip award are summarised in the following table
type of
award grant date
face value
of award
 of base
salary
face value
of award
a’000
a
vestingat
threshold
performance
end of the
performance
period over
which the
performance
conditions
have to be
fulfilled
bc
psp
17 march
2014 420 8180 225 31 dec 2018
a the face value represents the maximum value of the award and resulted in an
award of 134026 conditional shares based on the average share price over 2013
of a61029 the expected value of the award is 50 per cent of the face value or
a4090000
b the 2014 psp award may vest after five years in 2019
c the full performance conditions for the award are set out in detail in table 3 on
page 100
ltip award for 2015
sam’s psp award in 2015 will have a face value of 430 per cent of base salary
and an expected value of 215 per cent of base salary the award may vest
after five years in 2020 subject to the group’s relative tsr and relative ebit
margin performance the performance conditions for the award are
unchanged from 2014 and the full performance conditions are set out in detail
on page 83 as with other participants sam’s award in 2015 may be subject to
prorating depending on the date of his retirement from rio tinto
shareholding
sam’s shareholding for the purposes of the share ownership policy calculated
using the market price of rio tinto shares on the latest practicable date each
year before the date of publication of this report was
31 december
2014
31 december
2013
increase in
shareholding
value of
options
holding of ordinary shares 146993 94444 556
value of vested but
unexercised options ‘000 a809 a1073 246
multiple of base salary 52 40 12
the value of vested but unexercised options is calculated based on the share
price as at the relevant date in february each year less the exercise price and
with a 50 per cent discount for the effects of taxation
78 riotintocom superannuation
sam is provided with superannuation through an employer funded plan as
provided to australianbased employees
in line with australianbased employees with defined benefit provision who
remain in service beyond age 62 sam’s benefit is calculated as the greater of
a 20 per cent of base salary averaged over three years for each year of
service and proportionate month with the company to date of
retirement or
b i his accrued benefit at age 62 of 405 times final base salary plus
ii company contributions required under australian legislation
sufficient to meet the maximum contribution base as detailed
within the superannuation guarantee legislation being at the
rate of 925 per cent for the period 1 january to 30 june 2014 and
95 per cent for the period 1 july to 31 december 2014 less tax
plus
iii investment earnings at the rate the trustee of the superannuation
fund may determine from time to time for the period from age 62
to the date of retirement
in line with typical market practice in australia sam continues to receive an
additional company contribution on a defined contribution basis of 20 per cent
of the lesser of
a 50 per cent of the annual stip award or
b 20 per cent of base salary
this benefit can be taken without employer or trustee consent and without
actuarial reduction on cessation of employment on or after age 62
the accrued lump sum benefit as at 31 december 2014 was a9496489
31 december 2013 a8454000 the accrued lump sum benefit as at
31 december 2014 calculated by reference to sam’s base salary as set out in
a above was a8235215 31 december 2013 a7811427 the additional
company contribution on a defined contribution basis for 2014 was a75999
2013 a66000 sam elected to take the defined contribution element as a
cash amount less any applicable withholdings
fees received from external appointments
sam received no fees from external appointments in 2014 in 2013 sam
received a27282 in respect of his position as a nonexecutive director of
seven west media limited from which he stood down in january 2013
service contract
positions held and date of appointment to position
position held during 2014 date of appointment to position
chief executive 17 january 2013
it is intended that sam will transfer to a rolling contract which can be
terminated by either party with 12 months’ notice in writing or immediately by
paying the base salary only in lieu of any unexpired notice his initial contract
was due to end on 31 december 2015 with a break clause from 31 october
2014 subject to shareholder approval of the remuneration policy at
rio tinto’s agms in 2015 the revised contract terms will come into effect
immediately thereafter
other
sam receives a housing allowance and other assignment benefits during his
secondment to london his remuneration is not subject to tax equalisation or
cost of living adjustments both of which are standard provisions for other
international assignees in the group the amounts are included in note
e under the single total figure of remuneration table on page 77
sam will be eligible to receive the value of unused annual leave and long
service leave at the conclusion of his employment in accordance with
australian legislation and applicable practice applying to all employees in
australia the value of this leave as at 16 february 2015 was a1139000 and
a1703000 respectively
chief executive’s pay and employee pay
the table below compares the changes from 2013 to 2014 in salary
benefits and annual incentives paid for the chief executive and the australian
workforce we chose the comparison to the australian workforce because it is
the country where approximately 40 per cent of the total workforce is based
this comparator group has been selected due to the availability of
comparative data and to remove the impacts of yearonyear exchange
rate fluctuations the underlying elements of the chief executive’s pay are
based on the values reported in the single total figure of remuneration table
the chief executive’s base salary was increased by 25 per cent with effect
from 1 march 2014 the increase in annual incentive paid for the chief
executive reflects a higher base salary in 2013 resulting from his appointment
as chief executive in january 2013 and net higher overall safety financial and
individual performance in 2013 compared to 2012
percentage
change in
salary paid
percentage
change in
other
benefits paid
percentage
change in
annual
incentive
paid
b
chief executive 27 33 275
australian workforce
a
33 28 105
a the percentage change in each element of remuneration for the workforce is
calculated on a per capita basis using average employee numbers
b the percentage change in annual incentive compares amounts paid in 2014 with
respect to the 2013 performance year to amounts paid in 2013 with respect to the
2012 performance year annual incentives for the workforce comprise a number of
different shortterm incentive arrangements
riotintocom 79
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implementation report
financial statements production reserves
and operations
additional information remuneration report implementation report continued
chris lynch chief financial officer
single total figure of remuneration
the table below provides a summary of actual remuneration in respect of
2014 and the prior year in accordance with uk legislation stated in pounds
sterling the currency of chris’s arrangements this is in addition to the
australian statutory disclosure requirements set out in us dollars in tables 1a
and 1b on pages 92 to 93 the remuneration details for 2014 set out in table
1a include theoretical accounting values relating to various parts of the
remuneration packages most notably ltip arrangements and require a
different methodology for calculating the pension value accordingly the
figures below are not directly comparable with those in table 1a
remuneration for 2013 is split for the period chris was a nonexecutive
director up until 28 february 2013 and for the period from 1 march 2013 the
day he became an executive director to 31 december 2013
stated in £’000 2014
2013
1 mar to
31 dec
2013
1 jan to
28 feb
base salary paidfees
a
817 667 35
stip payment – cash
a
746 457 –
stip payment – deferred shares
b
746 456 –
total shortterm pay 2309 1580 35
value of ltip awards vesting
c
0 0–
pension
d
204 167 –
other benefits
e
107 941 –
single total figure of remuneration 2620 2688 35
percentage change in total
remuneration 2014 versus 2013 38 ––
percentage of total remuneration
provided as performancerelated
pay stip and ltip 569 340 –
percentage of total remuneration
provided as nonperformance
related pay base salaryfees
pension and other benefits 431 660 100
percentage of maximum stip
awarded
f
910 681 –
percentage of maximum stip
forfeited 90 319 –
percentage of target stip awarded 1517 1135 –
percentage of psp award vesting
c
– ––
percentage sop award vesting
c
– ––
a salaryfees paid in the financial year to 31 december salaries are reviewed with
effect from 1 march
b value of stip deferred under the bdp
c chris had no ltip awards vest in respect of the performance period that ended
31 december 2014 as he received no ltip awards prior to the award made in 2013
d pension reflects the value of the pension contribution and payment in lieu of
pension paid during the year
e includes healthcare allowance for professional tax services and car allowance 2013
includes oneoff costs of £896000 associated with chris’s relocation from
melbourne australia to london
f the maximum potential stip award is 200 per cent of base salary
base salary
the committee has increased chris’s base salary by 20 per cent with effect
from 1 march 2015 consistent with the salary budget for other uk contracted
employees in the group
2015 2014  change
base salary stated in £’000 836 820 20
stip individual objectives for 2014
chris’s performance against his individual objectives is summarised below
category performance
business
transformation
– increased discipline in capital management and
prioritisation and focus on costs
– strengthened key governance models such as the
investment and evaluation committees
capital
and cost
reductions
– reduced capital expenditure by us48 billion to
us82 billion in 2014
– achieved working capital improvements of
us15 billion principally from lower inventories and
lower receivables
– achieved us15 billion of sustainable operating
cash cost improvements and exploration and
evaluation savings in 2014 contributing to a total of
us48 billion since 2012
– decreased net debt by us56 billion in 2014 to
us125 billion at 31 december 2014
performance
delivery
– actively contributed to the investment committee
evaluation committee plan review committee
executivecommitteeandtheboard
leadership and
engagement
– made new appointments within finance leadership
team
– increased level of engagement with investors
the committee with input from the chief executive assessed chris’s
performance against his individual objectives as 1815 per cent out of
200 per cent for his individual contribution to the business during the year
stip outcomes for 2014
the following table summarises the stip outcomes for 2014
measures
weight

score
out of
200
weighted
score
safety
a
20 1035 207
group financial
a
50 1530 765
safety and financial 70 1389 972
individual 30 1815 545
total  of target out of 200 100 – 1517
a refer to page 76 for further details of group safety and financial performance the
group safety score of 138 per cent has been reduced by 25 per cent to 1035 per
cent for the impact of fatalities in 2014
as a result chris received a stip award of 1517 per cent of target equivalent
to 1820 per cent of base salary 50 per cent to be delivered in cash in march
2015 and the remainder to be delivered in deferred shares vesting in
december 2017
ltip outcome for the period ended 31 december 2014
chris had no ltip awards which had a performance period that ended on
31 december 2014 having become an executive director on 1 march 2013
80 riotintocom ltip award granted in 2014
the details of chris’s 2014 ltip award are summarised in the following table
type of
award grant date
face value
of award
 of base
salary
face
value
of award
£’000
a
vestingat
threshold
performance
end of the
performance
period over which
the performance
conditions have
to be fulfilled
b c
psp
17 march
2014 400 3280 225 31 dec 2018
a the face value represents the maximum value of the award and resulted in an
award of 104312 conditional shares based on the average share price over 2013 of
£31444 the expected value of the award is 50 per cent of the face value or
£1640000
b the 2014 psp award may vest after five years in 2019
c the full performance conditions for the award are set out in detail in table 3 on
page 100
ltip award for 2015
chris’s psp award in 2015 will have a face value of 430 per cent of base salary
and an expected value of 215 per cent of base salary the award may vest
after five years in 2020 subject to the group’s relative tsr and the relative
ebit margin performance the performance conditions for the award are
unchanged from 2014 and the full performance conditions are set out in detail
on page 83
shareholding
chris’s shareholding for the purposes of the share ownership policy calculated
using the market price of rio tinto shares on the latest practicable date each
year before the date of publication of this report was
31 december
2014
31 december
2013
increase in
shareholding
holding of ordinary shares 9050 8960 10
multiple of base salary 04 04 0
chris holds no options over rio tinto shares he has until 2018 to build up his
ownership in shares to three times his salary as chief financial officer
pension
chris is employed in the uk and is provided with pension benefits on a defined
contribution basis
the company paid a pension contribution to a funded uk company pension
arrangement of 25 per cent of £135000 being the current maximum salary on
which pension contributions are based under that arrangement the pension
contribution for 2014 was £33750 2013 pro rata for the period from 1 march
2013 £28000
chris also received a cash supplement equal to 25 per cent of the amount by
which his base salary exceeded £135000 less any applicable withholdings
the gross cash supplement for 2014 was £170417 2013 pro rata for the
period from 1 march 2013 £139000
service contract
positions held and date of appointment to position
position held during 2014 date of appointment to position
chief financial officer 18 april 2013
it is intended that chris will transfer to a rolling contract which can be
terminated by either party with 12 months’ notice in writing or immediately by
paying the base salary only in lieu of any unexpired notice his initial contract
was due to end on 28 february 2017 with a break clause from 31 december
2015 subject to shareholder approval of the remuneration policy at
rio tinto’s agms in 2015 the revised contract terms will come into effect
immediately thereafter
other
as a uk contracted employee chris is not eligible for tax equalisation on his
remuneration cost of living or any other ongoing assignment benefits such as
housing allowance
pastdirector payments
guy elliott retired on 31 december 2013 upon his retirement good leaver
treatment and prorating where applicable were applied to outstanding ltip
awards in accordance with the plan rules
accordingly mr elliott received 29256 rio tinto plc shares on 16 february
2015 resulting from the vesting of the psp awarded in 2011 in accordance
with the remuneration policy he also received a cash payment of £109488
equal to the aggregate net dividends that would have been paid on those
shares had he owned them during the fouryear performance period no
dividends were paid in respect of the 10549 shares which lapsed
the market price of rio tinto plc shares at 16 february 2015 the latest
practicable date before the date of publication of this report was £3164 the
total value of the ltip awards vesting with respect to the performance period
ending 31 december 2014 inclusive of the cash payment for dividends on the
2011 psp was therefore £1034000
during 2014 mr elliott also received a payment for 235 days outstanding
unused annual leave of £66704
what we paid our chairman and nonexecutive directors
annual fees payable
the table below sets out the annual fees paid in 2014 and payable in 2015 to
the chairman and the nonexecutive directors
2015 2014 2013
director fees
chairman’s fee £730000 £730000 £715000
nonexecutive director base fee
a
£90000 £90000 £85000
senior independent director £40000 £40000 £40000
committee fees
audit committee chairman £35000 £35000 £35000
audit committee member £20000 £20000 £20000
remuneration committee chairman £30000 £30000 £30000
remuneration committee member £15000 £15000 £15000
sustainability committee chairman £30000 £30000 £30000
sustainability committee member £15000 £15000 £15000
nominations committee member £7500 £7500 £7500
meeting allowances
long distance
flights over 10 hours per journey £10000 £10000 £10000
medium distance
flights of 510 hours per journey £5000 £5000 £5000
a the fees payable to nonexecutive directors are subject to review by the board on
the recommendation of the chairman’s committee following a review taking into
account the demands on directors market and related developments the base fee
for nonexecutive directors was increased to £90000 with effect from 1 january
2014 there have been no changes to other fees or allowances since 1 january
2012 save that the travel allowances are now based on length of flights
unchanged rather than whether the travel is overseas
details of each element of remuneration and the single total figure of
remuneration paid to the chairman and nonexecutive directors during
2014 and 2013 are set out in us dollars in table 1b on page 94 no
postemployment termination payments or sharebased payments were
made where the payment of statutory minimum superannuation
contributions for nonexecutive directors is required by australian
superannuation law these contributions are deducted from the director’s
overall fee entitlements
the total fee and allowances payments made to the chairman and non
executive directors in 2014 are within the maximum aggregate annual amount
of £3 million set out in the group’s constitutional documents approved by
shareholders at the 2009 annual general meetings
riotintocom 81
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and operations
additional information remuneration report implementation report continued
share ownership policy for nonexecutive directors
the board in 2006 adopted a policy whereby nonexecutive directors are
encouraged to build up a shareholding within three years of their appointment
equal in value to one year’s base fee details of nonexecutive directors’ share
interests in the group including total holdings are set out in table 2 on
page 95
nonexecutive directors’ share ownership
the nonexecutive directors’ shareholdings calculated using the market price
of rio tinto shares on the latest practicable date before the date of publication
of this report were
director
share ownership level
at 31 december 2014
as a multiple of base fee
janduplessis 13
robert brown 15
megan clark 01
michael fitzpatrick 23
ann godbehere 11
richard goodmanson 19
john kerr 53
anne lauvergeon 12
michael l’estrange 01
paul tellier 74
simon thompson 26
john varley 34
what we paid our other executive committee members
and why
base salary
the committee has reviewed the base salary levels and for the majority of the
executives made adjustments in line with the base salary budgets applying to
the broader employee population
the increases for alan davies and jeanse ´bastien jacques are specific
adjustments designed to reflect the additional responsibilities and broader
portfolios transferred to them from the former energy product group these
adjustments are compliant with our remuneration policy and are inclusive of
the 2 per cent salary budget for the broader employee population in the uk
stated in ‘000 2015 2014  change
hugo bague £494 £484 20
alfredo barrios c964 c945 20
alan davies £540 a791 note a
andrew harding £571 £560 20
jeansébastien jacques £553 £512 80
greg lilleyman a778 a760 23
debra valentine us696 us682 20
a alan davies’ remuneration has been localised to the uk with effect from 1 march
2015 the effective base salary increase in line with our principle of applying three
year average exchange rates as at september 2014 is 114 the increase using
the average exchange rate for january 2015 is 28 to comply with australian
legislation the company will pay alan’s accrued longservice leave which is
currently valued at a482000 alan will also receive a lump sum payment with an
estimated disclosable value of £263000 in lieu of contractual commitments already
made in relation to his future multiyear entitlements to housing allowance
education assistance home leave and a resettlement allowance
stip objectives and outcomes for 2014
overview of stip weightings and measures for 2014
the following table provides an overview of the measures and weightings used
to determine stip awards for members of the executive committee in 2014
weighting for
executive
directors and
group
executives
weighting for
pgceos
safety – split equally between aifr and
ltis adjusted for fatalities 20 20
financial measures split equally between
underlying earnings and free cash flow for
the group 50 20
financial measures split equally between
underlying earnings and free cash flow for
the relevant product group 0 30
individual measures based on key
strategic initiatives of each role and
contribution to overall company
performance 30 30
although the group safety score was above target the average performance
against safety goals for individual executive committee members was below
target and for individual financial goals above target
the individual performance of executive committee members who are not
executive directors was reviewed by the committee against these measures
and on average was considered above target this reflected among other
things the outstanding performance against the cost reduction targets set
for 2014
2014 stip award
 of salary
a
2014 stip award
000’s
hugo bague 1460 £707
alfredo barrios
b
1740 c964
jacynthe côté
c
1454 c569
alan davies 1748 a1382
andrew harding 1236 £692
jeansébastien jacques 1540 £789
harry kenyonslaney 954 £501
greg lilleyman 1426 a1084
debra valentine 1517 us1035
a scores out of 200 have been rounded to one decimal place in the above table as
the actual stip awards do not use rounding conventions small rounding variances
may occur
b stip award for the period 1 june 2014 – 31 december 2014
c stip award for the period 1 january 2014 – 31 may 2014 the full stip award for
the period 1 january 2014 – 1 september 2014 was c920000
detailed commentary on the performance of each product group is provided in
the annual report on pages 28 to 39 the average individual performance of
executive committee members who are not executive directors was adjudged
to be between target and outstanding
ltip outcomes for the period ended 31 december 2014
details of the ltip outcomes for the period ended 31 december 2014 are
providedonpages89and90
82 riotintocom ltip awards granted in 2014
the maximum potential value of psp awards granted in 2014 was 438 per cent
of base salary the committee decided that the psp awards in 2014 would
have a face value of awards as shown in the table below the eventual value of
the award will depend on the group’s relative tsr and relative ebit margin
performance during the years 20142018 the 2014 psp award may vest after
five years in 2019 the performance conditions for the awards granted in 2014
are consistent with the performance conditions for awards to be granted in
2015 as set out below
ltip awards for 2015
the committee has decided that the psp awards in 2015 will have a face value
of awards as shown in the table below the award levels have been set to
incentivise executives to meet the longterm strategic goals of the group to
provide retention and to contribute towards the competitiveness of the overall
remuneration package the average face value of awards to be made to
executive committee members in 2015 excluding the executive directors is
413 per cent of base salary
maximum value
percentage of 1 march base salary 2015 2014
hugo bague 430 400
alfredo barrios
a
400 a
alan davies 420 400
andrew harding 420 430
jeansébastien jacques 420 430
greg lilleyman 400 380
debra valentine 400 400
average 413 407
b
a a 2014 psp award of 233 per cent of base salary was granted on 16 september
2014 this award was the annual equivalent of 400 per cent of base salary
prorated for the period of service from 1 june 2014 to 31 december 2014
b average of executive committee members shown above
the performance conditions for the awards made in 2015 and 2014 are the
same the expected value of the awards in both years is equal to 50 per cent
of the face value the percentage vesting at threshold performance in both
years is 225 per cent the 2015 award may vest after five years in 2020
subject to the group’s relative tsr and relative ebit margin performance
for the tsr component constituting twothirds of the award where tsr
performance is measured against both the hsbc global mining index and the
broader market of large global companies as measured through the morgan
stanley capital world index the award will vest as follows
outperformance of the index by 6 per cent
per annum
10 x award vests
performance between equal to the index and
6 per cent outperformance
proportionate vesting
between 0225 x and
10 x vesting
performance equal to the index 0225 x award vests
performance less than the index nil vesting
for the ebit margin measure change in the ebit margin of rio tinto and each
of the comparator companies measured on a “pointtopoint” basis using the
last financial year in the performance period and the financial year prior to the
start of the performance period will be calculated using independent third
party data vesting will be subject to rio tinto’s interpolated ranking position
using the following schedule
equal to or greater than 2nd ranked company 10 x award vests
between the 5th and 2nd ranked companies proportionate vesting
between 0225 x and 10 x
vesting
above the 6th ranked company 0225 x award vests
equal to the 6th ranked company or below nil vesting
the 2015 comparator group unchanged from 2014 for the ebit margin
measure is alcoa antofagasta anglo american barrick gold bhp billiton
freeport mcmoran glencore peabody teck resources and vale
share ownership
the following table illustrates the executive share ownership level for current
members of the executive committee in office at 31 december 2014 as a
multiple of salary as at the same date
share ownership
level at 31 december 2014
as a multiple of base pay
hugo bague 40
alfredo barrios 02
alan davies 19
andrew harding 28
jeansébastien jacques 06
harry kenyonslaney 30
greg lilleyman 27
debra valentine 39
the share ownership level is calculated using the market price of rio tinto
shares on the latest practicable date each year before the date of publication of
this report the value of any vested but unexercised options is calculated based
on the share price as at the relevant date in february less the exercise price and
with a 50 per cent discount for the effects of taxation the recent vesting of the
2011 psp has increased the multiples noted above for several executives
postemployment benefits
executives may participate in pension superannuation and postemployment
medical and life insurance benefits which are typically offered to the broader
employee population in similar locations
service contracts
all other executives have service contracts which can be terminated by the
company with 12 months’ notice in writing and by the employee with six
months’ notice in writing or immediately by the company by paying the base
salary only in lieu of any unexpired notice
riotintocom 83
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and operations
additional information remuneration report implementation report continued
positions held and date of appointment to position
name positions held during 2014
date of appointment
to position
other executives
hugo bague group executive
organisational resources
1 march 2013
alfredo barrios chief executive
rio tinto alcan
1 june 2014
jacynthe côté
a
chief executive
rio tinto alcan
1 february 2009
alan davies chief executive
diamonds  minerals
1 september 2012
andrew harding chief executive iron ore 14 february 2013
jeansébastien jacques chief executive copper 14 february 2013
harry kenyonslaney chief executive energy 1 september 2012
greg lilleyman group executive
technology  innovation
1 january 2014
debra valentine group executive
legal  regulatory
affairs
17 march 2009
a jacynthe côté stepped down from the executive committee on 31 may 2014
departures from the executive committee
jacynthe côté stepped down from the executive committee on 31 may 2014
and remained with the group in an advisory role until 1 september 2014
jacynthe received her normal base salary and contractual benefits until
1 september 2014 the committee exercised its discretion to treat her as an
eligible leaver as such she remained eligible for a pro rata stip for the period
1 january 2014 to 1 september 2014 which has been calculated based on
actual business and individual performance and will be paid fully in cash in
march 2015 outstanding ltip awards were also treated where required in
accordance with eligible leaver provisions of each plan with pro rating where
applicable up to 1 september 2014
jacynthe is eligible to receive 24 months’ base salary and target stip
opportunity inclusive of notice to the extent paid  in line with entitlements
under her alcan inc contract which the company inherited on the acquisition
of alcan inc jacynthe has elected to take her termination payments in the
form of salary continuance for a two year period until 31 august 2016 which
will include the monthly payment of her base salary and target stip and
ongoing participation in benefit programmes pension accrual and other
benefits including medical cover life accident and critical illness insurance
jacynthe will not accrue vacation be eligible for short or long term disability
insurance or be eligible to participate in employee share plans
at any time during her period of salary continuance jacynthe may with the
company’s consent leave the payroll and receive the balance of her payments
in a lump sum however her membership in the benefit plans which remain in
force after the termination date will cease at the date she leaves the payroll
as recently announced harry kenyonslaney will leave the group in march
2015 the remuneration associated with his departure will be determined in
accordance with our remuneration policy details of the terms of his
departure will be disclosed in the 2015 implementation report
84 riotintocom stip measures weightings and targets for 2015
as in 2014 the stip measures and opportunities for executives will be
weighted 50 per cent for financial 30 per cent for individual and 20 per cent
for safety measures the financial and individual targets which have been set
for 2015 are regarded by the board to be commercially sensitive as such the
specific targets for these measures and the performance against them will be
described retrospectively in the 2015 implementation report the group
financial targets relate to earnings and free cash flow the individual targets
include objectives relating to business transformation cost reduction
performance delivery and leadership and engagement
the safety measures weightings and targets for 2015 are outlined opposite
2015 safety measures weightings and targets
for 2015 the safety measures for all executives will continue to be split
equally between aifr and ltis for the aifr measure target performance for
the group has been set at an 85 per cent improvement compared with the
actual outcome for 2014 which is the threshold number for calculation
purposes for the lti measure a higher improvement rate has been set
reflecting an increased focus on injury severity the target has been set at a
14 per cent improvement compared with the actual outcome for 2014 which is
the threshold number for calculation purposes outstanding performance for
both measures has been set at twice the target improvement
the safety stip score will continue to be adjusted for fatalities the
adjustment has been modified for the chief executive chief financial officer
group executive organisational resources and group executive legal 
regulatory affairs to reflect the exposure of these roles to the aggregated
group fatalities the adjustment for fatalities for 2015 in the event a fatality
occurs will be
– for the product group chief executives and the group executive
technology  innovation the safety score is reduced by 50 per cent if a
fatality occurs within their respective product groups or function
– for the chief executive and the group executive organisational resources
the safety score is reduced by 25 per cent if a fatality occurs in the group
– for the chief financial officer and the group executive legal  regulatory
affairs the safety score is reduced by 15 per cent if a fatality occurs in the
group
the fatality adjustment for a multiple fatality incident or multiple incidents
resulting in fatalities will remain at the discretion of the board in respect of
executive committee members and the chief executive in respect of other
employees
when remuneration is delivered
the following chart provides a timeline of when total remuneration is delivered using 2014 as an example
stip and psp
performance
measurement
commences
new base salary
effective psp
awards allocated
stip award
approved
jan
2014
psp
stip
base salary
mar
2014
dec
2014
feb
2015
mar
2015
stip cash
paidbdp
shares
allocated
performance measured
performance measured deferred shares bdp
5 years
3 years
riotintocom 85
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and operations
additional information remuneration report implementation report continued
single total figure of remuneration
the table below provides a summary of actual remuneration in respect of 2014 and 2013 stated in the currency of payment while not required under uk or
australian legislation the information is presented for consistency with the disclosures for executive directors on pages 77 to 81 this is in addition to the
australian statutory disclosure requirements set out in us dollars in table 1a on pages 92 and 93 the remuneration details set out in table 1a include theoretical
accounting values relating to various parts of the remuneration packages most notably ltip arrangements and require a different methodology for calculating the
pension and superannuation values accordingly the figures below are not directly comparable with those in table 1a
hugo bague alfredo barrios
g
jacynthe côté
h
stated in ‘000 2014 2013 2014 2013 2014 2013
base salary paid
a
£482 £465 c551 – c391 c930
stip payment – cash £353 £305 c482 – c569 c527
stip payment – deferred shares
b
£354 £305 c482 – c0 c527
total shortterm pay £1189 £1075 c1515 – c960 c1984
value of ltip awards vesting
c
£596 £916 c283 – c612 c2154
pension or superannuation
d
£115 £110 c110 – c102 c832
other benefits
e
£36 £45 c1625 – c23 c48
single total figure of remuneration £1936 £2146 c3533 – c1697 c5018
percentage change in total remuneration 2014 versus 2013 98 – 662
percentage of total remuneration provided as performancerelated pay
stip and ltip 673 711 353 – 696 639
percentage of total remuneration provided as nonperformancerelated pay
base salary pension and other benefits 327 289 647 – 304 361
percentage of maximum stip awarded
f
730 646 870 – 727 567
percentage of maximum stip forfeited 270 354 130 – 273 433
percentage of target stip awarded 1460 1291 1740 – 1454 1134
alan davies
i
andrew harding jeansébastien jacques
j
stated in ‘000 2014 2013 2014 2013 2014 2013
base salary paid
a
a787 a768 £557 £533 £500 £383
stip payment – cash a691 a414 £346 £372 £394 £229
stip payment – deferred shares
b
a691 a414 £346 £371 £395 £229
total shortterm pay a2169 a1596 £1249 £1276 £1289 £841
value of ltip awards vesting
c
a564 a764 £603 £1074 £350 £236
pension or superannuation
d
a191 a184 £143 £133 £117 £77
other benefits
e
a547 a529 £493 £416 £31 £23
single total figure of remuneration a3471 a3073 £2488 £2899 £1787 £1177
percentage change in total remuneration 2014 versus 2013 130 142 518
percentage of total remuneration provided as performancerelated pay
stip and ltip 561 518 520 627 637 589
percentage of total remuneration provided as nonperformancerelated pay
base salary pension and other benefits 439 482 480 373 363 411
percentage of maximum stip awarded
f
874 537 618 680 770 597
percentage of maximum stip forfeited 126 463 382 320 230 403
percentage of target stip awarded 1748 1073 1236 1361 1540 1195
86 riotintocom harry kenyonslaney greg lilleyman debra valentine
stated in ‘000 2014 2013 2014 2013 2014 2013
base salary paid
a
£523 £512 a760 – us681 us668
stip payment – cash £501 £291 a542 – us517 us429
stip payment – deferred shares
b
– £290 a542 – us518 us428
total shortterm pay £1024 £1093 a1844 – us1716 us1525
value of ltip awards vesting
c
£882 £916 a482 – us960 us1451
pension or superannuation
d
£125 £126 a590 – us226 us214
other benefits
e
£276 £298 a236 – us594 us585
single total figure of remuneration £2307 £2433 a3152 – us3496 us3775
percentage change in total remuneration 2014 versus 2013 52 – 74
percentage of total remuneration provided as performancerelated pay
stip and ltip 599 615 497 – 571 611
percentage of total remuneration provided as nonperformance related
pay base salary pension and other benefits 401 385 503 – 429 389
percentage of maximum stip awarded
f
477 567 713 – 758 638
percentage of maximum stip forfeited 523 433 287 – 242 362
percentage of target stip awarded 954 1135 1426 – 1517 1276
a salary paid in the financial year to 31 december salaries are reviewed with effect from 1 march
b value of stip deferred under the bdp
c based on the value of the ltip awards 2011 psp 2012 sop and 2012 msp where applicable which vested in respect of the performance period that ended 31 december the
rio tinto ltd and rio tinto plc share prices used to calculate the value of the awards vesting on 16 february 2015 of a6355 and £3164 respectively were sourced from investis
ltd executives who were members of the executive committee at the time the 2011 psp awards were granted hugo bague jacynthe côté andrew harding harry kenyonslaney
and debra valentine also received a cash payment equal to the aggregate net dividends that would have been paid on the 2011 psp shares that vested had they owned them
during the fouryear performance period no dividends were paid in respect of the shares that lapsed
d for defined benefit plans pension or superannuation reflects the value of the pension or superannuation accrued during the year assuming that itwastocomeintopayment
immediately for defined contribution plans and cash paid in lieu of pension contributions it is the amount contributed in the year by the company this differs from the value
reported in table 1a which is calculated using an ias19 methodology and assumptions on rates of investment return inflation and salary increases
e includes healthcare other postemployment benefits allowance for professional tax services and car allowance or car will include active or legacy expatriate related benefits
as relevant for alfredo barrios this includes nonrecurring lump sum payments as a contribution to housing and children education costs that may be incurred in canada as well
as other oneoff benefits related to his relocation from spain to canada home finding shipment of goods and relocation flights
f the maximum potential stip award is 200 per cent of base salary
g remuneration details for 2014 reflect remuneration received for the period 1 june 2014 – 31 december 2014 the value of ltip awards vesting in 2014 includes an award of
5278 msp shares granted on 16 september 2014 which vested on 31 october 2014 this award was made to mr barrios in lieu of forfeited and foreshortened vesting periods of
stock options from his previous employer
h remuneration details for 2014 reflect remuneration received for the period 1 january 2014 – 31 may 2014 remuneration received for the period 1 june 2014 – 1 september 2014
was base salary of c237000 stip of c351000 value of ltip awards vesting of c377000 pension of c0 and other benefits of c13000
i superannuation contributions for alan davies for 2013 have been restated as a company contribution was incorrectly recorded as a personal contribution the previous figure
disclosed for 2013 was a174000
j remuneration details for 2013 reflect remuneration received for the period 14 february 2013 – 31 december 2013
context to outcomes for the executive committee
the decrease in the single total figure of remuneration for most executives is due mainly to the lower value of ltip awards vesting in 2014 compared to 2013
partly offset by higher stip payments in 2014 compared to 2013
hugo bague jacynthe côté andrew harding and debra valentine all received less remuneration related to the vesting of 2011 psp awards in 2014 comparedto
the vesting of 2010 psp awards in 2013 while the vesting levels for the awards were similar 735 per cent for the 2011 psp and 75 per cent for the 2010 pspthe
number of psp awards granted in 2011 was significantly lower than the psp awards granted in 2010 because psp awards are calculated based on the average
share price over the calendar year prior to the year of grant and the average 2009 share price was significantly lower than the average 2010 share price in addition
the share prices at the date the 2011 psp awards vested in february 2015 were lower than the share prices at the date the 2010 psp awards vested in february
2014 the value of sop awards vesting with respect to both the 2014 and 2013 performance periods was nil as both the 2012 sop and 2011 sop options are
currently under water
harry kenyonslaney elected to receive his full 2011 ltip allocation in the form of psp awards and hence he received a relatively larger number of 2011 psp
awards compared to other executives the reduction in his value of ltip awards vesting is therefore less pronounced
the decrease in remuneration for jacynthe côté reflects that her 2014 remuneration represents partyear remuneration for the period 1 january 2014 to
31 may 2014
the significantly higher single total figure of remuneration for jeansébastien jacques reflects that his 2013 remuneration represents part year remuneration for
the period 14 february 2013 to 31 december 2013 a higher 2014 base salary and a higher 2014 stip payment primarily due to higher product group financial
performance the value of ltip awards vesting was higher due to a larger number of msp awards granted prior to his appointment to the executive committee
vesting with respect to the performance period that ended 31 december 2014
riotintocom 87
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financial statements production reserves
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additional information remuneration report implementation report continued
potential value of 2015 remuneration package
the table below shows the potential minimum and maximum value of the 2015 remuneration package and the threshold target and maximum value of the 2015
stip and ltip awards
stated in ‘000 currency base salary
superannuation
or pension
a
benefits
b
minimum
potential
remuneration
c
threshold
value of
stip and
ltip awards
d
target
value of
stip and
ltip awards
e
maximum
value of
stip and
ltip awards
f
maximum
potential
remuneration
executive directors
sam walsh a a1992 a450 a948 a3390 a3122 a6673 a12550 a15940
chris lynch £ £836 £208 £107 £1151 £1310 £2801 £5267 £6418
other executives
hugo bague £ £494 £115 £36 £645 £725 £1556 £3112 £3757
alfredo barrios c c964 c336 c185 c1485 c1350 c2892 c5784 c7269
alan davies £ £540 £130 £681 £1351 £780 £1674 £3348 £4699
andrew harding £ £571 £143 £493 £1207 £825 £1770 £3540 £4747
jeansébastien jacques £ £553 £133 £31 £717 £799 £1714 £3429 £4146
greg lilleyman a a778 a590 a110 a1478 a1089 a2334 a4668 a6146
debra valentine us us696 us226 us594 us1516 us974 us2088 us4176 us5692
a superannuation or pension is measured at the superannuation or pension figure in the single figure tables on pages 86 to 87 adjusted accordingly for alfredo barrios where the
value for 2014 did not represent a full year
b benefits are as measured at the benefits figure in the single figure tables on pages 86 to 87 excluding any significant oneoff items where applicable oneoff items for alfredo
barrios in 2014 included a housing allowance an education assistance allowance and various other relocation related benefits for his relocation to montreal oneoff items for greg
lilleyman in 2014 included benefits relating to his relocation from perth to brisbane note that this number includes expatriate benefits which are not capped and are subject to
exchange rate fluctuations
c the sum of base salary pensionsuperannuation and benefits is the minimum potential remuneration fixed remuneration
d calculated based on threshold performance under the stip 50 per cent of stip target and threshold psp vesting 225 per cent of the face value of the 2015 psp award
e calculated based on target performance under the stip 100 per cent of stip target and target psp vesting 50 per cent of the face value of the 2015 pspaward
f calculated based on outstanding performance under the stip 200 per cent of base salary and maximum psp vesting 100 per cent of the face value of the 2015 psp award
g harry kenyonslaney is not listed above as he ceased to be a member of the executive committee on 27 february 2015
88 riotintocom longterm incentives – awards made prior to 2013
in 2012 and prior years awards were made in the form of options under the
share option plan sop andor performance shares under the psp
for 2011 and 2012 executives were able to express a preference regarding the
mix of their longterm incentive opportunity
– they could choose either a mix of performance shares and share options
with a maximum face value performance share award of 200 per cent of
base salary and a performance “kicker” leading to a vesting up to 15
times for exceptional performance together with a maximum share
option award of 300 per cent of base salary
– or alternatively they could choose to receive the full award in
performance shares with a maximum face value performance share award
of 292 per cent of base salary and a performance kicker leading to a
vesting up to 15 times for exceptional performance
– the maximum value of award from selecting the full award in performance
shares was therefore 438 per cent of base salary 292 per cent
x 150 per cent
– the total expected value of awards made under either preference was the
same at 190 per cent of base salary
– both awards were based solely on relative tsr performance to reward
executives for increasing the share price and delivering superior tsr
performance against other companies over a longterm timeframe
before awards vest the committee must also satisfy itself that tsr
performance is an appropriate reflection of the underlying performance of the
business andor the health of the group the committee may therefore adjust
vesting subject to the plan rules
longterm incentives – vesting outcomes for the period ended
31 december 2014
the awards with performance periods ending 31 december 2014 were the
2011 psp awards and the 2012 sop awards
2011 psp awards
performance period 4 years 1 january 2011 – 31 december 2014
rio tinto tsr 08
comparator index hsbc msci
index tsr 342 625
outperformance per annum 78 213
vesting against index 147 0
 of shares vested 735 49 of maximum
 of shares forfeited 765 51 of maximum
the performance conditions for the 2011 2012 and 2013 psp awards are
included in the notes to table 3 on pages 96 to 100
the methodology used to calculate the starting share prices for tsr
comparison purposes for rio tinto and the index was the 12month average
prior to the commencement of the performance period
the methodology used to calculate the ending share prices for tsr
comparison purposes for rio tinto and the index was the last 12 months in
the performance period the usual conventions were also applied to set the
number of options awarded based upon the prior year average share price
riotintocom 89
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and operations
additional information remuneration report implementation report continued
the table below summarises the average vesting of performance shares for
executive directors over the fiveyear period 2011– 2015
performance period vesting year
ofshares
vested
 of maximum
shares vested
2007 – 2010 2011 364 243
2008 – 2011 2012 00 00
2009 – 2012 2013 925 617
2010 – 2013 2014 750 500
2011 – 2014 2015 735 490
average vesting – 555 370
2012 sop awards
performance period 3 years 1 january 2012 – 31 december 2014
rio tinto tsr 109
hsbc global mining index tsr 412
rio tinto outperformance 303
outperformance required for
full vesting 158
 of options vested 100
ofoptionsforfeited 0
options awarded under the 2012 sop can be exercised from 19 march 2015
until 19 march 2022
the performance conditions for the 2012 sop awards are included in the
notes to table 3 on page 100
the methodology used to calculate the starting share prices for tsr
comparison purposes for rio tinto and the index was the 12month average
prior to the commencement of the performance period
the methodology used to calculate the ending share prices for tsr
comparison purposes for rio tinto and the index was the last 12 months in
the performance period the usual conventions were also applied to set the
number of options awarded based upon the prior year average share price
the table below summarises the average vesting of share options for
executive directors over the fiveyear period 2011– 2015
performance period vesting year
ofoptions
vested
2008 – 2010 2011 00
2009 – 2011 2012 1000
2010 – 2012 2013 1000
2011 – 2013 2014 1000
2012 – 2014 2015 1000
average vesting – 800
the sop ceased operation from 2013 no awards of share options have been
made since 2012
msp awards
although executives are not eligible to receive awards under the msp after
their appointment as executives alan davies jeansébastien jacques and
greg lilleyman received grants prior to their appointments as pgceos
alfredo barrios received an award of 5278 msp shares on 16 september 2014
which vested on 31 october 2014 this award was made in lieu of forfeited and
foreshortened vesting periods of stock options from his previous employer
plan period plan period that ended 31 december 2014
vesting period 19 march 2012 – 31 december 2014
 of shares vested 100
ofsharesforfeited –
tsr and relevant index tsr
relative tsr is the single performance measure used to determine the vesting
of awards made under the psp and sop prior to 2013 rio tinto’s tsr relative
to the relevant index over the performance period has a direct impact on the
levels of ltip vesting
the effect of this performance on shareholder wealth as measured by tsr
delivered during the relevant calendar year is detailed in the table
dividends
paid during
the year
share price –
rio tinto plc
pence
share price –
rio tinto
limited
a
total
shareholder
return
tsr
year
us cents
pershare 1jan 31dec 1jan 31dec group 
2014 2045 3409 3000 6818 5800 97
2013 1780 3512 3409 6601 6818 21
2012 1635 3125 3512 6030 6601 148
2011 1170 4487 3125 8547 6030 312
2010 900 3390 4487 7489 8547 316
the graph below illustrates the tsr performance of the group against the
hsbc global mining index and the msci over the past five years to the end of
2014 these two indices are used to assess rio tinto’s relative tsr
performance for awards made under the psp in 2011 and 2012 the hsbc
global mining index alone is used to determine the vesting of awards made
under the sop
the graph has been prepared in accordance with the requirements of
schedule 8 of the large and mediumsized companies and groups accounts
and reports regulations 2008 as amended and is not an indication of the
likely vesting of awards granted under the psp and sop the executive
remuneration structure policy table on pages 67 to 69 provides further details
of the performance conditions for the current psp the performance
conditions for the previous psp and the sop are provided in the notes to table
3 on pages 99 and 100
total return basis index 2008  100
500
400
300
200
100
0
2008
rio tinto dlc
hsbc index
msci world index
2009
key
2010 2011 2012 2013 2014
tsr us – rio tinto group vs the hsbc global mining and msci world indices
90 riotintocom chief executive’s remuneration summary
year
chief
executive
a
single total
figure of
remuneration
‘000
annual
stip award
against
maximum
opportunity
longterm
incentive
vesting
against
maximum
opportunity
sop
bc
longterm
incentive
vesting
against
maximum
opportunity
psp
c
2009 tom albanese £3516 541 00 264
2010 tom albanese £4512 878 00 243
2011 tom albanese £4256 00 1000 00
2012 tom albanese £4040 00 1000 617
2013 tom albanese £53 00 – –
sam walsh a10070 721 – 500
2014 sam walsh a10414 884 – 490
a tom albanese held the role of chief executive until 17 january 2013 and left the
group on 16 july 2013 the single total figure of remuneration for tom albanese for
2013 is for the period up until 17 january 2013 sam walsh took over as chief
executive from 17 january 2013 having previously been the chief executive iron
ore and australia
b in 2011 and 2012 sam walsh elected to receive his full ltip awards under the psp
and as a result he has no options under the sop that were granted in 2011 or 2012
and which had performance periods that ended on 31 december 2013 and
31 december 2014 respectively
c all outstanding but unvested ltip awards earned in previous years lapsed and were
forfeited when tom albanese left the group
employee share plans
management share plan msp
the primary focus of the msp is to support the group’s ability to attract and
retain key staff below executive level in an increasingly tight and competitive
labour market executives are not eligible to participate in the msp
retention of key individuals is also important given the longterm nature of
the delivery of the business strategy msp awards are conditional awards not
subject to a performance condition as they vest subject to continued
employment at the end of three years and thus act as an effective retention
tool shares to satisfy the awards are purchased in the market and no new
shares are issued
all employee share plans
executives may participate in broadbased share and share option plans which
are available to group employees generally and for which performance
conditions do not apply these plans form part of standard remuneration
practice whereby employees are offered participation in plans to encourage
alignment with the longterm performance of the group
global employee share plan
the committee believes that all employees should be given the opportunity to
become shareholders in our business a global employee share purchase plan
is normally offered to all eligible employees across the world save for any local
jurisdictional restrictions under the plan employees may acquire shares up to
the value of us5000 or equivalent in other currencies per year capped at
ten per cent of base salary each share purchased will be matched by the
company providing the participant holds the shares and remains employed at
the end of the threeyear vesting period the committee believes this plan will
serve to engage retain and motivate employees over the longterm
over 14000 of our employees are shareholders
dilution
awards under the sop psp and all employee plans may be satisfied by
treasury shares the issue of new shares or the purchase of shares in the
market currently rio tinto plc satisfies these awards by the issue of new
shares or the transfer of shares from treasury rio tinto limited currently
satisfies these awards by the market purchase and delivery of shares to plan
participants in the uk institutions have issued corporate governance
guidelines in relation to the issue of new shares with which rio tinto plc
complies they do not apply to rio tinto limited all other share awards are
satisfied by the use of shares which are purchased in the market further
information in respect of the number of shares issued under plan
arrangements can be found in note 44 to the financial statements
shareholder voting
the table below sets out the results of the remunerationrelated resolutions
approved at the group’s 2014 agms
resolution
total votes
cast votes for
votes
against
votes
withheld
a
approval of the
remuneration
policy report 1249331713 1175047346 64668462 9615905
948 52
approval of the
directors’ report
on remuneration
and remuneration
committee
chairman’s letter 1249331990 1188612802 34629544 26089644
972 28
approval of the
remuneration
report 1249332146 1177556466 45592093 26183587
963 37
approval of
potential
termination
benefits 1249327387 1223287903 22255938 3783546
982 18
a a vote “withheld” is not a vote in law and is not counted in the calculation of the
proportion of votes for and against the resolution
relative spend on remuneration
the table below sets out the details of total remuneration paid distributions to
shareholders purchase of property plant and equipment and intangible
assets and tax paid during the financial year
stated in usm 2014 2013
difference
in spend
remuneration paid
a
6659 7568 909
distributions to shareholders
b
3710 3322 388
purchase of property plant and
equipment and intangible assets
c
8162 13001 4839
corporate income tax paid
c
3618 3698 80
a total employment costs for the financial year as per note 5 to the financial
statements
b dividends paid during the financial year as per note 11 to the financial statements
c purchase of property plant and equipment and intangible assets and corporate
income tax paid during the financial year are as per the group cash flow statement
and are calculated as per note 1 to the financial statements these additional items
were chosen by the directors as they represent other significant disbursements of
the company’s funds
riotintocom 91
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additional information remuneration report implementation report continued
table 1a – executives’ remuneration
shortterm benefits
stated in us‘000
a
base salary cash bonus
b
other cash
based
benefits
c
non
monetary
benefits
de
total short
term benefits
other
long term
benefits
executive directors
sam walsh 2014 1751 1411 150 784 4096 –
2013 1830 1223 87 871 4011 –
chris lynch 2014 1346 1162 306 114 2928 –
2013 1043 754 236 1443 3476 –
other key management personnel
hugo bague 2014 795 550 167 28 1540 –
2013 728 504 151 42 1425 –
alfredo barrios
k
2014 500 416 77 1361 2354 –
jacynthe côté
l
2014 – exco 355 491 6 15 867 –
2013 903 495 1 45 1444 –
alan davies 2014 711 567 180 385 1843 –
2013 743 369 193 470 1775 –
andrew harding 2014 919 539 175 870 2503 –
2013 833 614 167 614 2228 –
jeansébastien jacques 2014 823 614 170 12 1619 –
2013 600 378 101 11 1090 –
harry kenyonslaney 2014 862 780 203 470 2315 –
2013 802 480 150 462 1894 –
greg lilleyman 2014 686 444 32 179 1341 –
debra valentine 2014 681 517 26 571 1795 –
2013 668 428 26 550 1672 –
notes to table 1a – executives’ remuneration
a the total remuneration is reported in us dollars the amounts have been converted using the relevant 2014 average exchange rates of a1  090278 us £1  164785
us 1c  090616 us the annual cash bonus payable under the stip has been converted using the relevant 2014 year end exchange rates of a1  081974 us £1  155690
us 1c  086244 us
b “cash bonus” relates to the cash portion of the 2014 stip to be paid in march 2015
c “other cash based benefits” typically include cash in lieu of a car and fuel and where applicable cash in lieu of company pension or superannuation contributions for jacynthe
côté it includes a cash balance related to her 20122013 flexible perks entitlement and the 2014 cash amount paid out in 2014 for her 2014 flexible perquisites
d “nonmonetary benefits” for executives include healthcare coverage provision of a car professional tax advice and flexible perquisites for executive directors it includes the
value of company provided transport
e “nonmonetary benefits” for executives living outside their home country international assignment benefits comprising housing education relocation expenses tax equalisation
and relocation payments made to and on their behalf are included nonmonetary benefits for alfredo barrios include nonrecurring lump sum payments as a contribution to any
and all housing and children’s education costs that may be incurred in canada as well as other oneoff benefits related to his relocation from spain to canada homefinding
shipment of goods and relocation flights
f the value of share based awards has been determined in accordance with the recognition and measurement requirements of ifrs2 “sharebased payment” the fair value of
awards granted under the share option plan sop the management share plan msp the bonus deferral plan bdp the performance share plan psp and the share savings
plan ssp have been calculated at their dates of grant using valuation models provided by external consultants lane clark and peacock llp including an independent lattice
based option valuation model and a monte carlo valuation model which take into account the constraints on vesting and exercise attached to these awards further details of the
valuation methods and assumptions used for these awards are included in note 44 sharebased payments in the financial statements the fair value of other sharebased awards
is measured at the purchase cost of the shares from the market the nonexecutive directors do not participate in the longterm incentive share schemes
92 riotintocom longterm benefits
value of sharebased awards
f
postemployment benefits
i
stated in us’000
a
bdp
g
psp msp sop others
h
pension and
superannuation
other post
employment
benefits
termination
benefits
total
remuneration
j
currency
of actual
payment
executive directors
sam walsh 2014 1002 3645 – – 2 421 – – 9166 a
2013 1189 3386 – 160 2 453 – – 9201 a
chris lynch 2014 330 1291 – – – 55 – – 4604 £
2013 176 399 – – – 44 – – 4095 £
other key management personnel
hugo bague 2014 385 1409 – 314 3 44 – – 3695 £
2013 402 1147 – 546 6 42 – – 3568 £
alfredo barrios
k
2014 51 135 257 – – 23 – – 2820 c
jacynthe côté
l
2014 – exco 119 684 – 251 1 197 – – 2119 c
2013 433 1543 – 745 1 510 – – 4676 c
alan davies 2014 286 880 92 – 2 25 – – 3128 a
2013 228 563 195 – 3 20 – – 2774 a
andrew harding 2014 423 1597 – 318 5 61 – – 4907 £
2013 455 1390 – 566 10 56 – – 4705 £
jeansébastien jacques 2014 216 785 154 – 1 44 – – 2819 £
2013 115 212 310 – 4 37 – – 1768 £
harry kenyonslaney 2014 320 1670 – 222 9 179 – – 4715 £
2013 422 1336 – 287 1 157 – – 4097 £
greg lilleyman 2014 152 522 154 – – 169 – – 2338 a
debra valentine 2014 363 1320 – 305 2 226 5 – 4016 us
2013 395 1115 – 535 1 214 5 – 3937 us
g “bdp bonus deferral plan” represents the deferral of the 2011 – 2014 bonus under stip into rio tinto shares
h “others” include the global employee share plan myshare share savings plan share ownership plan and global employee share plan as described in the remuneration report
on page 72
i the costs shown for defined benefit pension plans and postretirement medical benefits are the service costs attributable to the individual calculated in accordance with ias19
the cost for defined contribution plans is the amount contributed in the year by the company the table 1a value of jacynthe côté’s pension benefits between 1 june and
1 september 2014 was us118000 for alan davies we have restated the 2013 “pension and superannuation” value as some company contributions were incorrectly recorded as
employee contributions the restated amount for 2013 is u20000 whilst the amount shown in the 2013 report was us10000
j “total remuneration” represents the disclosure of total emoluments and compensation required under the australian corporations act 2001 and applicable accounting standards
k alfredo barrios joined rio tinto and became a member of the executive committee on 1 june 2014 therefore the amounts reported for him in table 1a relate to the period from
1 june 2014 to 31 december 2014 the msp amount for alfredo barrios reflects the value of an award of 5278 msp shares which he received on 16 september 2014 this award
was made in lieu of forfeited and foreshortened vesting periods of stock options from his previous employer the award vested on 31 october 2014
l jacynthe côté stepped down from the executive committee on 31 may 2014 and remained with the group in an advisory role until 1 september 2014 the amounts reported in
table 1a relate to the period when she was a member of the executive committee
riotintocom 93
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remuneration report
implementation report
financial statements production reserves
and operations
additional information remuneration report implementation report continued
table 1b – nonexecutive directors’ remuneration
stated in us’000
a
fees and
allowances
b
nonmonetary
benefits
cd
single total
figure of
remuneration
e
chairman
janduplessis 2014 1203 92 1295
2013 1119 121 1240
nonexecutive directors
robert brown 2014 286 50 336
2013 246 74 320
megan clark
f
2014 21 – 21
vivienne cox
g
2014 54 16 70
2013 184 14 198
michael l’estrange
h
2014 91 – 91
michael fitzpatrick 2014 284 – 284
2013 294 – 294
ann godbehere 2014 251 23 274
2013 246 22 268
richard goodmanson 2014 350 20 370
2013 340 97 437
anne lauvergeon
i
2014 180 11 191
lord kerr 2014 218 13 231
2013 222 14 236
paul tellier 2014 309 67 376
2013 293 71 364
simon thompson 2014 172 3 175
john varley 2014 342 10 352
2013 325 18 343
notes to table 1b – nonexecutive directors’ remuneration
a the remuneration is reported in us dollars the amounts have been converted using the relevant 2014 average exchange rates of £1  164785 us and a1  090278 us 1 jan
to 31 dec 2014 average
b “fees and allowances” comprise the total fees for the chairman and all nonexecutive directors and travel allowances for the nonexecutive directors other than the chairman
the payment of statutory minimum superannuation contributions for australian nonexecutive directors is required by australian superannuation law these contributions are
included in the fees and allowances amount disclosed for australian nonexecutive directors
c “nonmonetary benefits” include as in the previous year amounts which are deemed by the uk tax authorities to be benefits in kind relating largely to the costs of nonexecutive
directors’ expenses in attending board meetings held at the company’s uk registered office including associated hotel and subsistence expenses given these expenses are
incurred by directors in the fulfilment of their duties the company pays the tax on them
d in 2014 the following additional amounts are included as noted for the relevant director for jan du plessis the value of companyprovided transport and medical insurance
premiums for vivienne cox a gift received from rio tinto at retirement for richard goodmanson accountancy fees
e represents disclosure of the single total figure of remuneration under schedule 8 of the large and mediumsized companies and groups accounts and reports regulations
2008 as amended and total remuneration under the australian corporations act 2001 and applicable accounting standards
f the amounts reported for megan clark reflect the period when she was a member of the board from 20 november to 31 december 2014
g the amounts reported for vivienne cox reflect the period when she was a member of the board from 1 january to 15 april 2014
h the amounts reported for michael l’estrange reflect the period when he was a member of the board from 1 september to 31 december 2014
i the amounts reported for anne lauvergeon reflect the period when she was a member of the board from 15 march to 31 december 2014
94 riotintocom table 2 – directors’ and executives’ beneficial interests in rio tinto shares
rio tinto plc
a
rio tinto limited movements
1jan
2014
b
31 dec
2014
c
16 feb
2015
c
1jan
2014
b
31 dec
2014
c
16 feb
2015
c
exercise of
options
d
compensation
e
other
f
directors
robert brown 4200 4200 4200 ––– –– –
megan clark
g
––– 165 165 1715 – – 1550
vivienne cox
g
2912 2912 – ––– –– –
jan du plessis 30000 30000 30000 ––– –– –
michael fitzpatrick – – – 6252 6252 6252 –– –
ann godbehere 2981 3100 3100 ––– – – 119
richard goodmanson 15443 5512 5512 ––– – – 9931
lord kerr 15000 15000 15000 ––– –– –
anne lauvergeon
g
– 3350 3350 ––– – – 3350
michael l’estrange
g
––– 303 303 303 –– –
chris lynch 2070 2160 2160 6890 6890 6890 –89 1
paul tellier 18490 21022 21022 ––– – – 2532
simon thompson
g
7458 7458 7458 ––– –– –
john varley 2985 9685 9685 ––– – – 6700
samwalsh ––– 94444 146993 181003 125 107270 20836
executives
hugo bague 39708 60964 60990 ––– 15714 48352 42785
alfredo barrios
g
– 2585 2610 ––– – 5311 2700
jacynthe côté
g
39899 57967 – ––– – 34657 16589
alandavies ––– 15920 23521 23547 323 13617 6312
andrew harding 4466 8618 8618 24684 36605 36605 – 31177 15104
jeansébastien jacques 4528 9565 11402 ––– – 12332 5448
harry kenyonslaney 32506 47944 48391 ––– 434 31184 15733
greg lilleyman
g
––– 23133 31226 34865 – 13548 1816
debra valentine 33926 50571 50599 – – – – 31965 15292
notes to table 2
a rio tinto plc ordinary shares or american depositary shares
b or date of appointment if later
c or date of retirement or at date no longer a member of the executive committee if earlier
d shares obtained through the exercise of options under the rio tinto share savings plan or the share option plan the number of shares retained may differ from the number of
options exercised
e shares obtained through the rio tinto share ownership plan andor vesting of awards under the psp msp and bdp
f share movements due to sale or purchase of shares shares received under the dividend reinvestment plan shares purchasedsold through the rio tinto america savings plan or
nonexecutive directors’ share purchase plan
g megan clark anne lauvergeon michael l’estrange and simon thompson were appointed as directors on 20 november 2014 15 march 2014 1 september 2014 and 1 april 2014
respectively vivienne cox retired as a director on 15 april 2014 greg lilleyman was appointed on 1 january 2014 alfredo barrios was appointed on 1 june 2014 and jacynthe
coté resigned from the executive committee on 31 may 2014
h interests in outstanding awards under ltips and option plans are set out in table 3
riotintocom 95
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remuneration report
implementation report
financial statements production reserves
and operations
additional information remuneration report implementation report continued
table 3 – plan interests awards of shares and options under longterm incentiveplans
conditional
award granted
market
price at
award
1jan
2014
a
awarded
lapsed
cancelled
dividend
shares vested
31 dec
2014
b
16 feb
2015
h
performance
period
concludes
date of
election
market
price at
election
monetary
value of
vested
award
us’000
bonus deferral plan
hugo bague 19 mar 2012 £3615 7069 – – 670 7739 – – 1 dec 2014 3 dec 2014 £2975 379355
27 may 2013 £2867 6945 –– – – 6945 6945 1 dec 2015 – – –
17 mar 2014 £3154 – 9669 – – – 9669 9669 1 dec 2016 – – –
jacynthe côté 19 mar 2012 £3615 9096 –– – – 9096 na 1 dec 2014 – – –
27 may 2013 £2867 2050 –– – – 2050 na 1 dec 2015 – – –
17 mar 2014 £3154 – 9036 – – – 9036 na 1 dec 2016 – – –
alan davies 19 mar 2012 a6585 2315 – – 189 2504 – – 1 dec 2014 8 dec 2014 a5727 129462
27 may 2013 a5311 6702 –– – – 6702 6702 1 dec 2015 – – –
17 mar 2014 a6167 – 6709 – – – 6709 6709 1 dec 2016 – – –
andrew harding 19 mar 2012 £3615 7096 – – 672 7768 – – 1 dec 2014 3 dec 2014 £3004 384505
27 may 2013 £2867 7870 –– – – 7870 7870 1 dec 2015 – – –
17 mar 2014 £3154 – 11776 – – – 11776 11776 1 dec 2016 – – –
jeansébastien
jacques
19 mar 2012 £3615 518 – – 49 567 – – 1 dec 2014 1 dec 2014 £2951 27568
27 may 2013 £2867 2113 –– – – 2113 2113 1 dec 2015 – – –
17 mar 2014 £3154 – 8259 – – – 8259 8259 1 dec 2016 – – –
harry
kenyonslaney
19 mar 2012 £3615 6729 – – 637 7366 – – 1 dec 2014 17 dec 2014 £2758 334768
27 may 2013 £2867 8128 –– – – 8128 8128 1 dec 2015 – – –
17 mar 2014 £3154 – 9217 – – – 9217 9217 1 dec 2016 – – –
greg lilleyman 19 mar 2012 a6585 1877 – – 153 2030 – – 1 dec 2014 17 dec 2014 a5338 97827
27 may 2013 a5311 2094 –– – – 2094 2094 1 dec 2015 – – –
17 mar 2014 a6167 – 2754 – – – 2754 2754 1 dec 2016 – – –
chris lynch 17 mar 2014 £3154 – 14479 – – – 14479 14479 1 dec 2016 – – –
debra valentine 19 mar 2012 £3615 7244 – – 686 7930 – – 1 dec 2014 3 dec 2014 £2968 387777
27 may 2013 £2867 7173 –– – – 7173 7173 1 dec 2015 – – –
17 mar 2014 £3154 – 8153 – – – 8153 8153 1 dec 2016 – – –
sam walsh 19 mar 2012 a6585 18490 – – 1512 20002 – – 1 dec 2014 3 dec 2014 a5736 1035773
27 may 2013 a5311 18413 –– – – 18413 18413 1 dec 2015 – – –
17 mar 2014 a6167 – 22226 – – – 22226 22226 1 dec 2016 – – –
performance share plan
hugo bague 22 mar 2010 £3730 31531 – 7883 – 23648 – – 31 dec 2013 27 feb 2014 £3402 1325781
6 may 2011 £4151 22943 –– – – 22943 – 31 dec 2014 16 feb 2015 £3130 869755
19 mar 2012 £3615 22056 –– – – 22056 22056 31 dec 2015 – – –
27 may 2013 £2867 29294 –– – – 29294 29294 31 dec 2016 – – –
27 may 2013 £2867 29295 –– – – 29295 29295 31 dec 2017 – – –
17 mar 2014 £3144 – 61607 – – – 61607 61607 31 dec 2018 – – –
alfredo barrios 15 sep 2014 £3144 – 43568 – – – 43568 43568 31 dec 2018 – – –
jacynthe côté 22 mar 2010 £3730 46153 – 11539 – 34614 – – 31 dec 2013 21 feb 2014 £3600 2053392
6 may 2011 £4151 31682 –– – – 31682 na 31 dec 2014 – – –
19 mar 2012 £3615 30056 –– – – 30056 na 31 dec 2015 – – –
27 may 2013 £2867 27296 –– – – 27296 na 31 dec 2016 – – –
27 may 2013 £2867 27297 –– – – 27297 na 31 dec 2017 – – –
17 mar 2014 £3144 – 74752 – – – 74752 na 31 dec 2018 – – –
alan davies 22 mar 2010 a7503 9750 – 2438 – 7312 – – 31 dec 2013 19 feb 2014 a7111 469406
21 mar 2011 a8100 6228 –– – – 6228 4577 31 dec 2014 – – –
19 mar 2012 a6585 6663 –– – – 6663 6663 31 dec 2015 – – –
27 may 2013 a5311 27047 –– – – 27047 27047 31 dec 2016 – – –
27 may 2013 a5311 27047 –– – – 27047 27047 31 dec 2017 – – –
17 mar 2014 a6103 – 51817 – – – 51817 51817 31 dec 2018 – – –
96 riotintocom conditional
award granted
market
price at
award
1jan
2014
a
awarded
lapsed
cancelled
dividend
shares vested
31 dec
2014
b
16 feb
2015
h
performance
period
concludes
date of
election
market
price at
election
monetary
value of
vested
award
us‘000
performance share plan continued
andrew harding 22 mar 2010 a7503 31064 – 7766 – 23298 – – 31 dec 2013 21 feb 2014 a7027 1477987
6 may 2011 £4151 23219 –– – – 23219 17065 31 dec 2014 – – –
19 mar 2012 £3615 22390 –– – – 22390 22390 31 dec 2015 – – –
27 may 2013 £2867 35547 –– – – 35547 35547 31 dec 2016 – – –
27 may 2013 £2867 35548 –– – – 35548 35548 31 dec 2017 – – –
17 mar 2014 £3144 – 76539 – – – 76539 76539 31 dec 2018 – – –
jeansébastien
jacques
19 mar 2012 £3615 4793 –– – – 4793 4793 31 dec 2015 – – –
27 may 2013 £2867 25682 –– – – 25682 25682 31 dec 2016 – – –
27 may 2013 £2867 25683 –– – – 25683 25683 31 dec 2017 – – –
17 mar 2014 £3144 – 70057 – – – 70057 70057 31 dec 2018 – – –
harry
kenyonslaney
22 mar 2010 £3730 31531 – 7883 – 23648 – – 31 dec 2013 6 mar 2014 £3282 1278844
6 may 2011 £4151 33936 –– – – 33936 24942 31 dec 2014 – – –
19 mar 2012 £3615 22390 –– – – 22390 22390 31 dec 2015 – – –
27 may 2013 £2867 33353 –– – – 33353 33353 31 dec 2016 – – –
27 may 2013 £2867 33354 –– – – 33354 33354 31 dec 2017 – – –
17 mar 2014 £3144 – 66798 – – – 66798 66798 31 dec 2018 – – –
greg lilleyman 22 mar 2010 a7503 4219 – 1055 – 3164 – – 31 dec 2013 20 mar 2014 a6080 173669
6 may 2011 a7957 5423 –– – – 5423 3985 31 dec 2014 – – –
19 mar 2012 a6585 5585 –– – – 5585 5585 31 dec 2015 – – –
27 may 2013 a5311 6898 –– – – 6898 6898 31 dec 2016 – – –
27 may 2013 a5311 6898 –– – – 6898 6898 31 dec 2017 – – –
17 mar 2014 a6103 – 47321 – – – 47321 47321 31 dec 2018 – – –
chris lynch 27 may 2013 £2867 52084 –– – – 52084 52084 31 dec 2016 – – –
27 may 2013 £2867 52085 –– – – 52085 52085 31 dec 2017 – – –
17 mar 2014 £3144 – 104312 – – – 104312 104312 31 dec 2018 – – –
debra valentine 22 mar 2010 £3730 31887 – 7972 – 23915 – – 31 dec 2013 17 mar 2014 £3165 1247159
6 may 2011 £4151 22553 –– – – 22553 16576 31 dec 2014 – – –
19 mar 2012 £3615 21257 –– – – 21257 21257 31 dec 2015 – – –
27 may 2013 £2867 26274 –– – – 26274 26274 31 dec 2016 – – –
27 may 2013 £2867 26275 –– – – 26275 26275 31 dec 2017 – – –
17 mar 2014 £3144 – 55522 – – – 55522 55522 31 dec 2018
sam walsh 22 mar 2010 a7503 55842 – 13961 – 41881 – – 31 dec 2013 19 feb 2014 a7109 2687865
6 may 2011 a7957 61752 –– – – 61752 – 31 dec 2014 16 feb 2015 a6385 2616367
19 mar 2012 a6585 63540 –– – – 63540 63540 31 dec 2015 – – –
27 may 2013 a5311 66627 –– – – 66627 66627 31 dec 2016 – – –
27 may 2013 a5311 66628 –– – – 66628 66628 31 dec 2017 – – –
17 mar 2014 a6103 – 134026 – – – 134026 134026 31 dec 2018 – – –
management share plan
alan davies 21 mar 2011 a8100 3487 – – 200 3687 – – 31 dec 2013 19 feb 2014 a7106 236527
19 mar 2012 a6585 3997 –– – – 3997 4309 31 dec 2014 – – –
alfredo barrios 15 sep 2014 £3144 – 5278 5278 – – 31 oct 2014 6 nov 2014 £2950 256537
jeansébastien
jacques
12 sep 2011 £3510 7500 – – 825 8325 – – 1 jul 2014 24 oct 2014 £3019 414161
19 mar 2012 £3615 2875 –– – – 2875 – 31 dec 2014 16 feb 2015 £3146 162893
greg lilleyman 21 mar 2011 a8100 3037 – – 174 3211 – – 31 dec 2013 20 mar 2014 a6080 176249
19 mar 2012 a6585 3351 –– – – 3351 – 31 dec 2014 16 feb 2015 a6361 207480
27 may 2013 a5311 4598 –– – – 4598 4598 31 dec 2015 – – –
riotintocom 97
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remuneration report
implementation report
financial statements production reserves
and operations
additional information remuneration report implementation report continued
table 3 – plan interests awards of shares and options under longterm incentive plans continued
date of grant 1 jan 2014
a
vested
during 2014 exercised
lapsed
cancelled
vested and
exercisable on
31 dec 2014
b
share savings plan
hugo bague 4 oct 2011 425 – – – –
alan davies 5 oct 2010 323 323 323 – –
andrew harding 20 oct 2009 723 – – – –
5 oct 2010 555 – – – –
harry kenyonslaney
q
20 oct 2009 434 – – – –
greg lilleyman 5 oct 2010 555 – – – –
sam walsh
q
20 oct 2009 125 – – – –
5 oct 2010 457 – – – –
share option plan
hugo bague 17 mar 2009 15714 – 15714 – –
22 mar 2010 47297 – – – 47297
6 may 2011 34415 34415 – – 34415
19 mar 2012 33085 – – – –
jacynthe côté 17 mar 2009 35680 – – – 35680
22 mar 2010 69230 – – – 69230
6 may 2011 47523 47523 – – 47523
19 mar 2012 45084 – – – –
andrew harding 17 mar 2009 6268 – – – 6268
22 mar 2010 46597 – – – 46597
6 may 2011 34829 34829 – – 34829
19 mar 2012 33585 – – – –
harry kenyonslaney 17 mar 2009 6938 – – – 6938
22 mar 2010 47297 – – – 47297
19 mar 2012 33585 – – – –
greg lilleyman 22 apr 2004 1416 – 1416 – –
9 mar 2005 1275 – – – 1275
7 mar 2006 2186 – – – 2186
17 mar 2009 3058 – – – 3058
debra valentine 17 mar 2009 13558 – – – 13558
22 mar 2010 47831 – – – 47831
6 may 2011 33830 33830 – – 33830
19 mar 2012 31886 – – – –
sam walsh 7 mar 2006 48079 – – – 48079
17 mar 2009 40005 – – – 40005
22 mar 2010 83763 – – – 83763
notes to table 3
a or date of appointment if later
b or date of retirement or at date no longer a member of the executive committee if earlier
c alfredo barrios was appointed on 1 june 2014
d jacynthe côté stepped down from the executive committee on 31 may 2014
e awards denominated in pounds sterling were for rio tinto plc ordinary shares of 10 pence each and awards denominated in australian dollars were for rio tinto limited shares all
options granted over ordinary shares rio tinto plc – ordinary shares of 10 pence each stated in sterling rio tinto limited ordinary shares stated in australian dollars each option
is granted over one share at no cost to participants the exercise price represents the amount payable per share on the exercise of each option by participants
f the weighted fair value per share of conditional awards granted in 2014 under the bdp was £3138 for rio tinto plc and a6132 for rio tinto limited and for psp was £2271 for
rio tinto plc and a4440 for rio tinto limited
g conditional awards are awarded at no cost to the recipient and no amount remains unpaid on any shares granted
h the 2011 psp awards granted on 6 may 2011 with a performance period that concluded on 31 december 2014 vested at 735 per cent this award vested on 16 february 2015 as follows
hugo bague awarded 22943 lapsed 6080 vested 16863 hugo exercised his award on 16 february 2015 alan davies awarded 6228 lapsed 1651 vested 4577 andrew harding
awarded 23219 lapsed 6154 vested 17065 harry kenyonslaney awarded 33936 lapsed 8994 vested 24942 greg lilleyman awarded 5423 lapsed 1438 vested 3985 debra
valentine awarded 22553 lapsed 5977 vested 16576 sam walsh awarded 61752 lapsed 16365 vested 45387 sam exercised his award on 16 february 2015 the 2012 msp awards
granted 19 march 2012 vested on 16 february 2015 as follows alan davies awarded 3997 dividend shares 312 vested 4309 jeansébastien jacques awarded 2875 dividend shares 267
vested 3142 jeansébastien exercised his award on 16 february 2015 greg lilleyman awarded 3351 dividend shares 262 vested 3613 greg exercised his award on 16 february 2015
98 riotintocom 31 dec 2014
b
vested and
exercisable on
16 feb 2015 16 feb 2015 exercise price
value of options
exercised
during 2014
market price
on date of
exercise
date from
which first
exercisable expiry date
share savings plan
hugo bague 425 – 425 £28630 – – 1 jan 2017 1 jul 2017
alan davies –– – a5926 a2371 a6660 1 jan 2014 1 jul 2014
andrew harding 723 723 723 a4873 – – 1 jan 2015 1 jul 2015
555 – 555 £27810 – – 1 jan 2016 1 jul 2016
harry kenyonslaney
q
434 – – £21480 – – 1 jan 2015 1 jul 2015
greg lilleyman 555 – 555 a5926 – – 1 jan 2016 1 jul 2016
sam walsh
q
125 125 – a4873 – – 1 jan 2015 1 jul 2015
457 – 457 a5926 – – 1 jan 2016 1 jul 2016
share option plan
hugo bague –– – £16530 £285995 £3473 17 mar 2012 17 mar 2019
47297 47297 47297 £37050 – – 22 mar 2013 22 mar 2020
34415 34415 34415 £42450 – – 6 may 2014 6 may 2021
33085 – 33085 £35179 – – 19 mar 2015 19 mar 2022
jacynthe côté 35680 na na £16530 – – 17 mar 2012 1 sep 2015
69230 na na £37050 – – 22 mar 2013 1 sep 2015
47523 na na £42450 – – 6 may 2014 1 sep 2015
45084 na na £35179 – – 19 mar 2015 19 mar 2016
andrew harding 6268 6268 6268 a33450 – – 17 mar 2012 17 mar 2019
46597 46597 46597 a76150 – – 22 mar 2013 22 mar 2020
34829 34829 34829 £42450 – – 6 may 2014 5 may 2021
33585 – 33585 £35179 – – 19 mar 2015 19 mar 2022
harry kenyonslaney 6938 6938 6938 £16530 – – 17 mar 2012 17 mar 2019
47297 47297 47297 £37050 – – 22 mar 2013 22 mar 2020
33585 – 33585 £35179 – – 19 mar 2015 19 mar 2022
greg lilleyman –– – a1830 a63965 a6347 22 apr 2009 22 apr 2014
1275 1275 1275 a30933 – – 9 mar 2008 9 mar 2015
2186 2186 2186 a54951 – – 7 mar 2009 7 mar 2016
3058 3058 3058 a33451 – – 17 mar 2012 17 mar 2019
debra valentine 13558 13558 13558 £16530 – – 17 mar 2012 17 mar 2019
47831 47831 47831 £37050 – – 22 mar 2013 22 mar 2020
33830 33830 33830 £42450 – – 6 may 2014 6 may 2021
31886 – 31886 £35179 – – 19 mar 2015 19 mar 2022
sam walsh 48079 48079 48079 a54950 – – 7 mar 2009 7 mar 2016
40005 40005 40005 a33450 – – 17 mar 2012 17 mar 2019
83763 83763 83763 a76150 – – 22 mar 2013 22 mar 2020
i the closing price of rio tinto plc ordinary shares at 31 december 2014 was £3000 and of rio tinto limited ordinary shares at 31 december 2014 was a5800 the high and low
prices during 2014 of rio tinto plc and rio tinto limited shares were £3627 and £2616 and a7088 and a5265 respectively
j the exercise price represents the price payable on the options
k the amount in us dollars has been converted at the rate of us060685  £1 and us110768  a1 being the average exchange rates for 2014
l as of 16 february 2015 members of the executive committee held 1643138 shares awarded and not vested under longterm incentive plans and 632082 options to acquire
rio tinto plc and rio tinto limited shares
m between 31 december 2014 and 16 february 2015 no options were granted to the executives
n details of performance conditions for the bdp are provided below fifty per cent of the stip is delivered in cash and 50 per cent delivered in deferred shares under the bdp the
bdp vests in december of the third year after the end of performance year to which they relate
o details of performance conditions for the psp are provided below
for 2011 and 2012 awards the awards have a fouryear performance period and from 2014 awards have a fiveyear performance period commencing on 1 january of the year of
grant for 2013 awards only 50 per cent of the award granted will be measured against the performance conditions after four years at the end of 2016 and50percentofthe
awards granted will be measured against the performance conditions after five years at the end of 2017
for 2011 and 2012 awards subject to the “mix” chosen awards have a maximum face value of 292 per cent of base salary with the potential for 15 times of this value ie 438 per
cent of base salary for outstanding performance the expected value of the 2011 and 2012 awards is 190 per cent of base salary for awards granted from 2013 awards have a
maximum face value of 438 per cent of base salary and a maximum expected value of 190 per cent of base salary the actual award levels granted from 2013 varybyexecutive
for 2011 and 2012 awards conditional share awards vest subject to the achievement of a stretching tsr performance condition comparing rio tinto’s tsr performance against
– 50 per cent the hsbc global mining index
– 50 per cent the morgan stanley capital world index msci
riotintocom 99
strategic report directors’ report
remuneration report
implementation report
financial statements production reserves
and operations
additional information remuneration report implementation report continued
vesting of awards made in 2011 and 2012 is as follows
outperformance of the index by 8 per cent per annum 15x award vests
performance between index and 8 per cent outperformance proportionate vesting for performance between index and 8 per cent
outperformance of the index
outperformance of the index by approximately 5 per cent per annum 10x award vests
performance equal to index 035x award vests
performance less than index nil vesting
for awards granted from 2013 for the tsr component constituting twothirds of the award where tsr performance is measured against both the hsbc global mining index and
the morgan stanley capital world index the award will vest as follows
outperformance of the index by 6 per cent per annum 10x award vests
performance between equal to the index and 6 per cent outperformance proportionate vesting between 0225x and 10x vesting
performance equal to index 0225x award vests
performance less than index nil vesting
for the ebit margin measure constituting onethird of the award change in the ebit margin of rio tinto and each of the comparator companies measured on a “pointtopoint”
basis using the last financial year in the performance period and the financial year prior to the start of the performance period will be calculated using independent thirdparty
data vesting will be subject to rio tinto’s interpolated ranking position using the following schedule
equal to or greater than 2nd ranked company 10x award vests
between the 5th and 2nd ranked companies proportionate vesting between 0225x and 10x vesting
above the 6th ranked company 0225x award vests
equal to the 6th ranked company or below nil vesting
for awards granted in 2011 and 2012 if vesting is achieved a cash payment will be paid equal to the dividends that would have been received had the numberofshareswhich
have vested at the end of the performance period been held throughout the performance period for awards granted from 2013 if vesting is achieved participants will be entitled
to receive a number of additional shares whose market value reflects the aggregate cash amount of dividends that would have been received had the number of shares which have
vested at the end of the performance period been held throughout the period
p details of performance conditions for the sop are provided below
threeyear performance period
awards have a maximum face value of 300 per cent of base salary
options vest subject to the achievement of a stretching tsr performance condition comparing rio tinto’s tsr performance to that of the hsbc global mining index
vesting of awards made in 2012 is as follows
outperformance of the index by 5 per cent per annum awards vest in full
performance between index and 5 per cent outperformance proportionate vesting of residual award for performance between index and 5 per
cent outperformance of the index
performance equal to index awards of up to 20000 options or onethird of the award whichever is the higher
performance less than index nil vesting
the sop ceased to operate from 2013 no further awards of shares options will be made
q harry kenyonslaney exercised 434 share savings plan options on 14 february 2015 sam walsh exercised 125 share saving plan options on 16 february 2015
100 riotintocom audited information
under schedule 8 of the large and mediumsized companies and groups
accounts and reports regulations 2008 as amended the information
included in respect of the single total figure of remuneration for each director
details of the directors’ total pension entitlements details of scheme interests
awarded to the directors during the financial year details of payments to past
directors and the statement of the directors’ shareholdings and share
interests as set out in the implementation report are all auditable the
australian securities and investments commission issued an order dated 9
january 2015 under which the remuneration report must be prepared and
audited in accordance with the requirements of the corporations act 2001
applied on the basis of certain modifications set out in the order as detailed
on page 183 the information provided in the remuneration report has been
audited as required by section 3083c of the corporations act
going concern
the directors having made appropriate enquiries have satisfied themselves
that no material uncertainties that cast significant doubt about the ability of
the companies and the group to continue as a going concern have been
identified and they have a reasonable expectation that the group has
adequate financial resources to continue in operational existence for the
foreseeable future therefore these financial statements have been prepared
on a going concern basis
annual general meetings
the 2015 annual general meetings will be held on 16 april in london and
7 may in perth separate notices of the 2015 annual general meetings are
produced for the shareholders of each company
directors’ approval statement
the directors’ report is delivered in accordance with a resolution of the board
janduplessis
chairman
4 march 2015
riotintocom 101
strategic report directors’ report financial statements production reserves
and operations
additional information 2014 financial statements
contents
page
primary financial statements
group income statement 103
group statement of comprehensive income 104
group cash flow statement 105
group balance sheet 106
group statement of changes in equity 107
reconciliation with australian accounting standards 109
outline of dual listed companies structure and basis of
financial statements 109
notes to the 2014 financial statements
note 1 – principal accounting policies 110
group income statement
note 2 – operating segments 123
note 3 – operating segments – additional information 125
note 4 – net operating costs 127
note 5 – employment costs 127
note 6 – impairment charges and reversals 128
note 7 – share of profit after tax of equity accounted units 130
note 8 – finance income and finance costs 130
note 9 – taxation 130
note 10 – earningsloss per ordinary share 131
note 11 – dividends 132
group balance sheet
note 12 – goodwill 133
note 13 – intangible assets 134
note 14 – property plant and equipment 135
note 15 – investments in equity accounted units 136
note 16 – inventories 137
note 17 – deferred taxation 137
note 18 – trade and other receivables 138
note 19 – assets and liabilities held for sale 139
note 20 – other financial assets 139
note 21 – cash and cash equivalents 139
note 22 – borrowings and other financial liabilities 140
note 23 – capitalised finance leases 141
note 24 – consolidated net debt 141
note 25 – trade and other payables 142
note 26 – provisions including post retirement benefits 142
page
capital and reserves
note 27 – share capital – rio tinto plc 143
note 28 – share capital – rio tinto limited 144
note 29 – other reserves and retained earnings 144
additional disclosures
note 30 – financial instruments and risk management 146
note 31 – contingencies and commitments 155
note 32 – average number of employees 156
note 33 – principal subsidiaries 157
note 34 – principal joint operations 159
note 35 – principal joint ventures 160
note 36 – principal associates 161
note 37 – purchases and sales of subsidiaries joint ventures
associates and other interests in businesses 162
note 38 – directors’ and key management remuneration 163
note 39 – auditors’ remuneration 164
note 40 – related party transactions 165
note 41 – exchange rates in us 165
note 42 – bougainville copper limited bcl 165
note 43 – events after the balance sheet date 165
note 44 – share based payments 166
note 45 – post retirement benefits 168
note 46 – rio tinto limited parent company disclosures 174
rio tinto plc company balance sheet 175
rio tinto financial information by business unit 178
australian corporations act – summary of asic relief 183
directors’ declaration 184
auditor’s independence declaration 185
independent auditors’ report to the members of rio tinto plc and
rio tinto limited 186
financial summary 20052014 192
summary financial data 194
102 riotintocom group income statement
years ended 31 december
note
2014
usm
2013
usm
2012
usm
continuing operations
consolidated sales revenue 3 47664 51171 50942
net operating costs excluding items shown separately 4 33910 36104 37534
impairment charges net of reversals 6 1062 7315 14701
net lossesgains on consolidation and disposal of interests in businesses 237 563 787 845
exploration and evaluation costs 13 747 948 1971
lossprofit relating to interests in undeveloped projects 13 36 161 494
operating profitloss 11346 7430 1925
share of profit after tax of equity accounted units 7 625 698 1056
impairment charges net of reversals of investments in equity accounted units after tax 6 589 216 1526
profitloss before finance items and taxation 12560 7912 2395
finance items
net exchange lossesgains on external debt and intragroup balances 24 1995 3672 492
net lossesgains on derivatives not qualifying for hedge accounting 46 59 88
finance income 8 64 82 116
finance costs 8 649 507 293
amortisation of discount 382 369 439
3008 4407 36
profitloss before taxation 9552 3505 2431
taxation 9 3053 2426 589
profitloss from continuing operations 6499 1079 3020
discontinued operations
loss after tax from discontinued operations – –7
profitloss after tax for the year 6499 1079 3027
– attributable to owners of rio tinto net earningslosses 6527 3665 3028
– attributable to noncontrolling interests 28 2586 1
basic earningslosses per share
profitloss from continuing operations 10 3531c 1984c 1634c
loss from discontinued operations 10 – – 04c
profitloss for the year per share 10 3531c 1984c 1638c
diluted earningslosses per share
profitloss from continuing operations 10 3512c 1973c 1634c
loss from discontinued operations 10 – – 04c
profitloss for the year per share 10 3512c 1973c 1638c
the notes on pages 110 to 174 are an integral part of these consolidated financial statements
riotintocom 103
strategic report directors’ report financial statements production reserves
and operations
additional information group statement of comprehensive income
years ended 31 december
note
2014
usm
2013
usm
2012
usm
profitloss after tax for the year 6499 1079 3027
other comprehensive lossincome
items that will not be reclassified to profit or loss
actuarial lossesgains on post retirement benefit plans 45 735 2260 332
share of other comprehensive lossesincome of equity accounted units net of tax – 1 1
tax relating to components of other comprehensive income 9 215 641 83
520 1618 248
items that have beenmay be reclassified subsequently to profit or loss
currency translation adjustment 2004 2657 727
currency translation on companies disposed of transferred to the income statement 53 81 3
fair value movements
– cash flow hedge lossesgains 48 195 67
– cash flow hedge lossesgains transferred to the income statement 55 92 100
– lossesgains on revaluation of available for sale securities 36 101 34
– lossesgains on revaluation of available for sale securities transferred to the income statement 6 146 355
share of other comprehensive loss of equity accounted units net of tax 44 44 158
tax relating to components of other comprehensive income 9 9 56 26
other comprehensive lossincome for the year net of tax 2547 910 4
total comprehensive incomeloss for the year 3952 169 3023
– attributable to owners of rio tinto 4322 3261 3164
– attributable to noncontrolling interests 370 3092 141
the notes on pages 110 to 174 are an integral part of these consolidated financial statements
104 riotintocom group cash flow statement
years ended 31 december
note
2014
usm
2013
usm
2012
usm
cash flow from consolidated operations
a
18896 19531 15999
dividends from equity accounted units 298 600 522
cash flows from operations 19194 20131 16521
net interest paid 981 1164 824
dividends paid to holders of noncontrolling interests in subsidiaries 309 191 422
tax paid 3618 3698 5845
net cash generated from operating activities 14286 15078 9430
cash flow from investing activities
acquisitions of subsidiaries joint ventures  associates 37 – 4 1335
disposals of subsidiaries joint ventures  associates 37 887 1896 251
purchase of property plant and equipment and intangible assets 2 8162 13001 17615
sales of financial assets 172 224 692
purchases of financial assets 24 75 50
other funding of equity accounted units 117 88 223
other investing cash flows
b
741 94 37
cash used in investing activities 6503 10946 18243
cash flow before financing activities 7783 4132 8813
cash flow from financing activities
equity dividends paid to owners of rio tinto 11 3710 3322 3038
proceeds from additional borrowings 442 3954 8569
repayment of borrowings 3476 1832 682
proceeds from issue of equity to noncontrolling interests
c
1291 159 2945
own shares purchased from owners of rio tinto – – 1471
purchase of noncontrolling interests 37 – – 76
other financing cash flows 17 107 77
net cash flow used infrom financing activities 5436 934 6324
effects of exchange rates on cash and cash equivalents 156 261 16
net increasedecrease in cash and cash equivalents 2191 2937 2473
opening cash and cash equivalents less overdrafts 10209 7272 9745
closing cash and cash equivalents less overdrafts 21 12400 10209 7272
acashflowfromconsolidatedoperations
profitloss from continuing operations 6499 1079 3020
adjustments for
– taxation 3053 2426 589
– finance items 3008 4407 36
– share of profit after tax of equity accounted units 625 698 1056
– impairment charges net of reversals of investments in equity accounted units after tax 589 216 1526
– net lossesgains on disposal and consolidation of interests in businesses 37 563 787 845
– impairment charges net of reversals 6 1062 7315 14701
– depreciation and amortisation 4860 4791 4624
– provisions including exchange differences on provisions 26 712 1449 886
utilisation of provisions 26 973 871 840
utilisation of provision for post retirement benefits 26 296 635 695
change in inventories 937 330 433
change in trade and other receivables 962 84 412
change in trade and other payables 380 803 266
other items 103 282 152
18896 19531 15999
b other investing cash flows in 2014 mainly relate to the disposal of the group’s st james’s square properties
c cash proceeds from the issue of equity to noncontrolling interests relates mainly to turquoise hill resources ltd’s rights issue at the beginning of 2014 which increased
noncontrolling interests by us1158 million the balance in 2012 included us18 billion from the transfer of a 47 per cent interest in simfer jersey limited a rio tinto
subsidiary to chalco iron ore holdings limited a consortium led by chalco and reimbursing rio tinto for historic project costs plus subsequent cash calls to meet project costs
and us09 billion of proceeds from subscription by noncontrolling interests in a rights offering by turquoise hill refer to the group statement ofchangesinequityonpage107
and to note 33
the notes on pages 110 to 174 are an integral part of these consolidated financial statements
riotintocom 105
strategic report directors’ report financial statements production reserves
and operations
additional information group balance sheet
at 31 december
note
2014
usm
2013
usm
noncurrent assets
goodwill 12 1228 1349
intangible assets 13 5880 5421
property plant and equipment 14 68693 70827
investments in equity accounted units 15 4868 3957
inventories 16 397 511
deferred tax assets 17 3540 3555
trade and other receivables 18 1304 2140
other financial assets including tax recoverable and loans to equity accounted units 20 792 983
86702 88743
current assets
inventories 16 4350 5737
trade and other receivables 18 3623 4667
other financial assets including tax recoverable and loans to equity accounted units 20 417 710
cash and cash equivalents 21 12423 10216
20813 21330
assets of disposal groups held for sale 19 312 952
total assets 107827 111025
current liabilities
borrowings and other financial liabilities 22 2684 3926
trade and other payables 25 7437 8400
tax payable 800 1126
provisions including post retirement benefits 26 1299 1738
12220 15190
noncurrent liabilities
borrowings and other financial liabilities 22 22535 24625
trade and other payables 25 871 576
tax payable 370 468
deferred tax liabilities 17 3574 4140
provisions including post retirement benefits 26 13303 12343
40653 42152
liabilities of disposal groups held for sale 19 360 181
total liabilities 53233 57523
net assets 54594 53502
capital and reserves
share capital
–riotintoplc 27 230 230
– rio tinto limited 28 4535 4911
share premium account 4288 4269
other reserves 29 11122 12871
retained earnings 29 26110 23605
equity attributable to owners of rio tinto 46285 45886
attributable to noncontrolling interests 8309 7616
total equity 54594 53502
the notes on pages 110 to 174 are an integral part of these consolidated financial statements
the financial statements on pages 103 to 184 were approved by the directors on 4 march 2015 and signed on their behalf by
jan du plessis sam walsh ao chris lynch
chairman chief executive chief financial officer
106 riotintocom group statement of changes in equity
year ended 31 december 2014 attributable to owners of rio tinto
share
capital
notes 27 and 28
usm
share
premium
usm
other
reserves
note 29
usm
retained
earnings
note 29
usm
total
usm
non
controlling
interests
usm
total
equity
usm
opening balance 5141 4269 12871 23605 45886 7616 53502
total comprehensive income for the year
a
– – 1689 6011 4322 370 3952
currency translation arising on rio tinto limited’s
share capital
b
376 – – – 376 – 376
dividends – – – 3710 3710 304 4014
own shares purchased from rio tinto shareholders to
satisfy share options – – 129 31 160 – 160
treasury shares reissued and other movements –19 – 3 22 – 22
newly consolidated operations – ––– – 6 6
change in equity interest held by rio tinto –– – 36 36 29 7
equity issued to holders of
noncontrolling interests
c
– – – – – 1291 1291
companies no longer consolidated – – – – – 18 18
employee share options and other ifrs 2 charges taken
to the income statement – – 69 196 265 117 382
closing balance 4765 4288 11122 26110 46285 8309 54594
year ended 31 december 2013 attributable to owners of rio tinto
share
capital
notes 27 and 28
usm
share
premium
usm
other
reserves
note 29
usm
retained
earnings
note 29
usm
total
usm
non
controlling
interests
usm
total
equity
usm
opening balance 5945 4244 14868 21496 46553 11187 57740
total comprehensive income for the year
a
– – 1984 5245 3261 3092 169
currency translation arising on rio tinto limited’s share
capital
b
804 – – – 804 – 804
dividends – – – 3322 3322 196 3518
own shares purchased from rio tinto shareholders to
satisfy share options – – 77 44 121 – 121
treasury shares reissued and other movements – 25 – 55 80 – 80
change in equity interest held by rio tinto – – – 102 102 78 24
equity issued to holders of noncontrolling interests – – – – – 159 159
companies no longer consolidated – – – – – 369 369
employee share options and other ifrs 2 charges taken
to the income statement – – 64 73 137 5 142
closing balance 5141 4269 12871 23605 45886 7616 53502
riotintocom 107
strategic report directors’ report financial statements production reserves
and operations
additional information group statement of changes in equity continued
year ended 31 december 2012 attributable to owners of rio tinto
share
capital
notes 27 and 28
usm
share
premium
usm
other
reserves
note 29
usm
retained
earnings
note 29
usm
total
usm
non
controlling
interests
usm
total
equity
usm
opening balance 5816 4208 14745 27430 52199 6685 58884
total comprehensive loss for the year
a
– – 103 3267 3164 141 3023
currency translation arising on rio tinto limited’s share
capital
b
133 – – – 133 – 133
dividends – – – 3038 3038 422 3460
share buyback schemes 4 – 4 764 764 – 764
own shares purchased for share options – – 62 41 103 – 103
treasury shares reissued and other movements – 36 – 3 39 – 39
newly consolidated operations
d e
– – – – – 2902 2902
change in equity interest held by rio tinto
f
– – – 1128 1128 166 1294
equity issued to holders of noncontrolling interests
g
– – – – – 1595 1595
employee share options and other ifrs 2 charges taken
to the income statement – – 78 45 123 120 243
closing balance 5945 4244 14868 21496 46553 11187 57740
a refer to group statement of comprehensive income
b refer to note 1 d
c equity issued to holders of noncontrolling interest in 2014 include us1158 million of proceeds from a rights issue by turquoise hill resources ltd in january 2014
d rio tinto gained control of the nonoyu tolgoi llc ot assets of turquoise hill resources ltd on 24 january 2012 when its share reached 51 per cent
within newly consolidated operations for 31 december 2012 us2678 million represents noncontrolling interests in the nonot assets of which us1439 million is the
49 per cent noncontrolling interest in net loans receivable from rio tinto group companies refer to note 37
e rio tinto acquired a controlling interest in richards bay minerals rbm in 2012 with consolidation effective from 3 september 2012 the acquisition date us224 million within
newly consolidated operations relates to the fair value of noncontrolling interests at the acquisition date refer to note 37
f the majority of the adjustments to equity interest held by rio tinto in 2012 arose from the acquisition by a consortium led by chalco of shares in simfer jersey limited a rio tinto
subsidiary as set out in the simandou joint development agreement chalco made a payment of us135 billion on 24 april 2012 in exchange for an equity interest of 47 per cent
in simfer jersey reimbursing rio tinto for historic project costs the transfer on 24 april 2012 resulted in an adjustment to retained earnings attributable to owners of rio tinto of
us105 billion relating to the amount received over rio tinto’s carrying value of the interest transferred
g equity issued to holders of noncontrolling interests in 2012 include us09 billion of proceeds from a rights offering by turquoise hill and cash calls of us480 million following
the transfer described in f which resulted in the chalco consortium being issued with additional equity interest in proportion to its interest
108 riotintocom reconciliation with australian accounting standards
the group’s financial statements have been prepared in accordance with ifrs as defined in note 1 which differs in certain respects from the version of
international financial reporting standards that is applicable in australia referred to as australian accounting standards aas
prior to 1 january 2004 the group’s financial statements were prepared in accordance with uk gaap under ifrs as defined in note 1 goodwill on acquisitions
prior to 1998 which was eliminated directly against equity in the group’s uk gaap financial statements has not been reinstated this was permitted under the
rules governing the transition to ifrs set out in ifrs 1 the equivalent australian standard aasb 1 does not provide for the netting of goodwill against equity
as a consequence shareholders’ funds under aas include the residue of such goodwill which amounted to us553 million at 31 december 2014
2013 us550 million
save for the exception described above the group’s financial statements drawn up in accordance with ifrs are consistent with the requirements of aas
outline of dual listed companies structure and basis of financial statements
the rio tinto group
these are the financial statements of the group formed through the merger of economic interests of rio tinto plc and rio tinto limited “merger” and presented
by both rio tinto plc and rio tinto limited as their consolidated accounts in accordance with both uk and australian legislation and regulations
merger terms
on 21 december 1995 rio tinto plc and rio tinto limited which are listed respectively on stock exchanges in the uk and australia entered into a dual listed
companies dlc merger this was effected by contractual arrangements between the companies and amendments to rio tinto plc’s memorandum and articles
of association and rio tinto limited’s constitution
as a result rio tinto plc and rio tinto limited and their respective groups operate together as a single economic enterprise with neither assuming a dominant
role in particular the arrangements
– confer upon the shareholders of rio tinto plc and rio tinto limited a common economic interest in both groups
– provide for common boards of directors and a unified management structure
– provide for equalised dividends and capital distributions and
– provide for the shareholders of rio tinto plc and rio tinto limited to take key decisions including the election of directors through an electoral procedure in
which the public shareholders of the two companies effectively vote on a joint basis
the merger involved no change in the legal ownership of any assets of rio tinto plc or rio tinto limited nor any change in the ownership of any existing shares or
securities of rio tinto plc or rio tinto limited nor the issue of any shares securities or payment by way of consideration save for the issue by each company of
one special voting share to a trustee company which provides the joint electoral procedure for public shareholders during 2002 each of the parent companies
issued a dlc dividend share to facilitate the efficient management of funds within the dlc structure
accounting standards
the financial statements have been drawn up in accordance with ifrs as defined in note 1 the merger was accounted for as a merger under uk gaap as
permitted under the rules governing the transition to ifrs which are set out in ifrs 1 the group did not restate business combinations that occurred before the
transition date of 1 january 2004 as a result the dlc merger of economic interests described above continues to be accounted for as a merger under ifrs as
defined in note 1
the main consequence of adopting merger rather than acquisition accounting is that the balance sheet of the merged group includes the assets and liabilities of
rio tinto plc and rio tinto limited at their carrying values prior to the merger subject to adjustments to achieve uniformity of accounting policies rather than at
their fair values at the date of the merger for accounting purposes rio tinto plc and rio tinto limited are viewed as a single public parent company withtheir
respective public shareholders being the shareholders in that single company as a result the amounts attributable to both rio tinto plc and rio tinto limited
public shareholders are included in the amounts attributed to owners of rio tinto on the balance sheet income statement and statement of comprehensive
income
australian corporations act
the financial statements are drawn up in accordance with an order under section 340 of the australian corporations act 2001 issued by the australian securities
and investments commission asic on 9 january 2015 the main provisions of the order are that the financial statements are prepared in accordance withthe
principles and requirements of international financial reporting standards as adopted by the european union eu ifrs and include a reconciliation from eu ifrs
to the australian equivalents of ifrs see above
for further details of the asic class order relief see page 183
riotintocom 109
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements
1 principal accounting policies
corporate information
rio tinto’s business is finding mining and processing mineral resources major products are aluminium copper diamonds gold industrial minerals borates
titanium dioxide and salt iron ore thermal and metallurgical coal and uranium activities span the world and are strongly represented in australiaandnorth
america with significant businesses in asia europe africa and south america
rio tinto plc is incorporated in the uk and listed on the london stock exchange and rio tinto limited is incorporated in australia and listed on the australian
stock exchange rio tinto plc’s registered office is at 2 eastbourne terrace london w2 6lg uk rio tinto limited’s registered office is at 120 collins street
melbourne australia 3000
these financial statements consolidate the accounts of rio tinto plc and rio tinto limited together “the companies” and their respective subsidiaries together
“the group” and include the group’s share of joint arrangements and associates as explained in note 1b below the group’s financial statements for the year
ended 31 december 2014 were authorised for issue in accordance with a directors’ resolution on 4 march 2015
notes 33 to 36 provide more information on the group’s subsidiaries joint arrangements and associates and note 40 provides information on the group’sother
related party relationships
basis of preparation of the financial statements
the basis of preparation and the accounting policies used in preparing the group’s 2014 financial statements are set out below
the financial statements have been prepared on a going concern basis in accordance with the companies act 2006 applicable to companies reporting under
international financial reporting standards and in accordance with applicable uk law applicable australian law as amended by the australian securities and
investments commission order dated 9 january 2015 and article 4 of the european union ias regulation and with
– international financial reporting standards as issued by the international accounting standards board iasb and interpretations issued from time to time by
the ifrs interpretations committee ifric both as adopted by the european union eu and which are mandatory for eu reporting as at 31 december 2014
– ifric 21 “levies” which has been adopted by the eu and is mandatory as at 31 december 2015 for eu reporting and is available for early adoption and
– international financial reporting standards as issued by the iasb and interpretations issued from time to time by the ifric which are mandatory as at
31 december 2014
the above accounting standards and interpretations are collectively referred to as “ifrs” in this report the group has not early adopted any other amendments
standards or interpretations that have been issued but are not yet mandatory
the group’s financial statements have been prepared on the basis of accounting policies consistent with those applied in the financial statements fortheyear
ended 31 december 2013 except for the implementation of ifric 21 and a number of minor amendments issued by the iasb which applied for the first time in
2014 these new pronouncements do not have a significant impact on the accounting policies methods of computation or presentation applied by the group and
therefore prior period financial statements have not been restated for these pronouncements
the group has not applied the following pronouncements which are not mandatory for 2014
mandatory for 2015 and endorsed by the eu
amendments to ias 19 “defined benefit plans employee contributions” the objective of the amendment is to simplify the accounting for employee or third party
contributions that are independent of the number of years of employee service
certain annual improvements to ifrs 2010 to 2012 cycle
annual improvements to ifrs 2011 to 2013 cycle
mandatory for 2016 and beyond not yet endorsed by the eu
amendment to ias 1 “presentation of financial statements – disclosure initiative” the amendment provides clarification of guidance in ias 1 on materiality and
aggregation the presentation of subtotals the structure of financial statements and the disclosure of accounting policies
amendments to ias 16 and ias 38 the amendments provide clarification of acceptable methods of depreciation and amortisation
amendments to ifrs 10 and ias 28 the amendments deal with the sale or contribution of assets between an investor and its associate or joint venture
amendments to ifrs 11 “joint arrangements” the amendments deal with the accounting for acquisitions of interests in joint operations
annual improvements to ifrs 20122014 cycle
ifrs 15 “revenue from contracts with customers” the core principle of ifrs 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services
ifrs 9 “financial instruments” the standard includes a single approach for the classification of financial assets based on cash flow characteristics and the entity’s
business model it introduces a new expected loss impairment model which requires expected losses to be recognised when financial instruments are first
recognised the standard amends the rules on hedge accounting to align the accounting treatment with the risk management practices of an entity
the group is currently evaluating the impact of these pronouncements which may have an impact on the group’s earnings or shareholders’ funds in future years
judgments in applying accounting policies and key sources of estimation uncertainty
the preparation of the financial statements requires management to make assumptions judgments and estimates and to use judgment in applying accounting
policies and in making critical accounting estimates
these judgments estimates and assumptions are based on management’s best knowledge of the relevant facts and circumstances having regard to previous
experience but actual results may differ materially from the amounts included in the financial statements key areas of judgment and estimation uncertainty are
highlighted below and further information is contained in the accounting policies andor the notes to the financial statements
110 riotintocom areas of judgment that have the most significant effect on the amounts recognised in the financial statements are
– merger accounting for the 1995 merger of the economic interests of rio tinto plc and rio tinto limited into the dual listed companies dlc structure
see dual listed companies structure on page 109
– acquisitions – note 1b and note 37
– review of asset carrying values impairment charges and reversals and the recoverability of goodwill – note 1e and i note 6 note 12 and note 13
– estimation of asset lives – note 1e and i
– determination of ore reserve and mineral resource estimates – note 1j
– provision for onerous contracts – note 1i
– closedown restoration and environmental obligations – note 1k
– deferral of stripping costs – note 1h
– uncertain tax positions – note 1m
– recognition of deferred tax on mining rights recognised in acquisitions – note 1m
– recoverability of potential deferred tax assets – note 17c e and g
– capitalisation of exploration and evaluation costs – note 1f
– identification of functional currencies – note 1d
– basis of consolidation – note 1b
– contingencies – note 31 and
– postretirement cost assumptions – note 1n and note 45
key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are
– review of asset carrying values impairment charges and reversals and the recoverability of goodwill – note1e and i note 6 note 12 and note 13
– estimation of asset lives – note 1e and i
– determination of ore reserve and mineral resource estimates – note 1j
– estimation of closedown restoration and environmental costs and the timing of expenditure – note 1k and note 26
– estimation of obligations for postretirement costs – note 1n and note 45
– recoverability of potential deferred tax assets – note 17 c e and g
– contingencies – note 31 and
– capitalisation of exploration and evaluation costs – note 1f
these areas of judgment and estimation are discussed further in critical accounting policies and estimates on page 120
a accounting convention
the financial information included in the financial statements for the year ended 31 december 2014 and for the related comparative periods has been prepared
under the historical cost convention as modified by the revaluation of certain derivative contracts and financial assets the impact of fair value hedge accounting
on the hedged item and the accounting for postretirement assets and obligations the group’s policy in respect of these items is set out in the notes below
the group’s financial statements are presented in us dollars and all values are rounded to the nearest million usm unless otherwise stated
where applicable comparatives have been adjusted to measure or present them on the same basis as current period figures
b basis of consolidation notes 33 to 36
all intragroup transactions and balances have been eliminated on consolidation
where necessary adjustments are made to the locally reported assets liabilities and results of subsidiaries joint arrangements and associates to bring their
accounting policies into line with those used by the group
subsidiaries subsidiaries are entities controlled by the companies control exists where the companies have power over the entities ie existing rights that give
them the current ability to direct the relevant activities of the entities those that significantly affect the companies’ returns exposure or rights to variable
returns from their involvement with the entities and the ability to use their power to affect those returns subsidiaries are fully consolidated fromthedateon
which control is transferred to the group they are deconsolidated from the date that control ceases
joint arrangements a joint arrangement is an arrangement of which two or more parties have joint control joint control is the contractually agreed sharing of
control such that decisions about the relevant activities of the arrangement those that significantly affect the companies’ returns require the unanimous consent
of the parties sharing control the group has two types of joint arrangement
joint operations jos a jo is a joint arrangement in which the parties that share joint control have rights to the assets and obligations for the liabilities relating
to the arrangement this includes situations where the parties benefit from the joint activity through a share of the output rather than by receivingashareofthe
results of trading in relation to its interest in a jo the group recognises its share of assets and liabilities revenue from the sale of its share of the output and its
share of any revenue generated from the sale of the output by the jo and its share of expenses these are incorporated into the group’s financial statements
under the appropriate headings
joint ventures jvs a jv is a joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement jvs are accounted
for using the equity accounting method
associates an associate is an entity that is neither a subsidiary nor a joint arrangement over which the group has significant influence significant influence is
presumed to exist where there is neither control nor joint control and the group has over 20 per cent of the voting rights unless it can be clearly demonstrated
that this is not the case significant influence can arise where the group holds less than 20 per cent of the voting rights if it has the power to participate in the
financial and operating policy decisions affecting the entity investments in associates are accounted for using the equity accounting method
riotintocom 111
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
the group uses the term “equity accounted units” eaus to refer to associates and jvs collectively for all eaus the carrying value will include any longterm
loans to the eaus that in substance form part of the group’s net investment
under the equity accounting method the investment is recorded initially at cost to the group including any goodwill on acquisition in subsequent periods the
carrying amount of the investment is adjusted to reflect the group’s share of the eaus’ retained postacquisition profit or loss and other comprehensive income
when the group’s share of losses in an eau equals or exceeds its interest in the eau including any other unsecured receivables the group does not recognise
further losses unless it has incurred legal or constructive obligations or made payments on behalf of the eau
acquisitions note 37
under the “acquisition” method of accounting for business combinations the purchase consideration is allocated to the identifiable assets acquired and liabilities
and contingent liabilities assumed the identifiable net assets on the basis of their fair value at the date of acquisition which is the date on which control is
obtained
the consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred the liabilities incurred to the former owners of
the acquiree and any equity interests issued by the group costs related to the acquisition of a subsidiary are expensed as incurred
the excess of the consideration transferred the amount of any noncontrolling interest in the acquiree and the acquisitiondate fair value of any previous equity
interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill any shortfall is immediately recognised in the income
statement
provisional fair values allocated at a reporting date are finalised within 12 months of the acquisition date
on an acquisitionbyacquisition basis the group recognises any noncontrolling interest in the acquiree either at the noncontrolling interest’s proportionate
share of the acquiree’s identifiable net assets or at fair value in some cases noncontrolling interests may be treated as equity options and valued on that basis
goodwill see note e and amounts attributable to noncontrolling interests will differ depending on the basis used
where the group has a previously held noncontrolling interest in the acquiree this is remeasured to fair value at the date control is gained with any gain or loss
recognised in the income statement the cash cost of the share purchase that gives rise to control is included within “investing activities” in the cashflow
statement
where the group increases its ownership interest in a subsidiary the differencebetweenthepurchasepriceandthecarryingvalueoftheshareofnetassets
acquired is recorded in equity the cash cost of such purchases is included within “financing activities” in the cash flow statement
the results of businesses acquired during the year are included in the consolidated financial statements from the date on which control joint control or significant
influence commences
disposals note 37
individual noncurrent assets or “disposal groups” ie groups of assets and liabilities to be disposed of by sale or otherwise in a single transaction are classified as
“held for sale” if the following criteria are met at the period end
– the carrying amount will be recovered principally through a sale transaction rather than through continuing use and
– the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for such sales and
– the sale is highly probable
disposal groups held for sale are carried at the lower of their carrying amount and fair value less costs to sell the comparative balance sheet is not restated
disposal groups acquired with a view to resale are held at the fair value determined at the acquisition date for these assets acquired for resale no profits or losses
are recognised between the acquisition date and the disposal date unless there is a subsequent impairment
on classification as held for sale the assets are no longer depreciated
if control is lost any interest in the entity retained by the group is remeasured to its fair value and the change in carrying amount is recognised in the income
statement the retained interest may be subsequently accounted for as a joint venture joint operation associate or financial asset depending on thefactsany
amounts previously recognised in other comprehensive income in respect of the entity disposed of or for which control joint control or significant influence has
ceased may be recycled to the income statement in proportion to the interest disposed of the cash proceeds of disposals are included within “investing activities”
in the cash flow statement
gains or losses on disposals to noncontrolling interests where control is retained are recorded in equity the cash proceeds of such disposals are included within
“financing activities” in the cash flow statement
c sales revenue
sales revenue comprises sales to third parties at invoiced amounts all shipping and handling costs incurred by the group are recognised as operating costs
amounts billed to customers in respect of shipping and handling are classified as sales revenue where the group is responsible for freight if the groupisacting
solely as an agent amounts billed to customers are offset against the relevant costs revenue from services is recognised as services are rendered and accepted
by the customer
sales revenue excludes any applicable sales taxes mining royalties payable are presented as an operating cost or where they are in substance a profitbased tax
within taxation
revenues from the sale of significant byproducts such as gold are included in sales revenue sundry revenue incidental to the main revenuegenerating
activities of the operations and which is a consequence of producing and selling the main products is treated as a credit to operating costs
thirdparty commodity swap arrangements for delivery and receipt of smelter grade alumina are offset within operating costs
sales of copper concentrate are stated at their invoiced amount which is net of treatment and refining charges
sales revenue is only recognised on individual sales when all of the following criteria are met
– the significant risks and rewards of ownership of the product have been transferred to the buyer
– neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold has been retained
112 riotintocom – the amount of revenue can be measured reliably
– it is probable that the economic benefits associated with the sale will flow to the group and
– the costs incurred or to be incurred in respect of the sale can be measured reliably
these conditions are generally satisfied when title passes to the customer in most instances sales revenue is recognised when the product is delivered to the
destination specified by the customer which is typically the vessel on which it will be shipped the destination port or the customer’s premises
the group’s products are sold to customers under contracts which vary in tenure and pricing mechanisms with some volumes sold in the spot market
pricing for iron ore is on a range of terms the majority being either monthly or quarterly average pricing mechanisms with a smaller proportion of ironore
volumes being sold on the spot market substantially all iron ore sales are reflected at final prices in the results for the period based on the best available
information at the period end
sales revenue is commonly subject to adjustment based on an inspection of the product by the customer in such cases sales revenue is initially recognised on a
provisional basis using the group’s best estimate of contained metal and adjusted subsequently
certain products are “provisionally priced” ie the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after
deliverytothecustomerthefinalpriceisbasedonthemarketpriceattherelevantquotationpointstipulatedinthecontract
as is customary in the industry revenue on provisionallypriced sales is recognised based on estimates of the fair value of the consideration receivable based on
relevant forward market prices at each reporting date provisionally priced metal is marked to market based on the forward selling price for the quotational period
stipulated in the contract for this purpose the selling price can be measured reliably for those products such as copper for which there exists an active and
freelytraded commodity market such as the london metals exchange and the value of product sold by the group is directly linked to the form in which it is traded
on that market
the marking to market of provisionallypriced sales contracts is recorded as an adjustment to sales revenue information on provisionallypriced sales contracts is
included in note 30
d currency translation
the functional currency for each entity in the group and for joint arrangements and associates is the currency of the primary economic environment inwhichthat
entity operates for many entities this is the currency of the country in which they are located transactions denominated in other currencies are converted to the
functional currency at the exchange rate ruling at the date of the transaction monetary assets and liabilities denominated in foreign currencies areretranslatedat
year end exchange rates the group’s accounting policies for derivative financial instruments and hedge accounting are explained in more detail in note 1p iii
the group’s financial statements are presented in us dollars as that presentation currency most reliably reflects the global business performance of the group as
a whole on consolidation income statement items for each entity are translated from the functional currency into us dollars at average rates of exchange where
the average is a reasonable approximation of rates prevailing on the transaction date balance sheet items are translated into us dollars at periodend exchange
rates
exchange differences arising on the translation of the net assets of entities with functional currencies other than the us dollar are recognised directly in the foreign
currency translation reserve these translation differences are shown in the statement of comprehensive income with the exception of translation adjustments
relating to rio tinto limited’s share capital which are shown in the statement of changes in equity
where an intragroup balance is in substance part of the group’s net investment in an entity exchange gains and losses on that balance are taken to the foreign
currency translation reserve
except as noted above or in note p below relating to derivative contracts all other exchange differences are charged or credited to the income statement in the
year in which they arise
e goodwill and intangible assets excluding exploration and evaluation expenditure notes 12 and 13
goodwill is not amortised it is tested annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment
investments in eaus including any goodwill are tested for impairment as a single asset when a trigger for impairment has been identified the group’s impairment
policy is explained in note 1i
purchased intangible assets are initially recorded at cost finitelife intangible assets are amortised over their useful economic lives on a straight line or units of
production basis as appropriate intangible assets that are deemed to have indefinite lives and intangible assets that are not yet ready for use are not amortised
they are reviewed annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment in accordance with accounting
policy note 1i
the group considers that intangible assets have indefinite lives when based on an analysis of all of the relevant factors there is no foreseeable limit to the period
over which the asset is expected to generate cash flows for the group the factors considered in making this judgment include the existence of contractual rights
for unlimited terms or evidence that renewal of the contractual rights without significant incremental cost can be expected for indefinite future periods in view of
the group’s investment intentions the life cycles of the products and processes that depend on the asset are also considered
f exploration and evaluation note 13
exploration and evaluation expenditure comprises costs that are directly attributable to
– researching and analysing existing exploration data
– conducting geological studies exploratory drilling and sampling
– examining and testing extraction and treatment methods andor
– compiling prefeasibility and feasibility studies
exploration expenditure relates to the initial search for deposits with economic potential expenditure on exploration activity is not capitalised
riotintocom 113
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
evaluation expenditure relates to a detailed assessment of deposits or other projects that have been identified as having economic potential capitalisation of
evaluation expenditure commences when there is a high degree of confidence that the group will determine that a project is commercially viable ie the project
will provide a satisfactory return relative to its perceived risks and therefore it is considered probable that future economic benefits will flow tothegroup
the carrying values of capitalised evaluation expenditure are reviewed for impairment twice a year by management in the case of undeveloped mining projects
projects for which the decision to mine has not yet been approved at the appropriate authorisation level within the group which have arisen through acquisition
the allocation of the purchase price consideration may result in undeveloped properties being recognised at an earlier stage of project evaluation compared with
organic projects the impairment review is based on a status report summarising the group’s intentions for development subsequent expenditure on acquired
undeveloped projects is only capitalised if it meets the high degree of confidence threshold discussed above
in some cases undeveloped projects are regarded as successors to orebodies smelters or refineries currently in production where this is the case it is intended
that these will be developed and go into production when the current source of ore is exhausted or to replace the output when existing smelters andor refineries
are closed
g property plant and equipment note 14
once an undeveloped mining project has been determined as commercially viable and approval to mine has been given expenditure other than that on land
buildings plant equipment and capital work in progress is capitalised under “mining properties and leases” together with any amount transferred from
“exploration and evaluation” ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined
evaluation costs may continue to be capitalised during the period between declaration of ore reserves and approval to mine as further work is undertaken in order
to refine the development case to maximise the project’s returns
costs of evaluation of a smelter or refinery prior to approval to develop are capitalised under “capital works in progress” provided that there is a high degree of
confidence that the project will be deemed to be commercially viable
costs which are necessarily incurred whilst commissioning new assets in the period before they are capable of operating in the manner intended by management
are capitalised development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future
economic benefit interest on borrowings related to construction or development projects is capitalised at the rate payable on projectspecific debt if applicable or
at the group’s cost of borrowing if not until the point when substantially all the activities that are necessary to make the asset ready for its intendeduseare
complete
property plant and equipment is stated at cost as defined in ias 16 less accumulated depreciation and accumulated impairment losses the cost of property
plant and equipment includes the estimated closedown and restoration costs associated with the asset
h deferred stripping note 14
in open pit mining operations overburden and other waste materials must be removed to access ore from which minerals can be extracted economically
the process of removing overburden and waste materials is referred to as stripping during the development of a mine or pit before production commences
stripping costs are capitalised as part of the cost of construction of the mine or pit and are subsequently amortised over the life of the mine or pit on a units of
production basis
in order for production phase stripping costs to qualify for capitalisation as a stripping activity asset three criteria must be met
– it must be probable that there will be an economic benefit in a future accounting period because the stripping activity has improved access to the orebody and
– it must be possible to identify the “component” of the orebody for which access has been improved and
– it must be possible to reliably measure the costs that relate to the stripping activity
a “component” is a specific section of the orebody that is made more accessible by the stripping activity it will typically be a subset of the larger orebody that is
distinguished by a separate useful economic life eg a pushback
production phase stripping can give rise to two benefits the extraction of ore in the current period and improved access to ore which will be extracted in future
periods when the cost of stripping which has a future benefit is not distinguishable from the cost of producing current inventories the stripping cost is allocated to
each of these activities based on a relevant production measure using a life of component strip ratio the ratio divides the tonnage of waste mined for the
component for the period either by the quantity of ore mined for the component or by the quantity of minerals contained in the ore mined for the componentin
some operations the quantity of ore is a more appropriate basis for allocating costs particularly where there are significant byproducts stripping costs for the
component are deferred to the extent that the current period ratio exceeds the life of component ratio the stripping activity asset is depreciated on a “units of
production” basis based on expected production of either ore or contained minerals over the life of the component unless another method is more appropriate
the life of component ratios are based on the ore reserves of the mine and for some mines other mineral resources and the annual mine plan they are a
function of the mine design and therefore changes to that design will generally result in changes to the ratios changes in other technical or economic parameters
that impact the ore reserves and for some mines other mineral resources may also have an impact on the life of component ratios even if they do not affect the
mine design changes to the ratios are accounted for prospectively
it may be the case that subsequent phases of stripping will access additional ore and that these subsequent phases are only possible after the first phase has
taken place where applicable the group considers this on a minebymine basis generally the only ore attributed to the stripping activity asset for the purposes
of calculating a life of component ratio and for the purposes of amortisation is the ore to be extracted from the originally identified component
where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning initial stripping costs are accounted for
separately by reference to the ore from each separate pit if however the pits are highly integrated for the purpose of mine planning the second and subsequent
pits are regarded as extensions of the first pit in accounting for stripping costs in such cases the initial stripping ie overburden and other waste removal of the
second and subsequent pits is considered to be production phase stripping
the group’s judgment as to whether multiple pit mines are considered separate or integrated operations depends on each mine’s specific circumstances
the following factors would point towards the initial stripping costs for the individual pits being accounted for separately
– if mining of the second and subsequent pits is conducted consecutively with that of the first pit rather than concurrently
– if separate investment decisions are made to develop each pit rather than a single investment decision being made at the outset
114 riotintocom – if the pits are operated as separate units in terms of mine planning and the sequencing of overburden removal and ore mining rather than as an integrated unit
– if expenditures for additional infrastructure to support the second and subsequent pits are relatively large
– if the pits extract ore from separate and distinct orebodies rather than from a single orebody
if the designs of the second and subsequent pits are significantly influenced by opportunities to optimise output from the several pits combined including the
cotreatment or blending of the output from the pits then this would point to treatment as an integrated operation for the purpose of accounting for initial
stripping costs
the relative importance of each of the above factors is considered in each case
deferred stripping costs are included in “mining properties and leases” within “property plant and equipment” or within “investments in equity accounted units”
as appropriate amortisation of deferred stripping costs is included in “depreciation on property plant and equipment” within “net operating costs” or in “share of
profit after tax of equity accounted units” as appropriate
i depreciation and impairment notes 13 and 14
depreciation of noncurrent assets
property plant and equipment is depreciated over its useful life or over the remaining life of the mine or smelter or refinery if that is shorter and there is no
reasonable alternative use for the asset
the useful lives of the major assets of a cashgenerating unit are often dependent on the life of the orebody to which they relate where this is the case the lives
of mining properties and their associated refineries concentrators and other longlived processing equipment are generally based on the expectedlifeofthe
orebody the life of the orebody in turn is estimated on the basis of the lifeofmine plan where the major assets of a cashgenerating unit are not dependent on
the life of a related orebody management applies judgment in estimating the remaining service potential of longlived assets factors affecting the remaining
service potential of smelters for example include smelter technology and electricity purchase contracts when power is not sourced from the company’s or in
some cases a local government’s electricity generating capacity
the useful lives and residual values for material assets and categories of assets are reviewed annually and changes reflected prospectively
depreciation commences when an asset is available for use the major categories of property plant and equipment are depreciated on a units of production
andor straightline basis as follows
units of production basis
for mining properties and leases and certain mining equipment consumption of the economic benefits of the asset is linked to production except as noted below
these assets are depreciated on a units of production basis
in applying the units of production method depreciation is normally calculated based on production in the period as a percentage of total expected production in
current and future periods based on ore reserves and for some mines other mineral resources other mineral resources may be included in depreciation
calculations in limited circumstances and where there is a high degree of confidence that they can be extracted economically this would be the case when the
other mineral resources do not yet have the status of ore reserves merely because the necessary detailed evaluation work has not yet been performed and the
responsible technical personnel agree that inclusion of a proportion of measured and indicated resources is appropriate based on historic reserve conversion rates
other mineral resources would usually only be included in unit of production calculations where there are very large areas of contiguous mineralisation for which
the economic viability is not sensitive to likely variations in grade as may be the case for certain iron ore bauxite and industrial minerals deposits the required
level of confidence is unlikely to exist for minerals that are typically found in lowgrade ore compared with the above such as copper or gold in these cases
specific areas of mineralisation have to be evaluated in considerable detail before their economic status can be predicted with confidence
where measured and indicated resources are used in the calculation of depreciation for infrastructure primarily rail and port which will benefit current and future
mines then the measured and indicated resources may relate to mines which are currently in production or to mines where there is a high degree of confidence
that they will be brought into production in the future the quantum of mineral resources is determined taking into account future capital costs as required by the
joint ore reserves committee jorc code the depreciation calculation however does not take into account future development costs for mines whicharenot
yet in production measured and indicated resources are currently incorporated into depreciation calculations in the group’s australian iron ore business
straightline basis
assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the
related mine are depreciated on a straightline basis
impairment chargesreversals of noncurrent assets
impairment charges and reversals are assessed at the level of cashgenerating units which in accordance with ias 36 “impairment of assets” are identified as the
smallest identifiable asset or group of assets that generate cash inflows which are largely independent of the cash inflows from other assets the existence of an
active market for intermediate products is also monitored and separate cashgenerating units are identified even if the majority of those products are further
processed internally and therefore the cash flows are not independent impairment of financial assets is discussed in note p
in some cases individual business units consist of several operations with independent cashgenerating streams which constitute separate cashgenerating units
goodwill acquired through business combinations is allocated to the cashgenerating unit or groups of cashgenerating units if that is the lowest level within the
group at which goodwill is monitored for internal management purposes that are expected to benefit from the related business combination all goodwill and
intangible assets that are not yet ready for use or have an indefinite life are tested annually for impairment as at 30 september regardless of whether there has
been an impairment trigger or more frequently if events or changes in circumstances indicate a potential impairment
property plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the carrying amount may not be
recoverable the group conducts an internal review of the asset values annually as at 30 september which is used as a source of information to assess for
indications of impairment or reversal of previously recognised impairment losses external factors such as changes in expected future prices costs and other
market factors are also monitored to assess for indications of impairment or reversal of previously recognised impairment losses if any such indication exists then
an impairment review is undertaken the recoverable amount is assessed by reference to the higher of value in use being the net present value of expected future
cash flows of the relevant cashgenerating unit in its current condition and fair value less costs of disposal fvlcd
riotintocom 115
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
when the recoverable amount of the cashgenerating unit is measured by reference to fvlcd this amount is further classified in accordance with the fair value
hierarchy for observable market data that is consistent with the unit of account for the cashgenerating unit being tested the group considers that the best
evidence of fvlcd is the value obtained from an active market or binding sale agreement and in this case the recoverable amount is classified in the fair value
hierarchy as level 1 when fvlcd is based on quoted prices for equity instruments but adjusted to reflect factors such as a lack of liquidity in the market the
recoverable amount is classified as level 2 in the fair value hierarchy no cashgenerating units are currently assessed for impairment by reference to a recoverable
amount based on fvlcd classified as level 2
where unobservable inputs are material to the measurement of the recoverable amount fvlcd is based on the best information available to reflect the amount
the group could receive for the cashgenerating unit in an orderly transaction between market participants at the measurement date this is often estimated using
discounted cash flow techniques and is classified as level 3 in the fair value hierarchy
where the recoverable amount is assessed using fvlcd based on discounted cash flow techniques the resulting estimates are based on detailed “lifeofmine”
andor long term production plans the latter may include brownfield expansions which have not yet been approved at the appropriate authorisation level in the
group
the cash flow forecasts for fvlcd purposes are based on management’s best estimates of expected future revenues and costs including the future cash costs of
production capital expenditure closure restoration and environmental costs for the purposes of determining fvlcd from a market participant’s perspective the
cash flows incorporate management’s price and cost assumptions in the short and medium term in the longer term operating margins are assumed to remain
constant where appropriate as it is considered unlikely that a market participant would prepare detailed forecasts over a longer term the cash flow forecasts may
include net cash flows expected to be realised from extraction processing and sale of material that does not currently qualify for inclusion in ore reserves such
nonreserve material is only included when there is a high degree of confidence in its economic extraction this expectation is usually based on preliminary drilling
and sampling of areas of mineralisation that are contiguous with existing ore reserves typically the additional evaluation required to achieve reserve status for
such material has not yet been done because this would involve incurring evaluation costs earlier than is required for the efficient planning and operation of the
mine
as noted above cost levels incorporated in the cash flow forecasts for fvlcd purposes are based on the current lifeofmine plan or longterm production plan for
the cashgenerating unit this differs from value in use which requires future cash flows to be estimated for the asset in its current condition and therefore does
not include future cash flows associated with improving or enhancing an asset’s performance anticipated enhancements to assets may be included in fvlcd
calculations and therefore generally result in a higher value
where the recoverable amount of a cashgenerating unit is dependent on the life of its associated orebody expected future cash flows reflect the current life of
mine or longterm production plans which are based on detailed research analysis and iterative modelling to optimise the level of return from investment output
and sequence of extraction the mine plan takes account of all relevant characteristics of the orebody including wastetoore ratios ore grades haul distances
chemical and metallurgical properties of the ore impacting on process recoveries and capacities of processing equipment that can be used the lifeofmine plan
andor long term production plans are therefore the basis for forecasting production output and production costs in each future year
forecast cash flows for ore reserve estimation for jorc purposes are generally based on rio tinto’s commodity price forecasts which assume shortterm market
prices will revert to the group’s assessment of the longterm price generally over a period of three to five years for most commodities these forecast commodity
prices are derived from a combination of analyses of the marginal costs of the producers and of the incentive price of these commodities these assessments
often differ from current price levels and are updated periodically the group does not believe that published medium and longterm forward prices provide a good
indication of future levels because they tend to be strongly influenced by spot prices the price forecasts used for ore reserve estimation are generally consistent
with those used for impairment testing unless management deems that in certain economic environments a market participant would not assign rio tinto’s view
on prices in which case management estimates the assumptions that a market participant would be expected to use
forecast future cash flows of a cashgenerating unit take into account the sales prices under existing sales contracts
the discount rates applied to the future cash flow forecasts represent an estimate of the rate the market would apply having regard to the time value of money
and the risks specific to the asset for which the future cash flow estimates have not been adjusted the group’s weighted average cost of capital is used as a
starting point for determining the discount rates with appropriate adjustments for the risk profile of the countries in which the individual cashgenerating units
operate for final feasibility studies and ore reserve estimation internal hurdle rates which are generally higher than the group’s weighted average cost of capital
are used
for operations with a functional currency other than the us dollar the impairment review is undertaken in the relevant functional currency in estimating fvlcd
internal forecasts for longterm exchange rates take into account spot exchange rates historical data and external forecasts and are linked to price assumptions
the great majority of the group’s sales are based on prices denominated in us dollars to the extent that the currencies of countries in which the group produces
commodities strengthen against the us dollar without commodity price offset cash flows and therefore net present values are reduced management considers
that over the long term there is a tendency for movements in commodity prices to compensate to some extent for movements in the value of the us dollar
particularly against the australian dollar and canadian dollar and vice versa however such compensating changes are not synchronised and do not fully offset
each other
ias 36 requires that value in use be based on exchange rates current at the time of the assessment
noncurrent assets excluding goodwill that have suffered impairment are reviewed whenever events or changes in circumstances indicate that the impairment
loss may no longer exist or may have decreased if appropriate an impairment reversal will be recognised the carrying amount of the cash generating unit after
reversal must be the lower of a the recoverable amount as calculated above and b the carrying amount that would have been determined net of amortisation
or depreciation had no impairment loss been recognised for the cashgenerating unit in prior periods
an onerous contract is defined under ias 37 “provisions contingent liabilities and contingent assets” as a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic benefits expected to be received under it however no provision is required provided that the related
assets which may be the wider cashgenerating unit of which the business unit forms part are not fully impaired
116 riotintocom j determination of ore reserve and mineral resource estimates
the group estimates its ore reserves and mineral resources based on information compiled by competent persons as defined in accordance with the australasian
code for reporting of exploration results mineral resources and ore reserves of december 2012 the “jorc code” which is produced by the australasianjoint
ore reserves committee
ore reserves and for certain mines other mineral resources determined in this way are used in the calculation of depreciation amortisation and impairment
charges and for forecasting the timing of the payment of closedown and restoration costs and the recovery of deferred tax assets the depreciation and
impairment policy above notes instances in which mineral resources are taken into account for accounting purposes in addition value may be attributed to
mineral resources in purchase price allocations undertaken for the purposes of business combination accounting
k closedown restoration and environmental obligations note 26
the group has provisions for closedown and restoration costs which include the dismantling and demolition of infrastructure the removal of residual materials
and the remediation of disturbed areas for mines and certain refineries and smelters these provisions are based on all regulatory requirements and any other
commitments made to stakeholders closure provisions are not made for those operations that have no known restrictions on their lives as the closure dates
cannot be reliably estimated this applies primarily to certain north american smelters which have water rights or power agreements with local governments
closedown and restoration costs are a normal consequence of mining or production and the majority of closedown and restoration expenditure is incurred in the
years following closure of the mine refinery or smelter although the ultimate cost to be incurred is uncertain the group’s businesses estimate their costs using
current restoration standards and techniques
closedown and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs based on the net
present value of the estimated future costs of restoration to be incurred during the life of the operation and post closure where appropriate the provision is
estimated using probability weighting of the different remediation and closure scenarios the obligation may occur during development or during theproduction
phase of a facility
provisions for closedown and restoration costs do not include any additional obligations which are expected to arise from future disturbance the costs are
estimated on the basis of a closure plan and are reviewed six monthly during the life of the operation to reflect known developments the estimates are subject to
formal review at regular intervals
the initial closedown and restoration provision is capitalised within “property plant and equipment” subsequent movements in the closedown and restoration
provisions for ongoing operations including those resulting from new disturbance related to expansions or other activities qualifying for capitalisation updated
cost estimates changes to the estimated lives of operations changes to the timing of closure activities and revisions to discount rates are also capitalised within
“property plant and equipment” these costs are then depreciated over the lives of the assets to which they relate changes in closure provisions relating to
closed operations are chargedcredited to ‘’net operating costs’ in the income statement
where rehabilitation is conducted systematically over the life of the operation rather than at the time of closure provision is made for the estimated outstanding
continuous rehabilitation work at each balance sheet date and the cost is charged to the income statement
the amortisation or “unwinding” of the discount applied in establishing the provisions is charged to the income statement in each accounting period
the amortisation of the discount is shown within “finance items” in the income statement
environmental costs result from environmental damage that was not a necessary consequence of operations and may include remediation compensationand
penalties provision is made for the estimated present value of such costs at the balance sheet date these costs are charged to “net operating costs” except for
the unwinding of the discount which is shown within “finance items”
remediation procedures may commence soon after the time the disturbance remediation process and estimated remediation costs become known but can
continue for many years depending on the nature of the disturbance and the remediation techniques used
l inventories note 16
inventories are valued at the lower of cost and net realisable value primarily on a weighted average cost basis average costs are calculated by reference to the
cost levels experienced in the relevant month together with those in opening inventory the cost of raw materials and consumable stores is the purchaseprice
the cost of partlyprocessed and saleable products is generally the cost of production including
– labour costs materials and contractor expenses which are directly attributable to the extraction and processing of ore and the production of alumina and
aluminium
– the depreciation of mining properties and leases and of property plant and equipment used in the extraction and processing of ore and the production of
alumina and aluminium and
– production overheads
work in progress includes ore stockpiles and other partly processed material stockpiles represent ore that has been extracted and is available for further
processing if there is significant uncertainty as to when the stockpiled ore will be processed the ore is expensed as mined if the ore will not be processed within
the 12 months after the balance sheet date it is included within noncurrent assets and net realisable value is calculated on a discounted cash flow basis
quantities of stockpiled ore are assessed primarily through surveys and assays
m taxation note 9 and note 17
current tax is the tax expected to be payable on the taxable income for the year calculated using rates that have been enacted or substantively enacted atthe
balance sheet date it includes adjustments for tax expected to be payable or recoverable in respect of previous periods where the amount of tax payable or
recoverable is uncertain rio tinto establishes provisions based on the group’s judgment of the probable amount of the liability or recovery
deferred tax is calculated in accordance with ias 12 the group provides for deferred tax in respect of fair value adjustments on acquisitions these adjustments
may relate to assets such as mining rights that in general are not eligible for income tax allowances provision for deferred tax is based on the difference between
the carrying value of the asset and its income tax base which may be usnil even when there is no income tax base the existence of a tax base for capital gains
tax purposes is not taken into account in determining the deferred tax provision for the assets unless they are classified as held for sale because it is expected
that the carrying amount will be recovered primarily through use of the assets and not from disposal
riotintocom 117
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
n postemployment benefits note 45
the group operates a number of defined benefit plans which provide lump sums pensions medical benefits and life insurance to retirees for postretirement
definedbenefitplansthedifferencebetweenthefairvalueofanyplanassets and the present value of the plan obligations is recognised as an asset or liability in
the balance sheet
the fair value of plan assets is the price that would be received to sell the assets in orderly transactions between market participants at the measurement date
where appropriate the recognition of assets may be restricted to the present value of any amounts the group expects to recover by way of refunds from theplan
or reductions in future contributions
the most significant assumptions used in accounting for pension plans are the discount rate the inflation assumption and the mortality assumptions
the discount rate is used to determine the net present value of the obligations the interest cost on the obligations and the interest income on plan assets
the discount rate used is the yield on highquality corporate bonds with maturities and terms that match those of the postretirement obligations as closely as
possible where there is no developed corporate bond market in a country the rate on government bonds is used the inflation assumption is used to project
increases in future benefit payments for those plans that have benefits linked to inflation the mortality assumption is used to project the future stream of benefit
payments which is then discounted to arrive at the net present value of the obligations
valuations of the obligations are carried out using the projected unit method which values benefits accrued at the valuation date with allowance where appropriate
for future increases to pay and pensions the values of the obligations are assessed in accordance with the advice of independent qualified actuaries
the current service cost any past service cost and the effect of any curtailment or settlements are recognised in the income statement the interest cost less
interest income on assets held in the plans is also charged to the income statement all amounts charged to the income statement in respect of these plansare
included within “net operating costs” or in “share of profit after tax of equity accounted units” as appropriate
actuarial gains and losses arising in the year are creditedcharged to the statement of comprehensive income and comprise the effects of changes in actuarial
assumptions and experience adjustments due to differences between the previous actuarial assumptions and what has actually occurred in particular the
difference between the interest income and the actual return on plan assets is recognised in the statement of comprehensive income
the group’s contributions to defined contribution plans are charged to the income statement in the period to which the contributions relate
o cash and cash equivalents
for the purpose of the balance sheet cash and cash equivalents comprise cash on hand deposits held on call with banks and shortterm highly liquid
investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value bank overdrafts are shown as
current liabilities in the balance sheet
for the purposes of the cash flow statement cash and cash equivalents are net of bank overdrafts that are repayable on demand
p financial instruments note 30
i financial assets
classification
the group classifies its financial assets in the following categories at fair value through profit or loss loans and receivables availableforsale and held to maturity
investments the classification depends on the purpose for which the financial assets were acquired the group’s policy with regard to financial risk management
is set out in note 30 generally the group does not acquire financial assets for the purpose of selling in the short term when the group enters into derivative
contracts these transactions are designed to reduce exposures related to assets and liabilities firm commitments or anticipated transactions
management determines the classification of financial assets at initial recognition
a financial assets at fair value through profit or loss
derivatives including embedded derivatives separated from the host contracts are included within financial assets at fair value through profit or loss unless they
are designated as effective hedging instruments assets in this category are classified as current assets if expected to be settled within 12 months otherwise they
are classified as noncurrent
b loans and receivables
loans and receivables comprise nonderivative financial assets with fixed or determinable payments that are not quoted in an active market trade receivables are
included within this category however trade receivables subject to provisional pricing are valued as explained in note 1c sales revenue
cheldtomaturity
heldtomaturity investments are nonderivative financial assets with fixed or determinable payments and fixed maturity that the group has the intention and
ability to hold to maturity and which do not qualify as loans and receivables assets in this category are classified as other investments and are classified as
current assets or noncurrent assets based on their maturity
d availableforsale financial assets
availableforsale financial assets are nonderivative financial assets that are either designated as availableforsale or not classified in any of the other categories
they are included in noncurrent assets unless the group intends to dispose of the assets within 12 months of the balance sheet date or the asset matures within
12 months
recognition and measurement
regular purchases and sales of financial assets are recognised on the tradedate being the date on which the group commits to purchase or sell the asset
financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the group has transferred
substantially all risks and rewards of ownership
availableforsale financial assets and financial assets at fair value through profit or loss are initially recognised at fair value with transaction costs expensed in the
income statement  and are subsequently carried at fair value loans and receivables and held to maturity financial assets are initially recognised at fair value plus
transactions costs and are subsequently carried at amortised cost using the effective interest method
118 riotintocom fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date where relevant market prices are available these are used to determine fair values adjusted where necessary for market liquidity bidoffer
spreads and credit considerations in other cases fair values are calculated using quotations from independent financial institutions or by using valuation
techniques consistent with general market practice applicable to the instrument
the fair values of cash shortterm borrowings and loans to joint ventures and associates approximate to their carrying values as a result of their short maturity or
because they carry floating rates of interest the fair values of the various derivative instruments used for hedging purposes are disclosed in note 30 movements
on the hedging reserve are disclosed in note 29
offsetting financial instruments
financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously
impairment of financial assets
the group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired if impairment is
identified for a financial asset carried at amortised cost the carrying amount of the asset is reduced through the use of an allowance account and the loss is
recognised in the income statement
in the case of equity securities classified as availableforsale an evaluation is made as to whether a decline in fair value is “significant” or “prolonged” based on an
analysis of indicators such as significant adverse changes in the technological market economic or legal environment in which the company invested in operates
if such evidence exists for availableforsale financial assets the cumulative loss measured as the difference between acquisition cost and the current fair value
less any impairment loss previously recognised in the income statement is removed from equity and recognised in the income statement
ii financial liabilities
borrowings and other financial liabilities including trade payables but excluding derivative liabilities are recognised initially at fair value net of transaction costs
incurred and are subsequently stated at amortised cost
any difference between the amounts originally received for borrowings and other financial liabilities net of transaction costs and the redemptionvalueis
recognisedintheincomestatementovertheperiodto maturity using the effective interest method
the fair values of medium and longterm borrowings are calculated as the present value of the estimated future cash flows using quoted prices in active markets
or an appropriate market based yield curve the carrying value of the borrowings is amortised cost
where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are
substantially modified such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the
difference in the respective carrying amounts is recognised in the income statement
iii derivative financial instruments and hedging activities
derivatives embedded in host contracts are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts
in some cases derivatives and embedded derivatives may be designated as hedges
derivatives are initially recognised at their fair value on the date the derivative contract is entered into and transaction costs are expensed in the income
statement they are subsequently remeasured to fair value at each balance sheet date gains or losses on derivatives which are not designated as hedges are
taken to the income statement the method of recognising the resulting gainorlossforderivativesdesignatedashedginginstrumentsdependsonthenature of
the item being hedged the group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or of firm commitments fair
value hedges or hedges of a particular risk associated with a recognised asset or liability or of a highly probable forecast transaction cash flow hedges
fair value hedges changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement together
with any changes in the fair value of the hedged asset or liability or firm commitment that is attributable to the hedged risk
when a fair value interest rate hedging instrument expires or is sold or when a fair value interest rate hedge no longer meets the criteria for hedge accounting the
fair value adjustments which have been made to the hedged item are amortised through the income statement over the remaining life of the hedged item or
written off immediately when the hedged item is derecognised
cash flow hedges the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income the gain or loss relating to the ineffective portion is recognised immediately in the income statement amounts accumulated inequityare
recycled in the income statement in the period when the hedged item affects profit or loss for example when the forecast sale that is being hedged takes place
when the forecast transaction that is being hedged results in the recognition of a nonfinancial asset  for example property plant and equipment the gains and
losses previously deferred in equity are transferred from equity and adjust the cost of the asset the gains and losses are recognised subsequently in the income
statement when the nonfinancial asset is amortised or sold
when a cash flow hedging instrument expires or is sold or when a cash flow hedge no longer meets the criteria for hedge accounting although the forecast
transaction is still expected to occur any cumulative gain or loss relating to the instrument which is held in equity at that time remains in equity and is recognised
intheincomestatementatthesametimeastheforecasttransactionwhenaforecast transaction is no longer expected to occur the cumulative gain or loss that
is held in equity is immediately recognised in the income statement
q sharebased payments note 44
the fair value of the group’s share plans is recognised as an expense over the expected vesting period with a corresponding entry to retained earnings for rio tinto
plc plans and to other reserves for rio tinto limited plans
the group uses fair values provided by independent actuaries calculated using either a latticebased option valuation model or a monte carlo simulation model
the fair value of the share plans is determined at the date of grant taking into account any marketbased vesting conditions attached to the award nonmarket
based vesting conditions eg earnings per share targets are taken into account in estimating the number of awards likely to vest the estimate of the number of
awards likely to vest is reviewed at each balance sheet date up to the vesting date at which point the estimate is adjusted to reflect the actual awards issued
no adjustment is made after the vesting date even if the awards are forfeited or not exercised
riotintocom 119
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
the terms of each plan are considered at the balance sheet date to determine whether they should be accounted for as equity or cash settled the group no
longer operates any plans as cashsettled however the performance share plan can at the discretion of the directors offer employees an equivalent amount in
cash this is not standard practice in some jurisdictions employees are granted cashsettled awards where equitysettled awards are prohibited by local laws and
regulations the value of these awards is immaterial
the group’s equitysettled share plans are settled either by the issue of shares by the relevant parent company the purchase of shares on market or the use of
shares previously acquired as part of a share buyback if the cost of shares acquired to satisfy the plans differs from the expense charged the difference is taken
toretainedearningsorotherreservesasappropriate
r share capital notes 27 and 28
ordinary shares are classified as equity incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction netoftaxfrom
the proceeds
where any group company purchases the group’s equity share capital treasury shares the consideration paid including any directly attributable incremental
costs net of income taxes is deducted from equity attributable to owners of rio tinto where such shares are subsequently reissued any consideration received
net of any directlyattributable incremental transaction costs and the related income tax effects is included in equity attributable to owners of rio tinto
s segment reporting notes 2 and 3
operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker codm the codm who is
responsible for allocating resources and assessing performance of the operating segments has been identified as rio tinto’s chief executive
critical accounting policies and estimates
iduallistedcompaniesreporting
as described in the “outline of dual listed companies structure and basis of financial statements” the consolidated financial statements of the rio tinto group
deal with the results assets and liabilities of both of the dual listed companies rio tinto plc and rio tinto limited and their subsidiaries rio tinto plc and
rio tinto limited are viewed as a single parent company with their respective shareholders being the shareholders in that single company
the 2014 annual report satisfies the obligations of rio tinto limited to prepare consolidated accounts under australian company law as amended by an order
issued by the australian securities and investments commission on 9 january 2015 the 2014 financial statements disclose the effect of the adjustments to the
group’s consolidated profitloss consolidated total comprehensive incomeloss and consolidated shareholders’ funds as prepared under ifrsasdefinedon
page 110 that would be required under the version of international financial reporting standards that is applicable in australia referred to as australian
accounting standards aas
the us dollar is the presentation currency used in these financial statements as it most reliably reflects the group’s global business performance
ii acquisitions note 37
the determination of the fair values of net identifiable assets acquired and of any goodwill involves significant judgment this is particularly the case when the
acquisition involves little or no cash for example when the group gains control of a company in stages or by the issuance of shares the allocation of fair value
between intangible assets and the tangible assets with which they are used is also judgmental the group engages thirdparty valuers to advise on thepurchase
price allocation for significant acquisitions
iii impairment review of asset carrying values notes 6 12 and 13
events or changes in circumstances can give rise to significant impairment charges or reversals of impairment
estimates in respect of the timing of project expansions and the cost to complete asset construction are critical to determining the recoverable amounts for
cashgenerating units
where the recoverable amounts of the group’s cashgenerating units are assessed by analyses of discounted cash flows the resulting valuations are also sensitive
to changes in estimates of longterm commodity prices production timing and recovery rates exchange rates operating costs reserve estimates and discount
rates
note 6 outlines the significant judgments and assumptions made in measuring the impairments recorded and notes 12 and 13 outline judgments in relationtothe
testing of cashgenerating units containing goodwill and indefinitelived intangible assets respectively
iv estimation of asset lives and determination of ore reserve and mineral resource estimates
intangible assets are considered to have indefinite lives when based on an analysis of all of the relevant factors there is no foreseeable limit to theperiodover
which the asset is expected to generate cash flows for the group the factors considered in making this judgment include the existence of contractual rights for
unlimited terms or evidence that renewal of the contractual rights without significant incremental cost can be expected for indefinite periods intothefuturein
view of the group’s investment intentions
rio tinto estimates its ore reserves and mineral resources based on information compiled by competent persons as defined in the jorc code see note 1j the
amounts presented under ifrs and aas are based on the ore reserves and in some cases mineral resources determined under the jorc code
the estimation of ore reserves and mineral resources requires judgment to interpret available geological data and then to select an appropriate mining method
and establish an extraction schedule it also requires assumptions about future commodity prices exchange rates production costs recovery rates and discount
rates and in some instances the renewal of mining licences there are many uncertainties in the estimation process and assumptions that are valid atthetimeof
estimation may change significantly when new information becomes available
new geological data as well as changes in assumptions may change ore reserve and mineral resource estimates and may ultimately result in their restatement
changes in ore reserves and in some cases mineral resources could have an impact on depreciation and amortisation rates the carrying values of intangible
assets and property plant and equipment deferred stripping calculations provisions for closedown and restoration costs and the recovery of deferred tax assets
v closedown restoration and environmental obligations note 26
provision is made for closedown restoration and environmental costs when the obligation occurs based on the net present value of estimated future costs with
where appropriate probability weighting of the different remediation and closure scenarios the ultimate cost of closedown and restoration is uncertain and
120 riotintocom management uses its judgment and experience to provide for these costs over the life of the operations cost estimates can vary in response to many factors
including changes to the relevant legal or localnational government ownership requirements and any other commitments made to stakeholders review of
remediation and relinquishment options the emergence of new restoration techniques the timing of the expenditures and the effects of inflation experience
gained at other mine or production sites is also a significant consideration although elements of the restoration and rehabilitation of each site are relatively unique
to the site and in some cases there may be relatively limited restoration and rehabilitation activity and historical precedent against which to benchmark cost
estimates where appropriate external experts support the cost estimation process
cost estimates are updated throughout the life of the operation and must comply with the group’s capital project framework once the operation is ten years from
expected closure the expected timing of expenditure included in cost estimates can also change for example in response to changes to expectations relating to
ore reserves and mineral resources production rates operating licences or economic conditions expenditure may occur before and after closure and can continue
for an extended period of time depending on the specific site requirements some expenditure can continue into perpetuity
cash flows must be discounted if this has a material effect the selection of appropriate sources on which to base the calculation of the riskfree discount rate used
for such obligations requires judgment
as a result of all of the above factors there could be significant adjustments to the provision for closedown restoration and environmental costs which would
affect future financial results increases and decreases in environmental obligations are charged or credited directly to the income statement increases and
decreases in closedown obligations for operating businesses are accounted for as indicated in note k above an increase in capitalised closedownand
restoration provisions would increase the unwind of the discount and depreciation charges in the income statement in future years and increase the carrying value
of property plant and equipment potentially impacting any future impairment charges or reversals
vi deferral of stripping costs note 14
stripping of waste materials takes place throughout the production phase of a surface mine or pit the identification of components within a mine and oflifeof
component strip ratios is dependent on an individual mine’s design changes to that design may introduce new components andor change the life of component
strip ratios changes in other technical or economic parameters that impact on ore reserves may also have an impact on the life of component strip ratiosevenif
they do not affect the mine’s design changes to the life of component strip ratios are accounted for prospectively
the group’s judgment as to whether multiple pit mines are considered separate or integrated operations determines whether initial stripping of a pit is deemed to
be preproduction or production phase stripping and therefore the amortisation base for those costs the judgment depends on each mine’s specific
circumstances and the analysis requires judgment another mining company could make a different judgment even where the fact pattern appears to be similar
vii recognition of deferred tax liabilities on mining rights recognised in acquisitions
deferred tax is provided in respect of fair value adjustments on acquisitions these adjustments may relate to assets such as mining rights that in general are not
eligible for income tax allowances provision for deferred tax is based on the difference between the carrying value of the asset and its income tax base which may
be usnil even where there is no income tax base the existence of a tax base for capital gains tax purposes is not taken into account in determining the deferred
tax liability for the assets unless they are classified as held for sale because it is expected that the carrying amount will be recovered primarily through use of the
assets and not from disposal for acquisitions after 1 january 2004 such a deferred tax liability on acquisition results in a consequential increase in the amounts
attributed to goodwill for acquisitions prior to 1 january 2004 such deferred tax was recognised in equity on transition to ifrs
viii capitalisation of exploration and evaluation costs and development costs prior to the decision to mineconstruct note 13
under the group’s accounting policy exploration expenditure is not capitalised evaluation expenditure is capitalised when there is a high degree of confidence
that the group will determine that a project is commercially viable and therefore it is considered probable that future economic benefits will flow to the group
a project’s commercial viability is determined based on whether it will provide a satisfactory return relative to its perceived risks once commercial viability has
been established the group will decide at the appropriate authorisationlevelietheriotintoinvestmentcommitteeandtheboardwhereappropriate whether
the project should proceed in determining whether to approve a mining project the investment committee reviews the ore reserves estimate together with
analyses of the net present value of the project and sensitivity analyses for the key assumptions
there are occasions when the group concludes that the asset recognition criteria are met at an earlier stage than approval to proceed in these cases evaluation
expenditure is capitalised if there is a high degree of confidence that the group will determine the project is commercially viable the group’s view is that a high
degree of confidence is greater than “more likely than not” that is greater than 50 per cent certainty and less than “virtually certain” that is less than 90 per cent
certainty determining whether there is a high degree of confidence that the group will determine that an evaluation project is commercially viable requires a
significant degree of judgment and assessment of all relevant factors such as the nature and objective of the project the project’s current stage project timeline
current estimates of the project’s net present value including sensitivity analyses for the key assumptions and the main risks of the project development
expenditure incurred prior to the decision to proceed is subject to the same criteria for capitalisation being a high degree of confidence that the group will
determine that a project is commercially viable
in accordance with ifrs 6 “exploration for and evaluation of mineral resources” the criteria for the capitalisation of evaluation costs are applied consistently from
period to period
subsequent recovery of the carrying value for evaluation costs depends on successful development or sale of the undeveloped project if a project does not prove
viable all irrecoverable costs associated with the project net of any related impairment provisions are charged to the income statement
ix identification of functional currencies
the functional currency for each subsidiary joint operation and equity accounted unit is the currency of the primary economic environment in which it operates
determination of functional currency involves significant judgment and other companies may make different judgments based on similar facts for many of
rio tinto’s businesses their functional currency is the currency of the country in which they operate the group reconsiders the functional currencyofits
businesses if there is a change in the underlying transactions events and conditions which determine their primary economic environment
the determination of functional currency affects the carrying value of noncurrent assets included in the balance sheet and as a consequence the amortisation of
those assets included in the income statement it also impacts exchange gains and losses included in the income statement and in equity
riotintocom 121
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
1 principal accounting policies continued
x estimation of obligations for postemployment costs note 45
the value of the group’s obligations for postretirement benefits is dependent on the amount of benefits to be paid out and is discounted to the balance sheet
date this amount will vary depending on the assumptions made about the future pay increases received by members of final pay plans the level of inflation for
those benefits that are subject to some form of inflation protection the number of individuals and how long individuals live in retirement most of the group’s
defined benefit pension plans are closed to new entrants and the majority of the obligations relate to former employees as a consequence the carrying value of
the group’s postretirement obligations is less sensitive to assumptions about future salary increases than it is to assumptions regarding future inflation the
assumption regarding future inflation is based on market yields on inflationlinked instruments where possible combined with consensus views on future inflation
and is derived using the same process at each reporting date changes to the assumption therefore reflect changes to the market and consensus views of future
inflation
the group reviews the actual mortality rates of retirees in its major pension plans on a regular basis and uses these rates to set its current mortality assumptions
it also allows for future improvements in mortality having regard to standard improvement scales in each country
the discount rate used to value postretirement obligations is based upon the yields on high quality corporate bonds in the relevant currency and whichhave
durations consistent with the nature of the obligations the discount rate will vary from one period to another in line with movements in corporate bondyieldsbut
at any given measurement date there is relatively little estimation uncertainty this rate is also used to calculate the interest cost on obligations and interest
income on plan assets
details of the key assumptions how they have moved since the previous balance sheet date and the sensitivity of the carrying value to changes in the
assumptions are set out in note 45
for 2014 the charge against income for postretirement benefits net of tax and noncontrolling interests was us418 million this charge included both pension
and postretirement healthcare benefits the charge is net of interest income of us475 million after tax and noncontrolling interests
the weighted average future increase in compensation levels was assumed to be 36 per cent in 2014 and will be 33 per cent for 2015 the average discount rate
used was 44 per cent in 2014 and will be 35 per cent in 2015 reflecting the net impact of changes in corporate bond yields in the currencies in which the group
has pension obligations
based on the known changes in assumptions noted above and other expected circumstances the expected impact of postretirement costs on the group’s net
earnings in 2015 would be us48 million more than in 2014 the actual charge may be impacted by other factors that cannot be predicted such as the effect of
changes in benefits number of employees and exchange rates
the table below sets out the potential change in the group’s 2014 net earnings after tax and noncontrolling interests that would result from hypothetical
changes to postretirement assumptions and estimates the sensitivities are viewed for each assumption in isolation although a change in one assumption is likely
to result in some offset elsewhere the figures in the table only show the impact on underlying and net earnings changing the assumptions would also have an
impact on the balance sheet and this is shown in note 45
us million
sensitivity of the group’s 2014 underlying and net earnings to changes in
discount rate
increase of 05 percentage points 47
decrease of 05 percentage points 43
inflation
increase of 05 percentage points 33
decrease of 05 percentage points 31
salary increases
increase of 05 percentage points 9
decrease of 05 percentage points 8
demographic – allowance for additional future mortality improvements
participants assumed to have the mortality rates of individuals who are one year older 18
participants assumed to have the mortality rates of individuals who are one year younger 18
xi recoverability of potential deferred tax assets note 17
the group has tax losses and other deductible temporary differences mainly in uk french canadian us and australian taxable entities that have the potential to
reduce tax payments in future years deferred tax assets have been recognised to the extent that their recovery is probable having regard to the projected future
taxable income of these taxable entities and after taking account of specific risk factors that affect the recovery of these assets
xii contingencies note 31
disclosure is made of material contingent liabilities unless the possibility of any loss arising is considered remote
xiii basis of consolidation notes 33 to 36
judgment is sometimes required to determine whether the group has control joint control or significant influence over an entity
122 riotintocom 2 operating segments
gross sales revenue
a
2014
usm
2013
usm
2012
usm
iron ore 23281 25994 24279
aluminium 12123 12463 12170
copper 6282 5916 6661
energy 4308 5454 6062
diamonds  minerals 4150 4193 4056
other operations 241 1761 3898
reportable segments total 50385 55781 57126
intersegment transactions 344 1182 1560
product group total 50041 54599 55566
items excluded from underlying earnings – 24 31
share of equity accounted units and adjustments for intersubsidiaryequity accounted units sales 2377 3404 4655
consolidated sales revenue per income statement 47664 51171 50942
depreciation and amortisation
b
iron ore 1953 1627 1485
aluminium 1180 1151 1287
copper 1051 962 794
energy 548 766 770
diamonds  minerals 484 513 421
other operations 34 67 214
reportable segments total 5250 5086 4971
other items 82 106 113
less depreciation and amortisation of equity accounted units 472 401 460
depreciation and amortisation per note 4 4860 4791 4624
underlying earnings
c
iron ore 8107 9858 9247
aluminium 1248 557 54
copper 912 821 1059
energy 210 33 309
diamonds  minerals 401 350 149
other operations 243 281 582
reportable segments total 10215 11338 10236
intersegment transactions – 4 8
other items 593 730 750
exploration and evaluation not attributed to product groups 156 145 97
net finance costs 161 242 112
underlying earnings 9305 10217 9269
items excluded from underlying earnings
d
2778 6552 12297
net earningsloss attributable to owners of rio tinto per income statement 6527 3665 3028
tax charge
iron ore 3698 5290 4273
aluminium 303 18 205
copper 170 236 67
energy 164 12 8
diamonds  minerals 224 177 84
other operations 132 227 235
reportable segments total 4099 5470 3858
other items 193 302 266
exploration and evaluation not attributed to product groups 34 23 26
net finance costs 396 77 81
3476 5068 3485
tax credit excluded from underlying earnings
d
423 2642 2896
tax charge per income statement 3053 2426 589
riotintocom 123
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
2 operating segments continued
capital expenditure
2014
usm
2013
usm
2012
usm
capital expenditure
iron ore 4211 6814 7152
aluminium 2021 2226 2755
copper 1958 2813 4455
energy 224 732 1877
diamonds  minerals 508 1009 1814
other operations 56 278 432
reportable segments total 8866 13872 18485
other items 416 145 161
less capital expenditure of equity accounted units 1032 1073 1071
capital expenditure per financial information by business units 7418 12944 17575
add proceeds from disposal of property plant and equipment 744 57 40
capital expenditure per cash flow statement 8162 13001 17615
rio tinto’s management structure is based on the principal product groups shown above together with the global functions that support the business the chief
executive of each product group reports to the chief executive of rio tinto the chief executive of rio tinto monitors the performance of each product group based
on a number of measures including capital expenditure and operating cash flows with underlying earnings being the key financial performance indicator finance
costs and net debt are managed on a group basis
generally business units are allocated to product groups based on their primary product the energy product group includes both coal and uranium businesses
the diamonds  minerals product group includes businesses with products such as borates salt and titanium dioxide feedstock together with diamond operations
and the simandou iron ore project which is the responsibility of the diamonds  minerals product group chief executive the copper group includes certain gold
operations in addition to copper
the financial information by business unit provided on page 178 of these financial statements provides additional voluntary disclosure which the group
considers useful to the users of the financial statements
a gross sales revenue
gross sales revenue includes the sales revenue of equity accounted units after adjusting for sales to subsidiaries of us2533 million 2013 us3757 million
2012 us5067 million which are not included in consolidated sales revenue consolidated sales revenue includes subsidiary sales of us156 million 2013
us353 million 2012 us412 million to equity accounted units which are not included in gross sales revenue
b depreciation and amortisation
product group depreciation and amortisation totals include 100 per cent of subsidiaries’ depreciation and amortisation and include rio tinto’s share of the
depreciation and amortisation of equity accounted units rio tinto’s share of the depreciation and amortisation charge of equity accounted units is deducted to
arrive at depreciation and amortisation excluding equity accounted units as shown in note 4 these figures exclude impairment charges and reversalswhichare
excluded from underlying earnings
c underlying earnings
underlying earnings is reported by rio tinto to provide greater understanding of the underlying business performance of its operations and to enhance
comparability of reporting periods
the measure of underlying earnings is used by the chief executive of rio tinto to assess the performance of the product groups underlying earnings and net
earnings both represent amounts net of tax attributable to owners of rio tinto the following items are excluded from net earnings in arriving at underlying
earnings each period irrespective of materiality
– net lossesgains on disposal and consolidation of interests in businesses
– impairment charges and reversals
– profitloss after tax from discontinued operations
– exchange and derivative gains and losses this exclusion includes exchange gainslosses on us dollar net debt and intragroup balances gainslosses on
currency and interest rate derivatives not qualifying for hedge accounting and gainslosses on commodity derivatives not qualifying for hedge accounting
in addition there is a final judgmental category which includes where applicable other credits and charges that individually or in aggregate if of a similar type are
of a nature or size to require exclusion in order to provide additional insight into underlying business performance
product group earnings include earnings of subsidiaries and equity accounted units stated before finance items but after the amortisation of discount
rio tinto’s share of the underlying earnings of equity accounted units amount to us626 million in 2014 2013 us710 million 2012 us1051 million this
amount is attributable as follows us622 million profit to the copper group and us4 million profit to other product groups 2013 us780 million profit
attributable to the copper product group and us70 million loss to other product groups 2012 us793 million profit attributable to the copper product group and
us258 million profit to other product groups these amounts are included in underlying earnings of the relevant product groups and include the underlying
earnings of the group’s tolling entities which process alumina tolling entities recharge the majority of their costs and generally have minimal earnings
the copper product group’s underlying earnings in 2013 included us131 million impairment after tax in relation to the group’s investment in northerndynasty
minerals ltd following a strategic review of this shareholding by the group
the energy product group’s underlying earnings in 2012 included us258 million profit after tax in relation to the divestments of equity interest in extract
resources and kalahari minerals
124 riotintocom d reconciliation of net earningslosses to underlying earnings
exclusions from underlying earnings
pre
tax
j
2014
usm
taxation
2014
usm
non
controlling
interests
2014
usm
net
amount
2014
usm
net
amount
2013
usm
net
amount
2012
usm
impairment charges net of reversals note 6 473 335 – 138 3428 14360
net lossesgains on disposal and consolidation of interests in businesses
e
563 203 11 349 847 827
exchange and derivative lossesgains
– exchange lossesgains on us dollar net debt and intragroup balances 1997 164 25 1858 2929 425
– lossesgains on currency and interest rate derivatives not qualifying for
hedge accounting 39 14 3 22 259
– gains on commodity derivatives not qualifying for hedge accounting 15 15 – 30 196 66
writeoffrecognition of deferred tax asset following the mrrt repeal – 401 39 362 – 1130
gain on disposal of the group’s st james’s square properties 341 15 – 356 ––
simandou ifrs 2 charge
f
230 – 114 116 ––
restructuring costs including global headcount reductions 123 37 4 82 367 77
kennecott utah copper
g
–– – – 283 –
clermontblair athol
h
–– – – 173 –
deferred tax asset writeoff –– – – 114 134
other exclusions
i
263 41 15 237 303 233
total excluded from underlying earnings 3332 423 131 2778 6552 12297
net earningsloss 9552 3053 28 6527 3665 3028
underlying earnings 12884 3476 103 9305 10217 9269
e pretax losses of us563 million arose mainly from further adjustments in respect of contractual obligations for product sales and delivery which remain with the group following
sale of the group’s interest in the clermont mine on 29 may 2014 the disposal of the group’s interest in rio tinto mozambique on 7 october 2014 and indemnities provided in
respect of prior disposals
net gains on disposal and consolidation of interests in businesses during 2013 mainly related to us590 million from the group’s divestment of its remaining interest in
constellium formerly alcan engineering products and us388 million from the disposal of interest in the northparkes mine
f a pretax charge of us230 million before noncontrolling interests calculated in accordance with ifrs 2 “sharebased payment” which reflects the discount to an estimate of fair
value at which shares are transferrable to the government of guinea under the investment framework ratified on 26 may 2014
g on 10 april 2013 kennecott utah copper’s bingham canyon mine experienced a slide along a geological fault line of its northeastern wall charges relating to the slide which
have been excluded from underlying earnings primarily comprise the writeoff 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
h adjustments in relation to clermont and blair athol arose in 2013 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
i other credits and charges that individually or in aggregate if of similar type are of a nature or size to require exclusion in order to provide additional insight into underlying
business performance in 2014 other exclusions include adjustments relating to the five year community support package for nhulunbuy area and community following the gove
refinery curtailment in 2013 other exclusions included adjustments relating to inventory sold by richards bay minerals during the period which had been recognised at fair value
on initial consolidation in 2012
j exclusions from underlying earnings relating to equity accounted units after tax are included in the column “pretax”
3 operating segments – additional information
gross sales revenue by destination
a
2014

2013

2012

2014
usm
2013
usm
2012
usm
china 382 354 323 19101 19331 17948
japan 154 161 158 7719 8770 8787
other asia 158 161 161 7913 8781 8933
usa 129 131 127 6439 7142 7085
europe excluding uk 88 102 115 4407 5552 6380
canada 28 23 33 1421 1276 1823
australia 22 20 26 1114 1114 1420
uk 10 11 12 481 617 678
other 29 37 45 1446 1992 2543
total 1000 1000 1000 50041 54575 55597
share of equity accounted units sales and intersubsidiary equity accounted
units sales and items excluded from underlying earnings 2377 3404 4655
consolidated sales revenue 47664 51171 50942
a gross sales revenue by geographical destination is based on the ultimate country of destination of the product if known if the eventual destination of the product sold through
traders is not known then revenue is allocated to the location of the product at the time when the risks and rewards of ownership are transferred rio tinto is domiciled in both the
uk and australia
riotintocom 125
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
3 operating segments – additional information continued
gross sales revenue by product
gross sales revenues of the group are derived from the following products sold to external customers
2014
usm
2013
usm
2012
usm
iron ore 23178 26235 24756
aluminium 11667 12059 12535
copper 4815 4766 4749
coal 3685 4557 5060
industrial minerals 3238 3330 3460
diamonds 901 859 754
gold 1007 402 614
other 1550 2367 3669
total 50041 54575 55597
share of equity accounted units sales and intersubsidiary equity accounted units sales and items excluded from
underlying earnings 2377 3404 4655
consolidated sales revenue 47664 51171 50942
noncurrent assets other than excluded items
the total of noncurrent assets other than items excluded is shown by location below this is allocated based on the location of the business units holding the
assets
noncurrent assets other than excluded items
b
2014
usm
2013
usm
australia 38162 38100
canada 17065 18567
mongolia 7842 8315
us 5163 4739
africa 5838 5486
south america 3552 3146
uk 236 1246
indonesia 1116 968
france 491 602
europe excluding france and the uk 460 524
other countries 1417 782
81342 82475
noncurrent assets excluded from analysis above
deferred tax assets 3540 3555
derivatives and other financial assets excluding tax recoverable 722 899
loans to equity accounted units
c
228 277
tax recoverable 70 83
accounts receivable 800 1454
total noncurrent assets per balance sheet 86702 88743
b allocation of noncurrent assets by country is based on the location of the business units holding the assets and includes investments in equity accounted units totalling
us4640 million 2013 us3681 million which represents the group’s share of net assets excluding quasi equity loans shown separately within “loans to equity accounted
units” above
c loans to equity accounted units comprise quasi equity loans of us228 million 2013 us276 million included in “investments in equity accounted units” on the face of the
balance sheet and nonquasi equity loans of usnil 2013 us1 million shown within “other financial assets”
126 riotintocom 4 net operating costs
note
2014
usm
2013
usm
2012
usm
raw materials consumables repairs and maintenance 11044 11164 13056
amortisation of intangible assets 13 237 255 310
depreciation of property plant and equipment 14 4623 4536 4314
employment costs 5 6659 7568 8671
shipping and other freight costs 3370 3513 3524
decrease in finished goods and work in progress 1284 199 100
royalties 2516 2883 2374
amounts charged by equity accounted units
a
1554 1728 2154
net foreign exchange lossesgains 34 71 2
other external costs 3074 4025 3027
provisions including exchange differences on provisions 26 1138 1449 886
research and development 112 231 246
costs included above qualifying for capitalisation 738 582 544
other operating income 929 794 586
net operating costs excluding items shown separately 33910 36104 37534
a amounts charged by equity accounted units relate to toll processing and also include purchases from equity accounted units of bauxite and aluminium which are then processed
by the product group or sold to third parties generally purchases are in proportion to the group’s share of the equity accounted unit but in 2014 us463 million
2013 us529 million 2012 us690 million related to purchases of the other investor’s share of production
information on auditors’ remuneration is included in note 39
5 employment costs
note
2014
usm
2013
usm
2012
usm
total employment costs
– wages and salaries 5878 7181 8382
– social security costs 467 421 156
– net post retirement charge 45 590 805 823
– share option charge 44 152 142 240
7087 8549 9601
less charged within provisions 428 981 930
employment costs 4 6659 7568 8671
riotintocom 127
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
6 impairment charges and reversals
pretax
2014
usm
taxation
2014
usm
non
controlling
interests
2014
usm
net
amount
2014
usm
pretax
amount
2013
usm
pretax
amount
2012
usm
aluminium – kitimat 1092 292 – 800 950 613
aluminium – pacific aluminium 1224 175 – 1049 – 1382
aluminium – other 46 6 – 40 847 2751
aluminium – goodwill –– – – – 7468
copper – molybdenum autoclave process 559 212 – 347 ––
copper – oyu tolgoi –– – – 4716 –
copper – southgobi –– – – 269 –
energy–riotintocoalmozambique –– – – 497 3269
diamonds –– – – – 659
other –– – – 252 85
total impairment charge net of reversals 473 335 – 138 7531 16227
allocated as
goodwill note 12 – 1149 8009
intangible assets note 13 – 1287 1817
property plant and equipment note 14 1034 4882 4686
investment in equity accounted units 589 216 1526
other assets 28 3 189
total impairment charge net of reversals 473 7531 16227
comprising
impairment charges net of reversals of consolidated balances 1062 7315 14701
impairment reversalscharges of investments in equity accounted
units pretax 841 230 2217
total impairment charge net of reversals in the financial information by
business unit page 179 221 7545 16918
taxation including related to eaus 83 1561 2536
noncontrolling interests – 2556 22
total impairment net of reversals in the income statement 138 3428 14360
aluminium
kitimat canada
during the first half of 2014 further revisions to future capital required to complete the modernisation project at kitimat in british columbia and related impacts
on the project led to a reduction in the recoverable value of the kitimat cashgenerating unit additional capital of us15 billion was approved by the board in
august 2014 taking the total approved capital cost of the project to us48 billion
the recoverable amount for the kitimat cashgenerating unit at 30 june 2014 was determined to be us2184 million assessed by reference to a fair value less
cost of disposal fvlcd model in line with the accounting policy set out in note 1i the reduction in the recoverable amount resulted in a pretax impairment
charge of us1092 million to property plant and equipment the recoverable amount is classified as level 3 under the fair value hierarchy in arriving at fvlcd
posttax cash flows expressed in real terms were estimated over the useful economic life of the modernised smelter which is the principal asset of the
cashgenerating unit and discounted using a posttax real discount rate of 73 per cent 2013 73 per cent
first production from the kitimat modernisation project is expected during the first half of 2015 the most critical assumption for the fvlcd calculation is the
forecast cost to complete the project which is unchanged since the half year other key assumptions to which the calculation of fvlcd for kitimat is sensitive are
the aluminium sales price aluminium price plus regional and product premiums discount rates the canadian dollar to us dollar exchange rate and
operating cost assumptions the longterm aluminium price for impairment testing purposes was unchanged at 30 june 2014 in real terms from the prior year
2013 decrease of 65 per cent marginally above the midpoint of the range published for 2018 by market commentators of us1993 and us2469 per tonne
with an average of us2246 per tonne no subsequent impairment indicators have been identified in the second half of 2014 in relation to the kitimat
modernisation project
in 2013 the annual impairment review of the group’s aluminium cashgenerating units with indefinitelived intangible assets resulted in a pretax impairment
charge of us950 million in the kitimat cashgenerating unit the indefinitelived intangible assets relating to water rights at kitimat were fully impaired following
the allocation of this impairment loss
pacific aluminium australia and new zealand
the annual review of asset values at 30 september 2014 of the pacific aluminium cashgenerating unit provides evidence that the impairment losses primarily
recorded in respect of tomago bell bay gladstone power station and boyne smelters in 2011 and 2012 have reversed as a result of significant cost
improvements and high regional and product premiums there has also been a regulatory change in australia with carbon tax legislation being repealed on 17 july
2014 for a period of five years with effect from 1 july 2014
128 riotintocom a pretax impairment reversal of us635 million has been recorded against the property plant and equipment of tomago bell bay and gladstone power station
and a posttax impairment reversal of us589 million relating to boyne smelters has been recorded against investments in equity accounted units the
recoverable amount of these assets has been determined on a fvlcd basis classified as level 3 in the fair value hierarchy modelled with cash flows expressed in
real terms and discounted using a posttax real discount rate of 72 per cent the recoverable amount of the assets is greater than the amount at which these
assets would have been carried net of depreciation had no impairment loss been recognised in prior periods and therefore the impairment reversal is based on
the latter amount
the tiwai point smelter in new zealand also part of the pacific aluminium cashgenerating unit is currently profitable as a result of high regional and product
premiums and operational cost improvements however operational uncertainties indicate that the impairment losses previously recognised are yet to reverse
aluminium other and 2012 impairments
in 2014 a pretax impairment loss of us46 million was recorded in relation to other aluminium businesses
in 2013 a pretax impairment loss of us847 million was recorded in the group’s aluminium business relating to the full writeoff of property plant and
equipment at the gove alumina refinery following the decision to curtail operations and at the shawinigan aluminium smelter following the decision to close
the plant
in 2012 the group’s aluminium cashgenerating units were tested for impairment in aggregate as the goodwill was allocated and monitored at the segmentlevel
this goodwill was fully written off in 2012 and the remaining loss allocated to specific cashgenerating units including kitimat and pacific aluminium the 2012
impairment testing of the group’s aluminium business resulted in a pretax impairment charge of us7468 million to goodwill a pretax impairment charge of
us229 million to intangible assets a pretax impairment charge of us3944 million to property plant and equipment a posttax impairment charge of
us379 million to investments in equity accounted units and a pretax adjustment of us194 million to other assets and liabilities
copper
molybdenum autoclave process us
a review of the investment case for the molybdenum autoclave process project in utah us has concluded that the project which has been on care and
maintenance since early 2013 will be terminated the recoverable amount has been determined based on the anticipated net disposal proceeds as a result a
pretax impairment charge of us559 million has been recorded against property plant and equipment
oyu tolgoi mongolia
the annual review of cashgenerating units identified indicators that an impairment loss may have occurred at the oyu tolgoi cashgenerating unit primarily as a
result of delays in developing the underground mine the recoverable amount for oyu tolgoi was determined by reference to a fvlcd model and exceeded the
us82 billion carrying value of the cashgenerating unit at 30 september 2014 no further impairment indicators were identified subsequent to the annual testing
date as such no impairment charge has been recognised in the income statement 2013 pretax impairment charge of us4716 million
the recoverable amount of the oyu tolgoi cashgenerating unit is classified as level 3 under the fair value hierarchy in arriving at fvlcd posttax cash flows
expressed in real terms have been estimated until the end of the life of mine plan and discounted using an asset specific posttax real discount rate of 83 per cent
2013 87 per cent
the assumption subject to the most estimation uncertainty for the fvlcd calculation is the timing of the underground project if this is further delayed it would
have an adverse impact upon the recoverable amount at the testing date due to the delay in commencing full underground production partially offset by delaying
project spend to illustrate this sensitivity the recoverable amount would be reduced by us05 billion 2013 us08 billion if the timing of first drawbell ore were
delayed by 12 months compared with the forecast timing of related cash flows in rio tinto’s fvlcd model as of 30 september 2014 the recoverable amount in
this illustration would continue to exceed the carrying value of the cashgenerating unit the yearonyear decrease in sensitivity is primarily theresultofmine
plan optimisation which has been undertaken while construction of the underground has been delayed
other key assumptions to which the calculation of fvlcd for oyu tolgoi is most sensitive are longterm copper prices discount rates and operating costs other
assumptions include the longterm gold price and mongolian tugrik and chinese yuan exchange rates against the us dollar future selling prices and operating
costs have been estimated in line with the policy set out in note 1i
southgobi mongolia
the expansion and undeveloped properties in southgobi were recognised in accordance with the requirement in ifrs as defined in note 1 to fair value assets on
first consolidation and were therefore recorded as an accounting uplift when rio tinto obtained control of turquoise hill resources ltd on 24 january 2012 these
assets were not amortised and were fully writtenoff as a result of the 2013 impairment testing
energy
rio tinto coal mozambique
as described in note 37 the sale of rio tinto coal mozambique was completed during 2014 in previous years the annual review of carrying values resulted in
impairment losses based on recoverable amounts assessed by reference to fvlcd models in line with the accounting policy set out in note 1i
in 2013 a posttax impairment loss of us216 million 2012 us1147 million was allocated to the benga cashgenerating unit which was included in
investments in equity accounted units and a pretax impairment loss of us259 million 2012 us1581 million was allocated to the zambeze cashgenerating
unit intangible assets and property plant and equipment of us22 million 2012 no impairment charge the impairment loss recorded in 2012 also included the
full writeoff of goodwill of us541 million which was monitored and tested at the business unit level
riotintocom 129
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
7 share of profit after tax of equity accounted units
2014
usm
2013
usm
2012
usm
sales revenue rio tinto share
a
2852 4113 5498
operating costs 1804 2871 3779
profit before finance items and taxation 1048 1242 1719
finance items 49 97 68
share of profit after tax of equity accounted units 30 31 47
profit before taxation 1029 1176 1698
taxation 404 478 642
profit for the year rio tinto share 625 698 1056
a sales revenue of equity accounted units excludes charges by equity accounted units to group subsidiaries
additional information relating to the group’s interests in joint ventures and associates is given in notes 35 and 36
8 finance income and finance costs
note
2014
usm
2013
usm
2012
usm
finance income from equity accounted units rio tinto share 10 14 14
other finance income including bank deposits and other financial assets 54 68 102
total finance income 64 82 116
interest payable and similar charges
a
1119 1234 1059
amounts capitalised 14 470 727 766
total finance costs 649 507 293
a interest payable and similar charges relate to interest on bank loans and other borrowings this includes a fair value gain on interest rate swaps designated as fair value hedges of
us199 million 2013 us266 million loss 2012 us25 million loss and a fair value loss on bonds and notes attributable to interest rate risk of us200 million 2013
us257 million gain 2012 us13 million loss
9 taxation
note
2014
usm
2013
usm
2012
usm
taxation charge
 current 3402 4102 3887
 deferred 17 349 1676 3298
3053 2426 589
prima facie tax reconciliation note
2014
usm
2013
usm
2012
usm
profitloss before taxation 9552 3505 2431
deduct share of profit after tax of equity accounted units 625 698 1056
deductadd impairment reversalimpairment after tax of investments in equity accounted units
a
589 216 1526
parent companies’ subsidiaries’ and joint operations profitloss before tax 8338 3023 1961
prima facie tax payable at uk rate of 21 2013 23 2012 24 1751 695 471
higher rate of taxation on australian earnings 1038 1411 838
impact of items excluded in arriving at underlying earnings
impairment charges net of reversals 112 135 1683
gains and losses on disposal and consolidation of businesses 85 199 185
foreign exchange on excluded finance items 231 77 44
impact of tax law changes on recognition of deferred tax assets
b
401 – 1205
other exclusions 35 7 157
impact of changes in tax rates and laws 11 12 5
other tax rates applicable outside the uk and australia 5 63 74
resource depletion and other depreciation allowances 121 103 121
research development and other investment allowances 34 49 57
recognition of previously unrecognised deferred tax assets 106 – 84
unrecognised current year operating losses 73 339 200
other items
c
58 178 43
total taxation charge
d
3053 2426 589
a impairment reversalsimpairment of investments in equity accounted units is net of a tax charge of us252 million for the year ended 31 december 2014 31 december 2013 tax
credit of us14 million 31 december 2012 tax credit of us691 million
130 riotintocom b the remaining minerals resource rent tax mrrt starting base deferred tax asset was derecognised on repeal of the tax in australia effective 30 september 2014
c other items include various adjustments to provisions for taxation in prior periods
d this tax reconciliation relates to the group’s parent companies subsidiaries and joint operations the group’s share of profit of equity accounted units is net of tax charges of
us404 million 31 december 2013 us478 million 31 december 2012 us642 million
2014
total
usm
2013
total
usm
2012
total
usm
tax on exchange adjustments 3 17 1
fair value movements
– cash flow hedge fair value lossesgains 2 34 26
– cash flow hedge gainslosses transferred to the income statement – 19 50
– losses on revaluation of available for sale securities 1 26
– lossesgains on revaluation of available for sale securities transferred to the income statement 1 20 1
currency translation reclassified – ––
tax creditcharge on actuarial lossesgains on post retirement benefit plans 215 641 83
other 8 6 8
tax relating to components of other comprehensive lossincome for the year
a
206 697 57
a this comprises deferred tax credit of us205 million 2013 charge of us697 million 2012 credit of us54 million and current tax credit of us1 million 2013 usnil 2012
credit of us3 million plus share of tax on other comprehensive income of equity accounted units shown separately see note 17
10 earningsloss per ordinary share
2014
earnings
usm
2014
weighted
average
number of
shares
millions
2014
per share
amount
cents
2013
earnings
usm
2013
weighted
average
number of
shares
millions
2013
per share
amount
cents
basic earnings per share attributable to ordinary shareholders of
rio tinto – continuing operations
a
6527 18484 3531 3665 18473 1984
diluted earnings per share attributable to ordinary shareholders of rio tinto
– continuing operations
b
6527 18587 3512 3665 18577 1973
2012
loss
usm
2012
weighted
average
number of
shares
millions
2012
per share
amount
cents
basic loss per share attributable to ordinary shareholders of rio tinto – continuing operations 3021 18491 1634
basic loss per share attributable to ordinary shareholders of rio tinto – discontinued operations 7 18491 04
total basic loss per share – profit for the year
a
3028 18491 1638
a the weighted average number of shares is calculated as the average number of rio tinto plc shares outstanding not held as treasury shares of 14130 million 2013
14116 million 2012 14134 million plus the average number of rio tinto limited shares outstanding of 4354 million 2013 4357 million 2012 4358 million no rio tinto
limited shares were held by rio tinto plc in any of the periods presented
b for the purposes of calculating diluted earnings per share the effect of dilutive securities of 103 million shares 2013 104 million shares is added to the weighted average
number of shares described in a above this effect is calculated under the treasury stock method the group’s only potential dilutive ordinary shares are share options for which
terms and conditions are described in note 44
in accordance with ias 33 “earnings per share” the effects of antidilutive potential have not been included when calculating diluted loss per share for the year
ended 31 december 2012 as a result the dilutive loss per share attributable to ordinary shareholders of rio tinto is the same as the basic loss per share
attributable to ordinary shareholders of rio tinto
riotintocom 131
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
11 dividends
2014
usm
2013
usm
2012
usm
rio tinto plc previous year final dividend paid 1533 1311 1295
rio tinto plc interim dividend paid 1299 1213 1054
rio tinto limited previous year final dividend paid 473 406 380
rio tinto limited interim dividend paid 405 392 309
dividends paid during the year 3710 3322 3038
dividends per share paid during the year 2045c 1780c 1635c
dividends per share proposed in the announcement of the results for the year 1190c 1085c 945c
dividends
per share
2014
dividends
per share
2013
dividends
per share
2012
riotintoplcpreviousyearfinalpence 6582p 6034p 5733p
rio tinto plc interim pence 5690p 5428p 4643p
rio tinto limited previous year final – fully franked at 30 australian cents 12014c 9167c 8420c
rio tinto limited interim – fully franked at 30 australian cents 10309c 9300c 6851c
number of
shares
2014
millions
number of
shares
2013
millions
number of
shares
2012
millions
riotintoplcpreviousyearfinal 14132 14119 14176
rio tinto plc interim 14138 14125 14109
rio tinto limited previous year final 4356 4358 4358
rio tinto limited interim 4357 4355 4358
the dividends paid in 2014 are based on the following us cents per share amounts 2013 final – 1085 cents 2014 interim – 960 cents 2013 dividends paid 2012
final – 945 cents 2013 interim – 835 cents 2012 dividends paid 2011 final – 910 cents 2012 interim – 725 cents
the number of shares on which rio tinto plc dividends are based excludes those held as treasury shares and those held by employee share trusts which waived
the right to dividends employee share trusts waived dividends on 207766 rio tinto plc ordinary shares for the 2013 final dividend and on 90304 rio tinto plc
ordinary shares for the 2014 interim dividend 2013 150361 rio tinto plc ordinary shares for the 2012 final dividend and 124636 rio tinto plc ordinary shares for
the 2013 interim dividend 2012 248955 rio tinto plc ordinary shares for the 2011 final dividend and 153119 rio tinto plc ordinary shares for the 2012interim
dividend in 2014 2013 and 2012 no rio tinto limited shares were held by rio tinto plc
the number of shares on which rio tinto limited dividends are based excludes those held by shareholders who have waived the rights to dividends employee
share trusts waived dividends on 183981 rio tinto limited shares for the 2013 final dividend and on 24046 rio tinto limited shares for the 2014 interim dividend
2013 there were no applicable waivers in respect of rio tinto limited shares for the 2012 final dividend dividend waivers applied to 222439 rio tinto limited
shares for the 2013 interim dividend 2012 there were no applicable dividend waivers in respect of rio tinto limited shares for the 2011 final dividend and 2012
interim dividend
in addition the directors of rio tinto announced a final dividend of 1190 cents per share on 12 february 2015 this is expected to result in payments of
us2202 million rio tinto plc us1683 million rio tinto limited us519 million the dividends will be paid on 9 april 2015 to rio tinto plc and rio tinto
limited shareholders on the register at the close of business on 6 march 2015
the proposed rio tinto limited dividends will be franked out of existing franking credits or out of franking credits arising from the payment of income tax during
2015
the approximate amount of the rio tinto limited consolidated tax group’s retained profits and reserves that could be distributed as dividends and franked out of
credits that arose from net payments of income tax in respect of periods up to 31 december 2014 after deducting franking credits expected to be utilised on the
2014 final dividend declared is us18290 million
132 riotintocom 12 goodwill
2014
usm
2013
usm
net book value
at 1 january 1349 2774
adjustment on currency translation 121 253
company no longer consolidated – 23
impairment charges
a
– 1149
at 31 december 1228 1349
–cost 20122 22678
– accumulated impairment 18894 21329
at 1 january
–cost 22678 24451
– accumulated impairment 21329 21677
at 31 december goodwill has been allocated as follows
2014
usm
2013
usm
net book value
richards bay minerals 591 656
pilbara 409 445
other 228 248
1228 1349
a during 2013 the goodwill impairment charge of us1149 million represented the full impairment of goodwill allocated to oyu tolgoi refer to note 6 for further details
impairment tests for goodwill
richards bay minerals
the group consolidated richards bay minerals on 3 september 2012 goodwill arose in accordance with the requirement in ifrs as defined in note 1 to recognise
a deferred tax asset or liability on the difference between the fair value of newly consolidated assets and liabilities and their tax base and is retranslated at each
period end for changes in the south african rand the recognition of richards bay minerals’ identifiable assets and liabilities in the balance sheet was based on fair
values at the acquisition date determined with the assistance of an independent third party valuer
richards bay minerals’ annual impairment review resulted in no impairment charge for 2014 2013 no impairment charge the recoverable amount has been
assessed by reference to fvlcd in line with the policy set out in note 1i and classified as level 3 under the fair value hierarchy fvlcd was determinedby
estimating cash flows until the end of the life of mine plan including anticipated expansions in arriving at fvlcd a posttax discount rate of 92 per cent 2013
73 per cent has been applied to the posttax cash flows expressed in real terms
the key assumptions to which the calculation of fvlcd for richards bay minerals is most sensitive and the corresponding decrease in fvlcd are set out below
us million
5 decrease in the titanium slag price 174
1 increase in the discount rate applied to posttax cash flows 296
10 strengthening of the south african rand 770
other assumptions include the longterm pig iron and zircon prices and operating costs future selling prices and operating costs have been estimated in line with
the policy set out in note 1i the recoverable amount of the cashgenerating unit exceeds the carrying value for each of these sensitivities applied in isolation
pilbara
the recoverability of goodwill arising from the acquisition of robe river and monitored at the pilbara cgu level has been assessed by reference to fvlcdusing
discounted cash flows which is in line with the policy set out in note 1i and is classified as level 3 under the fair value hierarchy in arriving at fvlcd a posttax
discount rate of 72 per cent 2013 73 per cent has been applied to the posttax cash flows expressed in real terms the recoverable amounts were determined
to be significantly in excess of carrying value and there are no reasonably possible changes in key assumptions that would cause the remaining goodwill to be
impaired
other
the recoverability of the other goodwill has been assessed by reference to fvlcd using discounted cash flows which is in line with the policy set out in note 1i
the recoverable amounts were determined to be in excess of carrying value and there are no reasonably possible changes in key assumptions that would cause
the remaining goodwill to be impaired by a significant amount
riotintocom 133
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
13 intangible assets
year ended 31 december 2014
exploration
and
evaluation
a
usm
trademarks
patented and
nonpatented
technology
usm
contract
based
intangible
assets
b
usm
other
intangible
assets
usm
total
usm
net book value
at 1 january 2014 1854 198 2831 538 5421
adjustment on currency translation 86 21 195 55 357
expenditure during the year 142 – – 307 449
amortisation for the year
c
– 20 116 101 237
disposals transfers and other movements
d
686 1 66 15 604
at 31 december 2014 2596 156 2454 674 5880
–cost 2770 294 4341 1536 8941
– accumulated amortisation and impairment 174 138 1887 862 3061
year ended 31 december 2013
exploration
and
evaluation
a
usm
trademarks
patented and
nonpatented
technology
usm
contract
based
intangible
assets
b
usm
other
intangible
assets
usm
total
usm
net book value
at 1 january 2013 2053 212 4120 495 6880
adjustment on currency translation 96 7 290 47 426
expenditure during the year 368 – 9 159 536
amortisation for the year
c
– 21 123 111 255
impairment charges
e
379 – 908 – 1287
disposals transfers and other movements 92 – 23 42 27
at 31 december 2013 1854 198 2831 538 5421
–cost 4507 334 4830 1357 11028
– accumulated amortisation and impairment 2653 136 1999 819 5607
a exploration and evaluation assets’ useful lives are not determined until transferred to property plant and equipment the reduction in cost and accumulated amortisation and
impairment from 2013 to 2014 mainly relates to the disposal of the fully impaired assets of rio tinto coal mozambique rtcm see note 37 the impairment charge in 2013 of
us379 million mainly related to exploration and evaluation assets within rtcm and southgobi resources limited see note 6
b the group benefits from certain intangible assets acquired with alcan including power supply contracts customer contracts and water rights the water rights are expected to
contribute to the efficiency and cost effectiveness of operations for the foreseeable future accordingly these rights are considered to have indefinite lives and are not subject to
amortisation but are tested annually for impairment these water rights constitute the majority of the amounts in “contract based intangible assets”
c finite life intangible assets are amortised over their useful economic lives on a straight line or units of production basis as appropriate where amortisation is calculated on a
straight line basis the following useful lives have been determined
trademark patented and nonpatented technology
trademarks 14 to 20 years
patented and nonpatented technology 10 to 20 years
contract based intangible assets
power contracts 2 to 39 years
other purchase and customer contracts 5 to 15 years
other intangible assets
internally generated intangible assets and computer software 2 to 5 years
other intangible assets 2 to 20 years
d disposals transfers and other movements for exploration and evaluation include us700 million previously classified as noncurrent receivables pending ratification of the
simandou project investment framework the incorporation of the investment framework into guinean law was completed following ratification by the guinean national
assembly presidential promulgation and its publication in august 2014 the project partners are continuing to work towards the completion of a bankable feasibility study
completion of which has been delayed due to the ebola outbreak and are aiming to establish a funding consortium to build the infrastructure necessary to develop the simandou
project
e the us908 million 2013 impairment charge to the contract based intangible asset class related to the full writeoff of the water right indefinitelived intangible assets at the
kitimat cashgenerating unit see note 6
the remaining carrying value of the water rights us1981 million as at 31 december 2014 relates wholly to the quebec smelters cashgenerating unit the quebec smelters
cashgenerating unit was tested for impairment and it was determined that its recoverable amount on a fvlcd basis exceeds the carrying amount by us3311 million
the recoverable amount of the quebec smelters is classified as level 3 under the fair value hierarchy in arriving at fvlcd posttax cash flows expressed in real terms have been
estimated over the expected useful economic lives of the underlying smelting assets and discounted using a posttax real discount rate of 72 per cent 2013 73 per cent
134 riotintocom the key assumptions to which the calculation of fvlcd for the quebec smelters is most sensitive and the corresponding decrease in fvlcd are set out below
us million
05 increase in discount rate applied to posttax cash flows 659
5 decrease in aluminium and alumina prices 1220
5 strengthening of the canadian dollar 396
5 increase in operating costs 914
each of the sensitivities has been determined by assuming that the relevant key assumption moves in isolation except where modifying the aluminium price
directly affects the price assumption for certain input costs and further assumes that there is no mitigating action by management the recoverable amount of the
cashgenerating unit exceeds the carrying value for each of these sensitivities in isolation
in 2012 and previous years the group’s aluminium cashgenerating units were tested for impairment in aggregate as the goodwill was allocated and monitored at
the segment level the remaining goodwill was fully impaired in 2012 refer to note 6 for further details
exploration and evaluation expenditure
the charge for the year and the net amount of intangible assets capitalised during the year are as follows
2014
usm
2013
usm
2012
usm
net expenditure in the year net of proceeds of us11 million 2013 us27 million 2012 us217 million on
disposal of undeveloped projects 872 1317 2608
changes in accruals including impairment of undeveloped projects of usnil 2013 us159 million
2012 usniland noncash proceeds on disposal of undeveloped projects 53 160 207
amount capitalised during the year 142 368 924
netchargefortheyear 783 1109 1477
reconciliation to income statement
exploration and evaluation costs 747 948 1971
lossprofit on disposal of interests in undeveloped projects 36 161 494
netchargefortheyear 783 1109 1477
at 31 december 2014 a total of us29 billion had been capitalised related to projects which had not yet been approved to proceed this comprised evaluation
costs of us26 billion included above and us03 billion of early works expenditure within property plant and equipment 31 december 2013 a total of
us23 billion had been capitalised comprising evaluation costs of us19 billion included above and us04 billion of early works expenditure within property
plant and equipment
14 property plant and equipment
year ended 31 december 2014
mining
properties
and leases
a
usm
land
and
buildings
b
usm
plant and
equipment
usm
capital
works in
progress
usm
total
usm
net book value
at 1 january 2014 10880 7410 38466 14071 70827
adjustment on currency translation 687 564 2918 545 4714
adjustments to capitalised closure costs note 26 525 – – – 525
interest capitalised
c
note 8 – – 2 468 470
additions 554 302 1369 5571 7796
depreciation for the year
a d
649 432 3542 – 4623
impairment charges net of reversals
e
139 10 277 1440 1034
disposals – 162 61 14 237
subsidiaries no longer consolidated –– 31 – 31
transfers and other movements
f
1151 541 6248 8226 286
at 31 december 2014 11913 7085 39810 9885 68693
–cost 23045 10845 69835 11544 115269
– accumulated depreciation and impairment 11132 3760 30025 1659 46576
noncurrent assets held under finance leases
g
–12 1 – 13
other noncurrent assets pledged as security
h
1261 173 2823 259 4516
riotintocom 135
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
14 property plant and equipment continued
year ended 31 december 2013
mining
properties
and leases
a
usm
land
and
buildings
b
usm
plant and
equipment
usm
capital
works in
progress
usm
total
usm
net book value
at 1 january 2013 16902 7187 31601 21295 76985
adjustment on currency translation 1303 629 3670 1612 7214
adjustments to capitalised closure costs note 26 391 – – – 391
interest capitalised
c
note 8 – – 2 725 727
additions 397 214 1444 9879 11934
depreciation for the year
a d
816 439 3281 – 4536
impairment charges net of reversals
e
3976 67 676 163 4882
disposals 1 5 89 27 122
subsidiaries no longer consolidated 401 62 274 334 1071
transfers and other movements
f
313 1211 13409 15692 1385
at 31 december 2013 10880 7410 38466 14071 70827
–cost 21521 11328 68429 14487 115765
– accumulated depreciation and impairment 10641 3918 29963 416 44938
noncurrent assets held under finance leases
g
–14 9 –23
other noncurrent assets pledged as security
h
1435 175 2872 97 4579
a at 31 december 2014 the net book value of capitalised production phase stripping costs totalled us18 billion with us14 billion within property plant and equipment and a
further us04 billion within investments in equity accounted units 2013 total of us13 billion with us09 billion in property plant and equipment and a further us04 billion
within investments in equity accounted units during the period capitalisation of us07 billion was partly offset by depreciation of us02 billion amortisation of deferred
stripping costs of us84 million 2013 us70 million 2012 us105 million is included within “depreciation for the year”
b at 31 december 2014 the net book value amount for land and buildings includes freehold us6899 million 2013 us6847 million long leasehold us186 million
2013 us562 million and no short leasehold 2013 us1 million
c interest is capitalised at a rate based on the group’s cost of borrowing or at the rate on project specific debt where applicable the group’s average borrowing rate used for
capitalisation of interest is 40 per cent 2013 40 per cent
d assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are
depreciated on a straight line basis as follows
land and buildings
land not depreciated
buildings5to50years
plant and equipment
other plant and equipment 3 to 50 years
power assets 25 to 50 years
capital work in progress not depreciated
e during 2014 and 2013 impairment charges primarily related to the aluminium and copper business in 2014 impairment charges of us1669 million were offset by
us635 million of impairment reversals
f “transfers and other movements” includes reclassifications between categories including transfer to assets of disposal groups held for sale
g the finance leases under which these assets are held are disclosed in note 23
h excludes assets held under finance leases noncurrent assets pledged as security represent amounts pledged as collateral against us587 million 2013 us865 million of
loans which are included in note 22
15 investments in equity accounted units
summary balance sheet rio tinto share
2014
usm
2013
usm
rio tinto’s share of assets
noncurrent assets 6605 5860
current assets 901 1197
7506 7057
rio tinto’s share of liabilities
current liabilities 681 791
noncurrent liabilities 1957 2309
2638 3100
rio tinto’s share of net assets
a b
4868 3957
a further details of investments in equity accounted units are set out in notes 35 and 36
136 riotintocom b the impact of impairment charges and impairment reversals on the group’s investments in equity accounted units are summarised in note 6
c at 31 december 2014 and 2013 the group had no investments in equity accounted units with shares listed on recognised stock exchanges
d at 31 december 2014 net debt of equity accounted units excluding amounts due to rio tinto was us922 million 2013 us991 million
16 inventories
2014
usm
2013
usm
raw materials and purchased components 726 1116
consumable stores 1411 1596
work in progress 1490 1721
finished goods and goods for resale 1120 1815
4747 6248
comprising
expected to be used within one year 4350 5737
expected to be used after more than one year 397 511
4747 6248
inventory writedowns net of reversals amounting to us94 million 2013 us201 million 2012 us208 million were recognised during the year
17 deferred taxation
2014
usm
2013
usm
at 1 january 585 1669
adjustment on currency translation 36 201
credited to the income statement note 9 349 1676
creditedcharged to statement of comprehensive income
a
205 697
newly consolidated operations note 37 – 1
disposals 10 –
other movements
b
29 95
at 31 december 34 585
comprising
– deferred tax liabilities
c d
3574 4140
– deferred tax assets
c e f g
3540 3555
deferred tax balances for which there is a right of offset within the same tax jurisdiction are presented net on the face of the balance sheet as permitted by ias 12
the closing deferred tax liabilities and assets prior to this offsetting of balances are shown below
total
2014
usm
total
2013
usm
deferred tax liabilities arising from
capital allowances 6018 6391
unremitted earnings
d
659 637
capitalised interest 368 348
unrealised exchange gains 255 91
other temporary differences 248 761
7548 8228
deferred tax assets arising from
tax losses
e
2276 2496
provisions 2096 2084
capital allowances
f
877 1289
post retirement benefits 1165 1036
unrealised exchange losses 658 184
other temporary differences 442 554
7514 7643
riotintocom 137
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
17 deferred taxation continued
total
2014
usm
total
2013
usm
creditedcharged to the income statement
unrealised exchange losses 365 566
tax losses 72 563
provisions 122 434
capital allowances 272 44
tax on unremitted earnings 2 3
post retirement benefits 34 68
other temporary differences 242 134
349 1676
a the amounts credited directly to the statement of comprehensive income include provisions for tax on exchange differences on intragroup loans qualifying for reporting as part of
the net investment in subsidiaries on cash flow hedges and on actuarial gains and losses on pension schemes and on post retirement healthcare plans
b “other movements” include deferred tax relating to tax payable recognised by subsidiary holding companies on the profits of the equity accounted units to which it relates
c the deferred tax liability of us3574 million 2013 us4140 million includes us3555 million 2013 us4139 million due in more than one year the deferred tax asset of
us3540 million 2013 us3555 million includes us3405 million 2013 us3426 million receivable in more than one year all amounts are shown as noncurrent on the face
of the balance sheet as required by ias 12
d deferred tax is not recognised on the unremitted earnings of subsidiaries and joint ventures where the group is able to control the timing of the remittance and it is probable that
there will be no remittance in the foreseeable future if these earnings were remitted tax of us202 million 2013 us183 million would be payable
e there is a limited time period the shortest of which is two years for the recovery of us1347 million 2013 us1384 million of tax losses and other tax assets which have been
recognised as deferred tax assets in the financial statements
f as at 31 december 2013 deferred tax assets arising from capital allowances included amounts arising following the introduction of the mrrt on 1 july 2012 at 31 december
2014 no deferred tax is recognised in respect of mrrt following the repeal of mrrt during 2014 refer to note 9
g recognised and unrecognised deferred tax assets are shown in the table below and totalled us6885 million at 31 december 2014 2013 us 17755 million of this total
us3540 million has been recognised as deferred tax assets 2013 us3555 million leaving us3345 million 2013 us14200 million unrecognised as recovery is not
considered probable
the recognised amounts do not include deferred tax assets that have been netted off against deferred tax liabilities
recognised unrecognised
at 31 december
2014
usm
2013
usm
2014
usm
2013
usm
uk 131 104 150 215
france
i
377 444 1184 1339
canada 491 297 371 181
us 932 560 16 16
australia
ii
1324 1880 287 11000
other 285 270 1337 1449
total
iii
3540 3555 3345 14200
i us1184 million 2013 us1274 million of the unrecognised assets relate to trading losses in france which were acquired as part of the alcan acquisition the amount
recognised takes account of legislation which restricts the recovery of losses
ii the recognised and unrecognised amounts for 2013 include temporary differences that are deductible for the purposes of mrrt at 31 december 2014 the recognised and
unrecognised amounts for mrrt are usnil following the repeal of mrrt
iii us688 million 2013 us652 million of the unrecognised assets relate to realised or unrealised capital losses recovery of which depends on the existence of capital gains in
future years there is a time limit the shortest of which is one year for the recovery of us353 million of the unrecognised assets 2013 us343 million
18 trade and other receivables
noncurrent
2014
usm
current
2014
usm
total
2014
usm
noncurrent
2013
usm
current
2013
usm
total
2013
usm
trade receivables
a
5 2483 2488 5 2987 2992
other receivables
b
435 884 1319 1150 1212 2362
prepayment of tolling charges to equity accounted units
c
387 – 387 479 – 479
pension surpluses note 45 353 – 353 290 – 290
amounts due from equity accounted units –36 36 – 136 136
other prepayments 124 220 344 216 332 548
1304 3623 4927 2140 4667 6807
a at 31 december 2014 trade and other receivables are stated net of provisions for doubtful debts of us39 million 2013 us12 million amounts of us35 million
2013 us10 million were impaired the majority of these receivables were more than 90 days overdue
138 riotintocom b as at 31 december 2013 noncurrent other receivables included a capitalised prepayment on an intangible asset of the simandou iron ore project of us700m this was
transferred to intangible assets see note 13 in 2014 on the ratification of the settlement agreement
c rio tinto aluminium has made certain prepayments to equity accounted units for toll processing of alumina these prepayments will be charged to group operating costs as
processing takes place
there is no material element of trade and other receivables that is interest bearing
the fair value of current trade and other receivables and the majority of amounts classified as noncurrent assets approximates their carrying value
as of 31 december 2014 trade receivables of us82 million 2013 us178 million were past due but not impaired the ageing of these receivables is as follows
2014
usm
2013
usm
less than 30 days overdue 34 57
between 30 and 60 days overdue 11 71
between 60 and 90 days overdue 30 47
more than 90 days overdue 7 3
82 178
these relate to a number of customers for whom there is no recent history of default
with respect to trade and other receivables that are neither impaired nor past due there are no indications as of the reporting date that the debtors will not meet
their payment obligations
19 assets and liabilities held for sale
at 31 december 2014 assets and liabilities held for sale comprised the group’s 712 per cent interest in the blair athol coal project blair athol and its
284 per cent indirect interest in southgobi resources limited which was acquired as part of the gain of control of turquoise hill resources ltd in 2012
at 31 december 2013 assets and liabilities held for sale comprised the group’s 501 per cent interest in the clermont joint venture clermont its 712percent
interest in blair athol and zululand anthracite colliery zac which was acquired with rio tinto coal mozambique in 2011 at 31 december 2014 zac was no
longer held for sale on 25 october 2013 rio tinto announced that it had reached a binding agreement to sell its interest in clermont to gs coal pty ltd a
company jointly owned by glencore and sumitomo corporation for us1015 million the sale was completed on 29 may 2014
20 other financial assets including tax recoverable and loans to equity accounted units
noncurrent
2014
usm
current
2014
usm
total
2014
usm
noncurrent
2013
usm
current
2013
usm
total
2013
usm
derivative financial instruments 393 43 436 403 63 466
equity shares and quoted funds 103 96 199 157 122 279
other investments including loans 226 61 287 339 167 506
loans to equity accounted units –7171 19394
tax recoverable 70 146 216 83 265 348
792 417 1209 983 710 1693
detailed information relating to other financial assets is given in note 30
21 cash and cash equivalents
note
2014
usm
2013
usm
cash at bank and in hand 1146 1548
money market funds and other cash equivalents 11277 8668
balance per group balance sheet 12423 10216
bank overdrafts repayable on demand unsecured 22 23 7
balance per group cash flow statement 12400 10209
cash and cash equivalents of us631 million 2013 us570 million are held in countries where there are restrictions on remittances of this balance
us455 million 2013 us402 million could be used to repay subsidiaries’ third party borrowings
there are also restrictions on a further us404 million 2013 us652 million of cash and cash equivalents the majority of which is held by partially owned
entities and is not available for use in the wider group due to the legal and contractual restrictions currently in place of this balance us24 million
2013 us119 million could be used to repay subsidiaries’ third party borrowings
riotintocom 139
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
22 borrowings and other financial liabilities
borrowings at 31 december note
noncurrent
2014
usm
current
2014
usm
total
2014
usm
noncurrent
2013
usm
current
2013
usm
total
2013
usm
usd commercial paper –– – – 156 156
rio tinto finance usa limited bonds 895 2014
a
–– – – 1907 1907
alcan inc global notes 52 due 2014
a
–– – – 499 499
rio tinto finance usa limited bonds 1875 2015 – 500 500 500 – 500
rio tinto finance usa plc bonds 1125 2015 – 500 500 499 – 499
rio tinto finance usa plc bonds libor plus 055 2015 – 250 250 250 – 250
alcan inc global notes 50 due 2015
a
– 496 496 499 – 499
rio tinto finance usa limited bonds 2500 2016 698 – 698 698 – 698
rio tinto finance usa limited bonds 2250 2016 498 – 498 498 – 498
rio tinto finance usa plc bonds 1375 2016 998 – 998 996 – 996
rio tinto finance usa plc bonds libor plus 084 2016 500 – 500 499 – 499
rio tinto finance usa plc bonds 20 2017 499 – 499 499 – 499
rio tinto finance usa plc bonds 1625 2017 1245 – 1245 1243 – 1243
rio tinto finance usa limited bonds 65 2018
a
1935 – 1935 1979 – 1979
rio tinto finance usa plc bonds 2250 2018 1239 – 1239 1238 – 1238
rio tinto finance usa limited bonds 90 2019 1474 – 1474 1467 – 1467
rio tinto finance usa limited bonds 35 2020 996 – 996 995 – 995
rio tinto finance plc euro bonds 20 due 2020
a b
934 – 934 999 – 999
rio tinto finance usa limited bonds 4125 2021 998 – 998 996 – 996
rio tinto finance usa limited bonds 3750 2021 1144 – 1144 1145 – 1145
rio tinto finance usa plc bonds 35 2022
a
995 – 995 992 – 992
rio tinto finance usa plc bonds 2875 2022
a
988 – 988 985 – 985
rio tinto finance plc euro bonds 2875 due 2024
a b
646 – 646 639 – 639
rio tinto finance usa limited bonds 7125 2028
a
1008 – 1008 934 – 934
alcan inc debentures 725 due 2028 106 – 106 107 – 107
rio tinto finance plc sterling bonds 40 due 2029
a b
774 – 774 822 – 822
alcan inc debentures 725 due 2031 429 – 429 430 – 430
alcan inc global notes 6125 due 2033 745 – 745 739 – 739
alcan inc global notes 575 due 2035 279 – 279 284 – 284
rio tinto finance usa limited bonds 52 2040 1145 – 1145 1147 – 1147
rio tinto finance usa plc bonds 475 2042 490 – 490 490 – 490
rio tinto finance usa plc bonds 4125 2042 726 – 726 725 – 725
loans from equity accounting units –52 52 977 86
other secured loans 376 211 587 651 214 865
other unsecured loans 497 627 1124 551 1049 1600
finance leases 23 49 5 54 39 7 46
bank overdrafts 21 –23 23 –7 7
total borrowings including overdrafts
c
22411 2664 25075 24544 3916 28460
a these borrowings are subject to the hedging arrangements summarised below
b rio tinto has a us10 billion 2013 us10 billion european debt issuance programme edip against which the cumulative amount utilised was us23 billion equivalent at
31 december 2014 2013 us26 billion the carrying value of these bonds after hedge accounting adjustments amounted to us24 billion 2013 us 25 billion in aggregate
c the group’s borrowings of us251 billion 2013 us285 billion include some us35 billion 2013 us33 billion which relates to subsidiary entity borrowings that are without
recourse to the group of which us06 billion 2013 us07 billion are subject to various financial and general covenants with which the respective borrowers were in compliance
as at 31 december 2014
other financial liabilities
noncurrent
2014
usm
current
2014
usm
total
2014
usm
noncurrent
2013
usm
current
2013
usm
total
2013
usm
derivative financial instruments 67 14 81 31 10 41
other financial liabilities 57 6 63 50 – 50
total other financial liabilities 124 20 144 81 10 91
total borrowings and other financial liabilities 22535 2684 25219 24625 3926 28551
swap arrangements
at 31 december 2014 us37 billion 2013 us42 billion us dollar notional of the fixed rate us dollar borrowings were swapped to floating us dollar rates and
us15 billion 2013 us16 billion us dollar notional equivalent of euro borrowings were fully swapped to floating us dollar rates
140 riotintocom during the year fair value hedge accounting has been applied to items marked a in the above table except for us750 million 2013 us750 million of the
rio tinto finance usa limited bonds 65 due 2018 us250 million 2013 us1000 million of the rio tinto finance usa plc bonds 35 due 2022
us250 million 2013 us1000 million of the rio tinto finance usa plc bonds 2875 due 2022 us75 million 2013 us75 million of the rio tinto finance
usa limited bonds 7125 due 2028 us250 million 2013 us250 million of the rio tinto finance usa limited bonds 895 due 2014 and us200 million
2013 us200 million of the alcan inc global notes 52 due 2014 these portions are held at amortised cost
the rio tinto finance plc sterling bond 40 due 2029 at us08 billion 2013 us08billion us dollar notional equivalent of sterling was fully swapped to fixed
us dollar rates cash flow hedging was applied to the annual interest coupons and principal of this bond the hedge was fully effective in 2014 and 2013 financial
years
the fair value of interest rate and cross currency interest rate swaps at 31 december 2014 was us200 million 2013 us192 million asset and us54 million
2013 us14 million liability respectively these are included in “other financial assets” and “other financial liabilities” in the balance sheet
details of the major interest rate and cross currency interest rate swaps are shown in note 30
23 capitalised finance leases
note
2014
usm
2013
usm
present value of minimum lease payments
total minimum lease payments 55 48
effect of discounting 1 2
14 54 46
payments under capitalised finance leases
due within 1 year 5 7
between 1 and 3 years 29 13
between 3 and 5 years 6 11
more than 5 years 14 15
14 54 46
24 consolidated net debt
2014
usm
2013
usm
analysis of changes in consolidated net debt
a
opening balance 18055 19192
adjustment on currency translation 1039 2051
exchange losses charged to the income statement
b
1070 2120
cash movements excluding exchange movements 5357 1076
other movements 234 130
closing balance 12495 18055
total borrowings in balance sheet note 22 25075 28460
derivatives related to net debt included in “other financial assetsliabilities” note 30 146 173
equity accounted unit funded balances excluded from net debt
c
11 16
adjusted total borrowings 24918 28271
cash and cash equivalents note 21 12423 10216
consolidated net debt 12495 18055
2014
usm
2013
usm
2012
usm
exchange lossesgains on us dollar net debt and intragroup balances excluded from underlying earnings
exchange lossesgains on us dollar net debt 1056 2098 416
exchange lossesgains on intragroup balances 940 1574 54
exchange gains on loans from equity accounted units 1 –4
exchange gains on settlement of dividend – –18
chargedcredited to income statement 1995 3672 492
a consolidated net debt is stated net of the impact of certain funding arrangements between equity accounted units and partially owned subsidiaries equity accounted unit funded
balances this adjustment is required in order to avoid showing borrowings twice in the net debt disclosure where funding has been provided to an equity accounted unit by the
group and subsequently on lent by the equity accounted unit to a consolidated group subsidiary
b exchange losses taken to the income statement include amounts excluded from underlying earnings
c equity accounted unit funded balances are defined as amounts owed by partially owned subsidiaries to equity accounted units where such funding was provided to the equity
accounted unit by the group
further information relating to the currency and interest rate exposures arising from net debt and related derivatives is given in note 30
riotintocom 141
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
25 trade and other payables
noncurrent
2014
usm
current
2014
usm
total
2014
usm
noncurrent
2013
usm
current
2013
usm
total
2013
usm
trade payables 5 2592 2597 2 3095 3097
accrualsanddeferredincome 248 2123 2371 146 2481 2627
other payables
a
359 1201 1560 164 1112 1276
employee entitlements – 905 905 – 861 861
royalties and mining taxes 2 526 528 2 682 684
amounts owed to equity accounted units 147 78 225 135 155 290
government grants deferred 110 12 122 127 14 141
871 7437 8308 576 8400 8976
a “other payables” include deferred consideration of us29 million 2013 us54 million relating to acquired assets all other accounts payable and accruals are noninterest
bearing
due to their short term maturities the fair value of trade and other payables approximates their carrying value
26 provisions including post retirement benefits
pensions
and post
retirement
healthcare
a
usm
other
employee
entitlements
b
usm
close down
and
restoration
environmental
cde
usm
other
usm
total
2014
usm
total
2013
usm
at 1 january 3599 941 8582 959 14081 16981
adjustment on currency translation 223 47 584 109 963 1081
adjustments to mining properties note 14
– changes in estimate – – 525 – 525 391
chargedcredited to profit
– increases to existing provisions 236 132 125 430 923 1171
– new provisions – 87 5 202 294 455
– unused amounts reversed 2 31 46 95 170 169
– exchange gainslosses on provisions – – 42 49 91 8
– amortisation of discount – 2 356 26 384 377
utilised in year 296 339 368 266 1269 1506
actuarial gainslosses recognised in equity 776 – – – 776 2204
newly consolidated operations note 37 – 1 10 – 11 18
subsidiaries no longer consolidated – – – 23 23 260
transfers to assets held for sale 6 1 20 4 23 104
transfers and other movements 2 146 3 64 81 20
at 31 december 4086 599 8630 1287 14602 14081
balance sheet analysis
current 117 430 355 397 1299 1738
noncurrent 3969 169 8275 890 13303 12343
total 4086 599 8630 1287 14602 14081
a the main assumptions used to determine the provision for pensions and post retirement healthcare and other information including the expected level of future funding
payments in respect of those arrangements are given in note 45
b the provision for other employee entitlements includes a provision for long service leave of us354 million 2013 us314 million based on the relevant entitlements in certain
group operations and includes us113 million 2013 us193 million of provision for redundancy and severance payments
c the group’s policy on closedown and restoration costs is described in note 1k and in paragraph v under “critical accounting policies and estimates” on pages 117 and 120
closedown and restoration costs are a normal consequence of mining and the majority of closedown and restoration expenditure is incurred in the years following closure of the
mine refinery or smelter remaining lives of operations and infrastructure range from one to over 50 years with an average for all sites weighted by closure provision of around 18
years 2013 21 years although the ultimate cost to be incurred is uncertain the group’s businesses estimate their respective costs based on current restoration standards and
techniques provisions of us8630 million 2013 us8582 million for closedown and restoration costs and environmental clean up obligations are based on risk adjusted cash
flows these estimates have been discounted to their present value at a real risk free rate of 2 per cent per annum based on an estimate of the long term risk free pretax cost of
borrowing
d noncurrent provisions for close down and restorationenvironmental expenditure include amounts relating to environmental cleanup of us341 million 2013 us327 million
expected to take place between one and five years from the balance sheet date and us798 million 2013 us909 million expected to take place later than five years after the
balance sheet date
e closedown and restorationenvironmental liabilities at 31 december 2014 have not been adjusted for amounts of us108 million 2013 us142 million relating to insurance
recoveries and other financial assets held for the purposes of meeting these obligations
142 riotintocom 27 share capital – rio tinto plc
2014
number
million
2013
number
million
2012
number
million
2014
usm
2013
usm
2012
usm
issued and fully paid up share capital of 10p each
at 1 january 1425377 1425376 1453400 230 230 234
ordinary shares issued
a c
0001 0001 – – ––
ordinary shares purchased but uncancelled on 1 january
b
– – 1800 – ––
own shares purchased and cancelled
b
– – 26224 – –4
at 31 december 1425378 1425377 1425376 230 230 230
shares held by public
at 1 january 1412695 1411257 1436542
shares reissued from treasury
a
1451 1437 0939
shares purchased and cancelled
b
– – 26224
ordinary shares issued
a c
0001 0001 –
at 31 december 1414147 1412695 1411257
shares repurchased and held in treasury 11231 12682 14119
shares held by public 1414147 1412695 1411257
total share capital 1425378 1425377 1425376
other share classes
special voting share of 10p each
d
1only 1only 1only
dlc dividend share of 10p each
d
1only 1only 1only
equalisation share of 10p each
d
1only 1only 1only
a 971 ordinary shares were issued in 2014 under the global employee share plan 1450659 ordinary shares were reissued from treasury during the year resulting from the exercise
of options under rio tinto plc employee share based payment plans with exercise prices between £10979p and £36275p per share 2013 951 ordinary shares were issued and
1436542 ordinary shares reissued from treasury with exercise prices between £1043p and £3576p per share 2012 no new ordinary shares issued and 939423 ordinary shares
reissued from treasury with exercise prices between £1043p and £3946p per share
b the authority for the company to buy back its ordinary shares was renewed at the 2014 annual general meeting no shares were bought back and held in treasury in 2013 and 2014
from january to march 2012 26223910 shares were bought back and cancelled and 1800000 shares purchased and awaiting cancellation at 31 december 2011 were cancelled
c the aggregate consideration for new shares issued under the global employee share plan was us005 million 2013 restated us004 million 2012 restated usnil the
differencebetweenthenominalvalueandtheissuepriceofthesharesissued was credited to the share premium account the aggregate consideration received for treasury
shares reissued was us22 million 2013 restated us32 million 2012 us39 million no new shares were issued as a result of the exercise of options under rio tinto plc
employee share based payment plans in 2014 2013 and 2012
d the “special voting share” was issued to facilitate the joint voting by shareholders of rio tinto plc and rio tinto limited on joint decisions following the dlc merger the “dlc
dividend share” was issued to facilitate the efficient management of funds within the dlc structure directors have the ability to issue an equalisation share if that is required
under the terms of the dlc merger sharing agreement
during 2014 us495 million of shares and adrs 2013 us42 million of shares and adrs 2012 us41 million of shares were purchased by employee share
ownership trusts on behalf of rio tinto plc to satisfy future share options and awards as they vest at 31 december 2014 794330 shares and 25502 adrs were
held in the employee share ownership trusts on behalf of rio tinto plc
information relating to share options and other share based incentive schemes is given in note 44 on share based payments
riotintocom 143
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
28 share capital – rio tinto limited
2014
number
million
2013
number
million
2012
number
million
2014
usm
2013
usm
2012
usm
issued and fully paid up share capital
at 1 january 43576 43576 43576 4911 5715 5582
adjustment on currency translation – –– 376 804 133
at 31 december 43576 43576 43576 4535 4911 5715
– special voting share
a
1only 1only 1only
– dlc dividend share
a
1only 1only 1only
total share capital
a
43576 43576 43576
a the “special voting share” was issued to facilitate the joint voting by shareholders of rio tinto limited and rio tinto plc on joint decisions following the dlc merger the “dlc
dividend share” was issued to facilitate the efficient management of funds within the dlc structure directors have the ability to issue an equalisation share if that is required
under the terms of the dlc merger sharing agreement
share options exercised during the year to 31 december 2014 under various rio tinto limited employee share option schemes were satisfied by the onmarket
purchase of rio tinto limited shares by a third party on the group’s behalf
information relating to share options and other share based incentive schemes is given in note 44
29 other reserves and retained earnings
2014
usm
2013
usm
2012
usm
capital redemption reserve
a
at 1 january 28 28 24
own shares purchased and cancelled – –4
at 31 december 28 28 28
hedging reserves
b
at 1 january 3 68 44
parent and subsidiaries’ net cash flow hedge fair value lossesgains 48 149 60
parent and subsidiaries’ net cash flow hedge lossesgains transferred to the income statement 55 69 47
tax on the above 2 9 11
at 31 december 12 3 68
available for sale revaluation reserves
c
at 1 january 117 179 193
losses on available for sale securities 19 67 25
lossesgains on available for sale securities transferred to the income statement 6 146 355
tax on the above – 17 8
at 31 december 130 117 179
other reserves
d
at 1 january 11766 11778 11765
own shares purchased from rio tinto limited shareholders to satisfy share options 129 77 62
employee share options value of services 69 64 78
deferred tax on share options 2 13
at 31 december 11704 11766 11778
foreign currency translation reserve
e
at 1 january 1191 3309 2807
parent and subsidiaries currency translation and exchange adjustments 1690 2138 664
equity accounted units currency translation adjustments 43 44 158
currency translation reclassified on disposal 53 81 3
tax on the above 3 17 1
at 31 december 492 1191 3309
total other reserves per balance sheet 11122 12871 14868
144 riotintocom 2014
usm
2013
usm
2012
usm
retained earnings
f
at 1 january 23605 21496 27430
parent and subsidiaries’ profitloss for the year 5243 2796 3859
equity accounted units’ profit after tax for the year 1284 869 831
actuarial lossesgains
g
720 2211 311
tax relating to components of other comprehensive income 204 631 72
total comprehensive incomeloss for the year 6011 5245 3267
share buyback scheme – – 764
dividends paid 3710 3322 3038
change in equity interest held by rio tinto 36 102 1128
own shares purchasedtreasury shares reissued for share options and other movements 28 11 38
employee share options value of services and other ifrs 2 charges taken to the income statement 196 73 45
at 31 december 26110 23605 21496
a the capital redemption reserve was set up to comply with section 733 of the companies act 2006 previously section 170 of the companies act 1985 when shares of a company
are redeemed or purchased wholly out of the company’s profits balances reflect the amount by which the company’s issued share capital is diminished in accordance with this
section
b the hedging reserve records gains or losses on cash flow hedges that are recognised initially in equity as described in note 1 p iii
c the available for sale revaluation reserves record fair value gains or losses relating to available for sale securities as described in note 1 p i d
d other reserves include the cumulative amount recognised under ifrs 2 in respect of options granted but not exercised to acquire shares in rio tinto limited less where
applicable the cost of shares purchased to satisfy share options exercised the cumulative amount recognised under ifrs 2 in respect of options granted but not exercised to
acquire shares in rio tinto plc is recorded in retained earnings
other reserves also include us11936 million which represents the difference between the nominal value and issue price of the shares issued arising from rio tinto plc’s rights
issue completed in july 2009 no share premium was recorded in the rio tinto plc financial statements through the operation of the merger relief provisions of the companies act
1985
e exchange differences arising on the translation of the group’s net investment in foreign controlled companies are taken to the foreign currency translation reserve as described in
note 1d the cumulative differences relating to an investment are transferred to the income statement when the investment is disposed of
f retained earnings and movements in reserves of subsidiaries include those arising from the group’s share of joint operations
g in 2014 there were no actuarial losses relating to equity accounted units 2013 usnil 2012 usnil
riotintocom 145
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
30 financial instruments and risk management
except where stated the information given below relates to the financial instruments of the parent companies and their subsidiaries and joint operations and
excludes those of equity accounted units the information is grouped in the following sections
a – financial assets and liabilities by categories
b – derivative financial instruments
c–fairvalues
a a financial assets and liabilities by categories
at 31 december 2014 note
total
usm
loans and
receivables
usm
available
for sale
securities
usm
held at
fair value
usm
held to maturity
assetsother
financial
liabilities
usm
financial assets
cash and cash equivalents 21 12423 12423 – – –
trade and other receivables
a
3727 3715 – 12 –
equity shares and quoted funds 20 199 – 199 – –
other investments including loans 20 287 118 – 164 5
currency and commodity derivatives designated as hedges
b
20 17 – – 17 –
derivatives and embedded derivatives not related to net debt
not designated as hedges
b
20 219 – – 219 –
derivatives related to net debt
b
202224 200 – – 200 –
loans to equity accounted units including quasi equity loans 299 299 – – –
total financial assets 17371 16555 199 612 5
financial liabilities
trade and other payables
c
6155 24 6131
short term borrowings and bank overdrafts 22 2664 – 2664
medium and long term borrowings 22 22411 – 22411
derivatives related to net debt
b
2224 54 54 –
other derivatives and embedded derivatives not designated as
hedges
b
22 27 27 –
other financial liabilities 22 63 – 63
total financial liabilities 31374 105 31269
146 riotintocom at 31 december 2013 note
total
usm
loans and
receivables
usm
available
for sale
securities
usm
held at
fair value
usm
held to maturity
assetsother
financial
liabilities
usm
financial assets
cash and cash equivalents 21 10216 10216 – – –
trade and other receivables
a
5412 5412 – – –
equity shares and quoted funds 20 279 – 279 – –
other investments including loans 20 506 179 – 322 5
currency and commodity derivatives designated as hedges
b
20 21 – – 21 –
derivatives and embedded derivatives not related to net debt
not designated as hedges
b
20 253 – – 253 –
derivatives related to net debt
b
202224 192 – – 192 –
loans to equity accounted units including quasi equity loans 370 370 – – –
total financial assets 17249 16177 279 788 5
financial liabilities
trade and other payables
c
6899 – 6899
short term borrowings and bank overdrafts 22 3916 – 3916
medium and long term borrowings 22 24544 – 24544
derivatives related to net debt
b
2224 19 19 –
other derivatives and embedded derivatives not designated as
hedges
b
22 22 22 –
other financial liabilities 22 50 – 50
total financial liabilities 35450 41 35409
a this excludes pension surpluses prepayment of tolling charges to equity accounted units and other prepayments and specific items within other receivables and will therefore not
agreetonote18
b these financial assets and liabilities in aggregate agree to total derivative financial instruments disclosed in notes 20 and 22
c trade and other payables excludes deferred income government grants royalties mining taxes and employee entitlements and will therefore notagreetonote25
a b financial risk management
funding and exposure management
the group’s policies on financial risk management are clearly defined and consistently applied they are a fundamental part of the group’s longterm strategy
covering areas such as foreign exchange risk interest rate risk commodity price risk credit risk liquidity risk and capital management
the group mainly sells commodities it has produced and also enters into third party transactions and physical swaps on alumina to balance regional positions and
to balance the loading on production facilities
the group has a diverse portfolio of commodities and operates in a number of markets which have varying responses to the economic cycle the relationship
between commodity prices and the currencies of most of the countries in which the group operates provides a further natural hedge in the long term production
of minerals aluminium and alumina is an important contributor to the gross domestic products of australia and canada countries in which the group has a large
presence as a consequence the australian and canadian currencies have historically tended to strengthen when commodity prices are high in addition us dollar
floating interest rates have historically also tended to be high when commodity prices are high and vice versa and hence the group’s interest rate policy is to
generally borrow and invest after the impact of hedging at floating interest rates however in certain circumstances the group may decide to maintain a higher
proportion of borrowings at fixed rates these natural hedges significantly reduce the necessity for using derivatives or other forms of synthetic hedging such
hedging is therefore undertaken to a strictly limited degree as described below
treasury operations
treasury operates as a service to the businesses of the group and not as a profit centre strict limits on the size and type of transactions permitted are laid down
by the board and are subject to rigorous internal controls senior management is advised of corporate cash and debt positions as well as commodity currency and
interest rate derivatives through a monthly reporting framework
treasury policy
rio tinto does not acquire or issue derivative financial instruments for trading or speculative purposes nor does it believe that it has material exposure to such
trading or speculative holdings through its investments in equity accounted units derivatives are used to separate funding and cash management decisions from
currency exposure and interest rate management bank counterparty exposures are managed within allocated credit limits investment funding and cash
management activities are managed and coordinated by treasury
i foreign exchange risk
management policy
the group’s shareholders’ equity earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the group’s sales and
the countries in which it operates the us dollar however is the currency in which the majority of the group’s sales are denominated operating costs are
influenced by the currencies of those countries where the group’s mines and processing plants are located and also by those currencies in which the costs of
riotintocom 147
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
30 financial instruments and risk management continued
imported equipment and services are determined the australian and canadian dollars are the most important currencies apart from the us dollar influencing
costs in any particular year currency fluctuations may have a significant impact on rio tinto’s financial results a strengthening of the us dollar against the
currencies in which the group’s costs are partly determined has a positive effect on rio tinto’s underlying earnings
given the dominant role of the us currency in the group’s affairs the us dollar is the currency in which financial results are presented both internallyand
externally it is also the most appropriate currency for financing the group’s operations borrowings and cash are predominantly denominated in us dollars either
directly or through the use of derivatives
certain us dollar debt and other financial assets and liabilities including intragroup balances are not held in the functional currency of the relevant subsidiary
this results in an accounting exposure to exchange gains and losses as the financial assets and liabilities are translated into the functional currency of the
subsidiary that holds those assets and liabilities these exchange gains and losses are recorded in the group’s income statement except to the extent that they
can be taken to equity under the group’s accounting policy which is explained in note 1d gains and losses on us dollar net debt and on all intragroup balances
are excluded from underlying earnings other exchange gains and losses are included in underlying earnings
see section b for the details of cross currency interest rate swaps relating to borrowings
after taking into account relevant swap instruments almost all of the group’s net debt is denominated in us dollars the table below summarises by currency the
net debt after taking into account relevant cross currency interest rate swaps and foreign exchange contracts
net fundsdebt by currency
cash and
cash
equivalents
usm
total borrowings
in note 22
usm
derivatives
related to net
debt
usm
eau funded
balances excluded
from net debt
usm
net funds
debt
2014
usm
net funds
debt
2013
usm
us dollar 11605 23895 146 – 12144 17359
australian dollar 364 500 – 11 125 376
euro 18 145 – – 127 218
south african rand 239 324 – – 85 201
canadian dollar 23 192 – – 169 115
sterling 4 – – – 4 95
other 170 19 – – 151 119
total 12423 25075 146 11 12495 18055
hedging strategy
under normal market conditions the group does not generally believe that active currency hedging of transactions would provide longterm benefits to
shareholders the group reviews its exposure on a regular basis and reserves the right to enter into hedges to maintain financial stability currency protection
measures may be deemed appropriate in specific commercial circumstances typically hedging of capital expenditures and other significant financial items such as
acquisitions disposals tax and dividends and are subject to strict limits laid down by the board a monthly treasury report is provided to senior management
which summarises corporate debt exposed to currency risks after the impact of derivatives refer to section b for the details of currency forward cross currency
interest rate and option contracts used to manage the currency risk exposures of the group at 31 december 2014
sensitivities
the table below gives the estimated retranslation effect on financial assets and financial liabilities of a ten per cent strengthening in the closing exchange rate of
the us dollar against significant currencies the impact is expressed in terms of the effect on net earnings underlying earnings and equity assumingthateach
exchange rate moves in isolation the sensitivities are based on financial assets and financial liabilities held at 31 december 2014 where balances are not
denominated in the functional currency of the subsidiary or joint operation and exclude financial assets and liabilities held by equity accounted units these
balances will not remain constant throughout 2015 and therefore the following information should be used with care
at 31 december 2014
gainslosses associated with ten per cent strengthening of the us dollar
currency exposure
closing
exchange
rate
us cents
effect
on net
earnings
usm
of which
amount
impacting
underlying
earnings
usm
net
impact
on equity
usm
australian dollar 82 855 27 5
canadian dollar 86 1537 22 1
euro 122 48 16 –
new zealand dollar 78 28 – –
148 riotintocom at 31 december 2013 restated
gainslosses associated with ten per cent strengthening of the us dollar
currency exposure
closing
exchange
rate
us cents
effect
on net
earnings
usm
of which
amount
impacting
underlying
earnings
usm
net
impact
on equity
usm
australian dollar 89 1450 19 20
canadian dollar 94 1603 16 –
euro 138 330 24 6
new zealand dollar 82 51 – –
ten per cent is the annual exchange rate movement that management deems to be reasonably probable on an annual basis over the long run for one of the
group’s significant currencies and as such provides an appropriate representation
ii interest rate risk
management policy
interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market
interest rates the group’s interest rate management policy is generally to borrow and invest at floating interest rates this approach is based on a historical
correlation between interest rates and commodity prices however in certain circumstances the group may decide to maintain a higher proportion of borrowings
at fixed rates
hedging strategy
as noted above the group hedges its interest rate risk by entering into interest rate derivatives to achieve its policies the market value of such instruments
moves in alignment with the market and at times can act as an alternative source of funding the group reviews the positions on a regular basis and may act to
monetise inthemoney instruments either to take advantage of favourable market conditions or manage counterparty credit risk during 2014 and 2013 no
interest rate swaps were closed out in this manner
at the end of 2014 us176 billion 2013 us204 billion of the group’s adjusted total borrowings was at fixed rates after taking into account interest and
currency interest rate swaps resulting in a fixed to floating debt ratio of 71 per cent fixed to 29 per cent floating 2013 72 per cent fixed to 28 per cent floating on
a net debt basis the fixed to floating debt ratio was 139 per cent fixed liability to 39 per cent floating asset 2013 111 per cent fixed liability to 11 per cent
floating asset the weighted average interest rate on total adjusted borrowings as at 31 december 2014 was 37 per cent 2013 38 per cent and the weighted
average maturity was approximately 8 years 2013 8 years the weighted average maturity and weighted average effective interest rate are based on current
interest rates and the carrying value of gross borrowings at the year end
the net debt ratio at the end of 2014 and 2013 reflects the high level of cash cash equivalents and other liquid resources held by the group and the impact of
borrowings held at fixed rates
see note 22 for the details of debt outstanding at 31 december 2014
sensitivities
based on the group’s net debt refer to note 24 and other floating rate financial instruments outstanding as at 31 december 2014 the effect on net earnings of a
half percentage point increase in us dollar libor interest rates with all other variables held constant would be an increase of us20 million 2013 increase of
us9 million reflecting the high level of cash at the period end the group has an exposure to interest rate volatility within shareholders’ equity arising from fair
value movements on derivatives in the cash flow reserve these derivatives have an underlying exposure to sterling and us dollar rates with all factors remaining
constant and based on the composition of derivatives impacting the cash flow reserve at 31 december 2014 the sensitivity of a 100 basis point increase in interest
rates in each of the currencies in isolation would impact equity before tax by us112 million charge 2013 us106 million charge for sterling and us108 million
credit 2013 us101 million credit for us dollar a 100 basis point decrease would have broadly the same impact in the opposite direction these balances will not
remain constant throughout 2015 and therefore this information should be used with care
iii commodity price risk
management policy
the group’s normal policy is to sell its products at prevailing market prices exceptions to this rule are subject to strict limits laid down by the boardandtorigid
internal controls
metals such as copper and aluminium are generally sold under contracts which vary in tenure and pricing mechanisms with some volumes sold in the spot
market the prices are determined by reference to prevailing market prices on terminal markets such as the london metal exchange lme and comex in new
york prices fluctuate widely in response to changing levels of supply and demand but in the long run prices are related to the marginal cost of supply gold is
also priced in an active market in which prices respond to daily changes in quantities offered and sought newly mined gold is only one source of supply
investment and disinvestment can be important elements of supply and demand
certain products predominantly copper concentrate are “provisionally priced” that is the selling price is determined normally 30 to 180 days after delivery to the
customer based on the market price at the relevant quotation point stipulated in the contract revenue is recognised on provisionally priced sales based on
estimates of fair value of the consideration receivable which is based on forward market prices at each reporting date provisionally priced metal sales are marked
to market based on the forward selling price for the period stipulated in the contract for this purpose the selling price can be measured reliably for those products
such as copper concentrate for which the price is directly related to the price of copper for which an active and freely traded commodity market exists such as the
lme and the value of product sold by the group is directly linked to the form in which it is traded on that market
riotintocom 149
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
30 financial instruments and risk management continued
the marking to market of provisionally priced sales contracts is recorded as an adjustment to sales revenue
at the end of 2014 the group had 331 million pounds of copper sales 2013 254 million pounds that were provisionally priced at us 288 cents per pound 2013
us 333 cents per pound the final price of these sales will be determined during the first half of 2015 a ten per cent change in the price of copper realised on the
provisionally priced sales all other factors held constant would increase or reduce net earnings by us51 million 2013 us49 million
hedging strategy
rio tinto’s exposure to commodity prices is diversified by virtue of its broad commodity base and the group does not generally believe commodity price hedging
would provide a long term benefit to shareholders the group may hedge certain commitments with some of its customers or suppliers details of commodity
derivatives held at 31 december 2014 are set out in section b
sensitivities
the group’s commodity derivatives are impacted by changes in market prices and include those aluminium forward and option contracts embedded in
electricity purchase contracts outstanding at 31 december 2014 a ten per cent increase in market prices would reduce net earnings by us97 million
2013 us164 million and a ten per cent decrease in prices would increase net earnings by us84 million 2013 us93 million a ten per cent change in
prices would impact equity before tax by us4 million 2013 us8 million
the group’s “own use contracts” are excluded from the sensitivity analysis as they are outside the scope of ias 39 such contracts to buy or sell nonfinancial
items can be net settled but were entered into and continue to be held for the purpose of the receipt or delivery of the nonfinancial item in accordance with the
business unit’s expected purchase sale or usage requirements
iv credit risk
treasury management policy
credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract leading to a financial loss the group is
exposed to credit risk from its operating activities primarily from customer receivables and from its financing activities including investments in government
securities deposits with banks and financial institutions other short term investments interest rate and currency derivative contracts and other financial
instruments
credit risks related to receivables
customer credit risk is managed by each business unit subject to the group’s established policy procedures and controls relating to customer credit risk
management credit limits are established for all customers based on internal or external rating criteria where customers are rated by an independent credit
rating agency these ratings are used to set credit limits in circumstances where no independent credit rating exists the credit quality of the customer is assessed
based on an extensive credit rating scorecard outstanding customer receivables are regularly monitored and any credit concerns highlighted to senior
management high risk shipments to major customers are generally covered by letters of credit or other forms of credit insurance
at 31 december 2014 the group had approximately 105 customers 2013 120 customers that owed the group more than us5 million each and these balances
accounted for approximately 77 per cent 2013 93 per cent of all receivables owing there were 22 customers 2013 46 customers with balances greater than
us20 million accounting for just over 43 per cent 2013 just over 65 per cent of total amounts receivable details of trade and other receivables pastduebutnot
impaired are provided in note 18
the maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets refer to table of financial assets and liabilities
reported above the group does not hold collateral as security for any trade receivables
credit risk related to financial instruments and cash deposits
credit risk from investments in government securities primarily us government treasuries and funds or money market funds and balances with banks and
financial institutions is managed by group treasury in accordance with a board approved policy investments of surplus funds are made only with approved
counterparties and within credit limits assigned to each counterparty mainly based upon specific assessment criteria counterparty credit limits are reviewed by
the board at least annually the limits are set to minimise the concentration of credit risk and therefore mitigate the potential for financial loss through
counterparty failure
the maximum credit risk exposure of the group’s financial assets at the balance sheet date is as follows
note
2014
usm
2013
usm
cash and cash equivalents 21 12423 10216
trade and other receivables 3727 5412
investments 20 287 506
derivative assets 20 436 466
total 16873 16600
v liquidity and capital risk management
management policy
the group’s overriding objective when managing capital is to safeguard the business as a going concern whilst maximising returns for shareholders inpractice
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 and the focus on the progressive dividend policy and other
forms of shareholder return whilst also striving to maintain the group’s “a” credit rating the resulting capital structure provides the group withahighdegreeof
financial flexibility at a low cost of capital
to maintain an “a” credit rating the group considers various financial metrics including the overall level of borrowings and their maturity profile liquidity levels
total capital cash flow ebitda and interest cover ratios either on a statutory reported basis or as expected to be adjusted by the credit rating agencies
150 riotintocom the group’s total capital which is defined as equity attributable to owners of rio tinto plus equity attributable to noncontrolling interests plus net debt amounted
to us671 billion at 31 december 2014 2013 us716 billion
total capital
2014
usm
2013
usm
equity attributable to owners of rio tinto see group balance sheet 46285 45886
equity attributable to noncontrolling interests see group balance sheet 8309 7616
netdebtnote24 12495 18055
total capital 67089 71557
net debt is a measure used by management and the board of directors to manage the group’s capital structure and liquidity risks and therefore is linked tothe
group’s financial and operational excellence strategic driver it is also used to manage the group’s interest rate risks and foreign exchange risks on borrowings and
cash net debt is disclosed and defined in note 24 net debt decreased from us181 billion at 31 december 2013 to us125 billion at 31 december 2014 as
operating cash inflows working capital improvements and divestment proceeds were partly offset by outflows relating to capital expenditure and theincreasein
the dividend at 31 december 2014 net debt to total capital was 19 per cent 2013 25 per cent and interest cover was 13 times 2013 13 times
the unified credit status of the group is maintained through cross guarantees whereby contractual obligations of rio tinto plc and rio tinto limited are
automatically guaranteed by the other the table below summarises the credit ratings attributed to the group as at 31 december
2014 2013
standard  poor’s sp
long term rating a a
short term rating a2 a2
outlook
a
stable negative
moody’s
long term rating a3 a3
short term rating p2 p2
outlook stable stable
a on 27 february 2014 sp revised its rio tinto outlook to ‘stable’
the group has access to various forms of financing including its us shelf programme european debt issuance programme commercial paper and credit
facilities the group did not issue any listed debt in 2014 under the various finance programmes listed in june 2013 under its us shelf programme the group
issued four rio tinto finance usa plc bonds us1000 million 1375 bond due 2016 us1250 million 2250 bond due 2018 us250 million libor plus
055 bond due 2015 and us500 million libor plus 0840 bond due 2016
rio tinto finance plc and rio tinto finance limited entered into new facility agreements for the aggregate amount of us75 billion on 15 november 2013 as
borrowers with a syndicate of banks the facilities are guaranteed by rio tinto plc and rio tinto limited the facilities comprise a us1875 million threeyear
multicurrency revolving credit facility and a us5625 million fiveyear multicurrency revolving credit facility including a us denominated same day access
swingline facility both facilities have been extended for one year on the first anniversary and can be extended for a further year on the second anniversary of the
date of the facility agreements by mutual agreement of the parties to the agreement the funds made available under the facility agreements may be used for the
general corporate purposes of the group the new facilities replaced the us6 billion multicurrency revolving credit facility dated 12 november 2010 and the
us2 billion bilateral bank facility agreements entered in the last quarter of 2012 which were closed out on 15 november 2013
advances under the revolving facilities bear an interest rate per annum based on libor or euribor cdor or bbsw in relation to any euro canadian dollar or
australian dollar loans respectively plus a margin which is dependent on the group’s longterm credit rating as determined by moody’s and standard  poor’s
and the level of drawdown the facility agreements contain no financial covenants at 31 december 2014 the facilities were undrawn
during the last quarter of 2012 the group entered into bilateral bank facility agreements amounting to us2 billion in aggregate the facilities were denominated
in us dollars and had a term of one year that was extendable at the group’s option by a further 364 days any borrowings under either facility were at prevailing
libor rates plus an agreed margin dependent on the amount of drawdown and the credit rating of the group the facilities were not subject to financial covenants
the facilities were undrawn and closed out on 15 november 2013
in november 2010 the group entered into a us6 billion multicurrency committed revolving credit facility maturing in november 2015 with its relationship banks
any borrowings under this facility were at prevailing libor rates plus an agreed margin dependent on the amount of drawdown and the credit rating of the group
the facility was not subject to any financial covenants the overall agreement also enabled same day access to a us swingline facility the funds available under
the facility agreement could have been used for general corporate purposes of the group the facility was undrawn and closed out on 15 november 2013
further details of the group’s credit facilities are set out in note 22
riotintocom 151
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
30 financial instruments and risk management continued
a c financial liability analysis
the table below analyses the group’s financial liabilities by relevant maturity groupings based on the remaining period from the balance sheet date tothe
contractual maturity date as the amounts disclosed in the table are the contractual undiscounted cash flows these balances will not necessarily agree with the
amounts disclosed in the balance sheet
at 31 december 2014
outflowsinflows
within 1
year or on
demand
usm
between
1and2
years
usm
between
2and3
years
usm
between
3and4
years
usm
between
4and5
years
usm
after
5years
usm
total
usm
nonderivative financial liabilities
trade and other payables 5640 515 – – – – 6155
borrowings before swaps 2664 2868 1973 3139 1524 12535 24703
expected future interest payments
a
927 883 838 816 608 5492 9564
other financial liabilities 49 67 3 1 – – 120
derivative financial liabilities
b
derivatives related to net debt – gross settled
a

gross inflows 36 36 36 36 36 1614 1794
gross outflows 28 28 28 28 28 1705 1845
derivatives not related to net debt – net settled 11 8 – 1 – – 20
derivatives not related to net debt – gross settled
grossinflows 423 –––– – 423
gross outflows 423 –––– – 423
total 9283 4333 2806 3949 2124 18118 40613
at 31 december 2013
outflowsinflows
within 1
year or on
demand
usm
between
1and2
years
usm
between
2and3
years
usm
between
3and4
years
usm
between
4and5
years
usm
after
5years
usm
total
usm
nonderivative financial liabilities
trade and other payables 6585 314 – – – – 6899
borrowings before swaps 4011 1926 2844 1984 3022 14684 28471
expected future interest payments
a
1007 928 889 857 804 6164 10649
other financial liabilities 39 67 18 – 1 1 126
derivative financial liabilities
b
derivativesrelatedtonetdebt–netsettled
a b
––––– 5 5
derivatives related to net debt – gross settled
a

gross inflows 516 20 20 20 20 797 1393
gross outflows 510 12 12 12 12 720 1278
total 11636 3227 3743 2833 3819 20777 46035
a interest payments have been projected using interest rates at the end of the applicable financial year where debt is subject to variable interest rates future interest payments are
subject to change in line with market rates
b the maturity grouping is based on the earliest payment date
c the maximum carrying value of borrowings repayable after the impact of swaps maturing in any financial year is us33 billion 2013 us32 billion
offsetting and enforceable master netting agreements
financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously there were no material amounts
offset in the balance sheet and no material enforceable master netting agreements were identified
152 riotintocom b derivative financial instruments
the group’s derivatives including embedded derivatives as at 31 december 2014 are summarised below
total fair value
2014 2013
derivatives designated as hedges
asset
usm
liability
usm
asset
usm
liability
usm
aluminium forward contracts embedded in electricity purchase contracts
a
17 – 21 –
interest rate swaps
b
189 – 138 –
cross currency interest rate swaps
c
11 54 54 14
total derivatives designated as hedges 217 54 213 14
derivatives not designated as hedges usm usm usm usm
currency forward contracts and swaps –5 41
aluminium forward contracts
d
13 20 6 19
aluminium options embedded in electricity purchase contracts
a
15 – 85 2
aluminium forward contracts embedded in electricity purchase contracts
a
182 – 128 –
other embedded derivatives 9– 30 –
other commodity contracts –2 ––
currency options embedded in borrowing contracts –– –5
total derivatives not designated as hedges 219 27 253 27
total derivative instruments 436 81 466 41
analysed by maturity
less than 1 year 43 14 63 10
between 1 and 5 years 102 13 109 11
more than 5 years 291 54 294 20
total 436 81 466 41
total net derivative instruments 355 425
reconciliation to balance sheet
2014
usm
2013
usm
– noncurrent assets note 20 393 403
– current assets note 20 43 63
– current liabilities note 22 14 10
– noncurrent liabilities note 22 67 31
total net derivatives instruments detailed above 355 425
a aluminium embedded derivatives forward contracts and options are contained within certain aluminium smelter electricity purchase contracts these contracts reduce the
group’s margin exposure to movements in the aluminium price
b the interest rate swaps are used to convert certain fixed rate borrowings to a floating rate for further details see note 22
c the cross currency interest rate swaps are used to convert non us dollar denominated borrowings to either fixed or floating us dollar borrowings for further details see note 22
d the aluminium forward contracts are entered into to convert aluminium sales made at a fixed price to lme cash in 2014 15 million ineffective portion arising from cash flow
hedges was recognised in the income statement 2013 nil
the aluminium forward contracts which were taken out to convert aluminium sales made at a fixed price to lme cash are not designated as hedges as they largely
offset
c fair values
the carrying amounts and fair values of all of the group’s financial instruments which are not carried at an amount which approximates their fair value at
31 december 2014 and 31 december 2013 are shown in the following table the fair values of the group’s cash and loans to equity accounted units approximate
their carrying values as a result of their short maturity or because they carry floating rates of interest
31 december 2014 31 december 2013
carrying
value
usm
fair
value
usm
carrying
value
usm
fair
value
usm
short term borrowings note 22 2664 2711 3916 3924
medium and long term borrowings note 22 22411 23657 24544 25746
borrowings with a carrying value of us232 billion 2013 us252 billion relate to listed bonds with a fair value of us245 billion 2013 us262 billion and are
categorised as level 1 in the fair value hierarchy the remaining borrowings have a fair value measured by discounting estimated cash flows with an applicable
market quoted yield and are categorised as level 2 in the fair value hierarchy
riotintocom 153
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
30 financial instruments and risk management continued
c a valuation hierarchy
the table below shows the financial instruments carried at fair value by valuation method at 31 december 2014
total level 1
a
level 2
b
level 3
c
not held
at fair value
assets
equity shares and quoted funds note 20 199 56 85 12 46
other investments including loans
d
note 20 287 108 – 56 123
trade receivables
e
2488 12 – – 2476
2974 176 85 68 2645
derivatives
f
forward contracts designated as hedges section b 17 – – 17 –
forward contracts and option contracts not designated as hedges section b 192 2 3 197 –
derivatives related to net debt section b 146 – 146 – –
3329 174 228 282 2645
the table below shows the financial instruments carried at fair value by valuation method at 31 december 2013
total level 1
a
level 2
b
level 3
c
not held
at fair value
assets
equity shares and quoted funds note 20 279 139 79 15 46
other investments including loans
d
note 20 506 106 1 215 184
785 245 80 230 230
derivatives
f
forward contracts designated as hedges section b 21 – – 21 –
forward contracts and option contracts not designated as hedges section b 231 2 19 210 –
derivatives related to net debt section b 173 – 173 – –
1210 247 272 461 230
a valuation is based on unadjusted quoted prices in active markets for identical financial instruments this category includes listed equity shares and other quoted funds
b valuation is based on inputs that are observable for the financial instruments which includes quoted prices for similar instruments or identical instruments in markets which are
not considered to be active or inputs either directly or indirectly based on observable market data
c valuation is based on inputs for the asset or liability that are not based on observable market data unobservable inputs
d other investments including loans comprise cash deposits in rehabilitation funds government bonds and royalty amounts receivable the royalty receivables are valued based
on an estimate of forward sales subject to the royalty agreement
e trade receivables includes provisionally priced receivables relating to sales contracts where selling price is determined after delivery to the customer based on the market price at
the relevant quotation point stipulated in the contract revenue is recognised on provisionally priced sales based on the forward selling price for the period stipulated in the
contract not included within the balance above are provisionally priced trade payables of us24 million wherein the fair value of the expected final price has fallen below the
initial consideration received
f level 3 derivatives consist of derivatives embedded in electricity purchase contracts linked to the lme with terms expiring between 2015 and 2030 2013 2014 and 2040
the embedded derivatives are measured using discounted cash flows and option model valuation techniques longterm embedded derivatives with a fair value of us196 million
at 31 december 2014 2013 us196 million are valued using significant unobservable inputs as the term of the derivative extends beyond the forward curve for alumnium
aluminium prices are flatlined beyond the market forward curve and increased by projected inflation up to the date of expiry of the contract the range of market prices are
us2320 per metric tonne in 2025 to us2578 in 2030 2013 us2413 per metric tonne in 2024 to us3157 in 2040
the other contracts with a fair value of us18 million at 31 december 2014 2013 us35 million are categorised as level three as the market premium assumptions used
represent unobservable inputs
g interest rate and currency interest rate swaps are valued using applicable market quoted swap yield curves adjusted for relevant basis and credit default spreads currency interest
rate swap valuations also use market quoted foreign exchange rates a discounted cash flow approach is applied to the cash flows derived from the inputs to determine fair value
h there were no transfers between level 1 and level 2 or between level 2 and level 3 in the year ended 31 december 2014 or the year ended 31 december 2013
154 riotintocom c b level 3 financial assets and financial liabilities
the table below shows the summary of changes in the fair value of the group’s level 3 financial assets and financial liabilities for the year ended 31 december
2014 and 31 december 2013
31 december 2014
level 3 financial assets
and financial liabilities
31 december 2013
level 3 financial assets
and financial liabilities
opening balance 461 189
currency translation adjustments 17 8
total realised losses or gains included in
– consolidated sales revenue – 20
– net operating costs 8 150
total unrealised gains or losses included in
– consolidated sales revenue – 2
– net operating costs 18 127
total unrealised losses or gains transferred into other comprehensive income 5 21
additions 8 –
disposalsmaturity of financial instruments 175 –
closing balance 282 461
total lossesgains for the year included in the income statement for assets and liabilities held
at year end 11 130
sensitivity analysis in respect of level 3 derivatives
forward contracts and options whose carrying value are valued using unobservable inputs are calculated using appropriate discounted cashflow and option model
valuation techniques the most significant of these assumptions relate to long term pricing wherein internal pricing assumptions are used after the ten year lme
curve a ten per cent increase in long term metal pricing assumptions would result in a us39 million 31 december 2013 us165 million decrease in carrying
value a ten per cent decrease in long term metal pricing assumptions would result in a us71 million 31 december 2013 us94 million increase in carrying value
31 contingencies and commitments
2014
usm
2013
usm
capital commitments excluding the group’s share of joint venture capital commitments
within 1 year 1838 5098
between 1 and 3 years 96 364
between 3 and 5 years 23 6
after 5 years 30 31
total 1987 5499
group’s share of joint venture capital commitments
within 1 year 782 831
between 1 and 3 years 331 789
between 3 and 5 years – 127
after 5 years – –
total 1113 1747
unrecognised commitments to contribute funding or resources to joint ventures
for minera escondida limitada and sohar aluminium company llc the group along with the other joint venturers has made various commitments to provide
shareholder funding as required subject to approved thresholds in particular minera escondida limitada holds a shareholder line of credit for us225 million
rio tinto share which is currently undrawn this line of credit was also available in 2013
the group has a commitment to purchase and market a portion which may be different to the group’s ownership interest of the output of sohar aluminium
company llc an aluminium smelter in which the group is a joint venturer the group subsequently sells the purchased products to third parties
operating leases
the aggregate amount of minimum lease payments under noncancellable operating leases are as follows
2014
usm
2013
usm
within 1 year 429 439
between 1 and 3 years 690 667
between 3 and 5 years 460 540
after 5 years 766 832
total 2345 2478
riotintocom 155
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
31 contingencies and commitments continued
purchase obligations
the aggregate amount of future payment commitments under purchase obligations outstanding at 31 december was
2014
usm
2013
usm
within 1 year 2912 3178
between 1 and 2 years 2434 2434
between 2 and 3 years 2026 2202
between 3 and 4 years 1660 1865
between 4 and 5 years 1479 1743
after 5 years 19572 14359
total 30083 25781
purchase obligations are agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms including fixed or
minimum quantities to be purchased fixed minimum or variable price provisions and the approximate timing of the transactions purchase obligations between
subsidiaries and joint arrangements are included to the extent that they relate to other venturers
2014
usm
2013
usm
contingent liabilities subsidiaries and joint operations
indemnities and other performance guarantees
a b
239 489
a indemnities and other performance guarantees represent the potential outflow of funds from the group for the satisfaction of obligations including those under contractual
arrangements for example undertakings related to supplier agreements not provided for in the balance sheet where the likelihood of the guaranteesorindemnitiesbeingcalled
is assessed as possible rather than probable or remote
b there were no material contingent liabilities arising in relation to the group’s joint ventures and associates
there are a number of legal claims currently outstanding against the groupnomateriallosstothegroupisexpectedtoresultfromtheseclaims
guarantees by parent companies
rio tinto plc and rio tinto limited have jointly and severally fully and unconditionally guaranteed the following securities issued by wholly ownedfinance
subsidiaries us185 billion 31 december 2013 us205 billion rio tinto finance usa limited and rio tinto finance usa plc bonds with maturitydatesupto
2042 usnil 31 december 2013 us157 million rio tinto america inc commercial paper and us23 billion 31 december 2013 us25 billion on the
european debt issuance programme in addition rio tinto finance plc and rio tinto finance limited have entered into facility arrangements for an aggregate
amount of us75 billion 31 december 2013 us75 billion the facilities are guaranteed by rio tinto plc and rio tinto limited
contingent assets
the group has various insurance claims outstanding with reinsurers including claims relating to the manefay slide at kennecott utah copper in april 2013
an interim progress payment was received on this claim in 2013 further receipts are considered probable but the amount cannot currently be reliably estimated
32 average number of employees
subsidiaries and joint
operations
equity accounted units
rio tinto share
a
group total
2014 2013 2012 2014 2013 2012 2014 2013 2012
the principal locations of employment were
australia and new zealand 23447 24740 25301 711 749 808 24158 25489 26109
canada 12187 12830 13688 – –– 12187 12830 13688
europe 3499 4210 5760 88 2427 3184 3587 6637 8944
africa 5699 6787 7055 1560 1505 2226 7259 8292 9281
united states 3503 4039 4564 – 285 375 3503 4324 4939
mongolia 3212 3289 2904 – –– 3212 3289 2904
indonesia 2959 2467 2467 – –– 2959 2467 2467
south america 356 511 235 1509 1409 1307 1865 1920 1542
other countries 1045 980 1143 – 103 202 1045 1083 1345
55907 59853 63117 3868 6478 8102 59775 66331 71219
a employee numbers which represent the average for the year include 100 per cent of employees of subsidiary companies employee numbers for joint operations and equity
accounted units are proportional to the group’s interest under contractual agreements average employee numbers include a part year effect for companiesacquiredordisposed
of during the year
part time employees are included on a full time equivalent basis temporary employees are included in employee numbers
people employed by contractors are not included
156 riotintocom 33 principal subsidiaries
at 31 december 2014
company and country of
incorporationoperation principal activities
class of
shares held
proportion of
class held 
group
interest 
noncontrolling
interest 
australia
argyle diamond limited mining and processing of diamonds ordinary 100 100 –
coal  allied industries limited
a
coal mining ordinary 80 80 20
dampier salt limited salt production ordinary 6836 6836 3164
energy resources of australia
limited
uranium mining ordinary 6839 6839 3161
hamersley iron pty limited iron ore mining ordinary 100 100 –
queensland coal pty limited
b
coal mining ordinary 100 100 –
rio tinto aluminium holdings
limited
bauxite mining alumina production
primary aluminium smelting
ordinary 100 100 –
robe river mining co pty ltd
c
iron ore mining class a 40

class b 7636
60 40
north mining limited
c
iron ore mining ordinary 100 100 –
brazil
alcan alumina ltda
d
alumina production and bauxite
mining
quota 100 100 –
canada
rio tinto canada uranium
corporation
uranium projects common shares 100 100 –
iron ore company of canada inc
e
iron ore mining iron ore pellets common shares 5872 5872 4128
rio tinto fer et titane inc titanium dioxide feedstock high common shares 100 100 –
purity iron and steel class b preference shares 100 100 –
cad 001 preferred shares 100 100 –
rio tinto alcan inc bauxite mining alumina refining
aluminium smelting
common shares 100 100 –
rio tinto diamonds and minerals
canada holding inc
f
diamond mining and processing class a b c
class p1 preferred
100
100
100
100
–
–
guinea
simfer jersey limited
g
iron ore project ordinary 53 53 47
madagascar
qit madagascar minerals sa
h
ilmenite mining common shares 80 80 15
investment certificates na 5
mongolia
turquoise hill resources ltd copper and gold mining common shares 5079 5079 4921
including oyu tolgoi llc and
southgobi resources ltd
i
namibia
rössing uranium limited
j
uranium mining b n1 7116

c n10c 7059
6858 3142
south africa
richards bay titanium
proprietary limited
k
titanium dioxidehigh purity iron
production
b ordinary 100

b preference 100 74 26
parent preference shares 100
richards bay mining
proprietary limited
k
ilmenite rutile and zircon
mining
b ordinary 100

b preference 100 74 26
parent preference shares 100
united states of america
kennecott holdings corporation
including kennecott utah copper
kennecott land and kennecott
exploration
copper and gold mining smelting and
refining land development and
exploration activities
common us001 100 100 –
us borax inc mining refining and marketing of
borates
common us010 100 100 –
riotintocom 157
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
33 principal subsidiaries continued
the group comprises a large number of companies and it is not practical to include all of them in this list the list therefore only includes those companies that have a more
significant impact on the profit or assets of the group
the group’s principal subsidiaries are mostly held by intermediate holding companies and not directly by rio tinto plc or rio tinto limited
a of the group’s 80 per cent interest in coal  allied industries limited an indirect share of 429 per cent is held through its investment in an equity accounted unit coal  allied
forms part of the rio tinto coal australia business unit
through a series of intermediate companies coal  allied holds interests in bengalla 40 per cent mount thorley 80 per cent and warkworth 556 percentthegroup’s
beneficial interests are therefore bengalla 32 per cent mount thorley 64 per cent warkworth 445 per cent these are unincorporated arrangements that are not entities the
group recognises its share of assets liabilities revenues and expenses relating to these arrangements coal  allied also owns 100 per cent of hunter valley operations
b queensland coal pty limited is the main legal entity that holds the group’s interests in hail creek 82 per cent blair athol 712 per cent and kestrel 80 per cent these are
unincorporated arrangements that are not entities the group recognises its share of assets liabilities revenues and expenses relating to these arrangements queensland coal
forms part of the rio tinto coal australia business unit
c robe river mining co pty ltd which is 60 per cent owned by the group holds a 30 per cent interest in robe river iron associates ‘robe river’ north mining ltd which is wholly
owned by the group holds a 35 per cent interest in robe river through these companies the group recognises a 65 per cent share of the assets liabilities revenues and
expenses of robe river with a 12 per cent noncontrolling interest the group therefore has a 53 per cent beneficial interest in robe river
d alcan alumina ltda holds the group’s 10 per cent interest in consórcio de alumínio do maranhão a joint operation in which the group participates but is not a joint operator
the group recognises its share of assets liabilities revenues and expenses relating to this arrangement
e iron ore company of canada inc is incorporated in the united states of america but operates in canada
f rio tinto diamonds and minerals canada holdings inc is the legal entity that owns the group’s 60 per cent interest in the diavik diamond mine diavik an unincorporated
arrangement that is not an entity the group recognises its share of assets liabilities revenue and expenses relating to this arrangement
g simfer jersey limited a company incorporated in jersey in which the group has a 53 per cent interest has an 8788 per cent interest in simfer sa the company that operates the
simandou mining project in guinea the group therefore has a 4657 per cent indirect interest in simfer sa these entities are consolidated as subsidiaries and together referred
to as the simandou iron ore project
h the group’s shareholding in qit madagascar minerals sa carries an 80 per cent economic interest and 80 per cent of the total voting rights a further 5 per cent economic interest
is held through nonvoting investment certificates to give an economic interest of 85 per cent the noncontrolling interests have a 15 per cent economic interest and 20 per cent
of the total voting rights
i the group obtained a controlling interest in turquoise hill resources ltd formerly ivanhoe mines limited on 24 january 2012 ivanhoe was renamed turquoise hill resources
ltd turquoise hill on 2 august 2012 refer to note 37 for further details relating to the consolidation of turquoise hill in 2012 the group has a 5079 per cent interest in
turquoise hill which holds a 66 per cent interest in oyu tolgoi ot and a 4791 per cent interest in southgobi resources ltd southgobi these companies are subsidiaries of
turquoise hill the group therefore has a 335 per cent indirect interest in ot and a 284 per cent indirect economic interest in southgobi southgobi is consolidated by virtue of
turquoise hill’s ability in practice to control the majority of effective votes at general meetings
this entity is incorporated in canada but operates in mongolia
j the group’s shareholding in rössing uranium limited holds 3554 per cent of the total voting rights the noncontrolling interests hold 6446 per cent of the total voting rights
rössing is consolidated by virtue of board control the government of namibia has the ability to veto matters that are considered not to be in the interest of namibia this is
considered to be a protective right rio tinto therefore has control of rössing and consolidates it as a subsidiary
k additional classes of shares issued by richards bay titanium proprietary limited and richards bay mining proprietary limited representing noncontrolling interests are not
shown the group’s total legal and beneficial interest in richards bay titanium proprietary limited and richards bay mining proprietary limitedis74percent
summary financial information for subsidiaries that have noncontrolling interests that are material to the group
this summarised financial information is shown on a 100 per cent basis it represents the amounts shown in the subsidiaries’ financial statements prepared in
accordance with ifrs under group accounting policies including fair value adjustments and before intercompany eliminations
iron ore
company
of canada
2014
iron ore
company
of canada
2013
energy
resources of
australia
2014
energy
resources of
australia
2013
simfer
jersey
a
2014
simfer
jersey
a
2013
turquoise
hill
b
2014
turquoise
hill
b
2013
revenue 1696 2258 345 339 – – 1765 237
profitloss after tax 222 485 167 132 334 87 156 5080
– attributable to noncontrolling interests 93 200 54 41 171 44 164 3203
– attributable to rio tinto 129 285 113 91 163 43 8 1877
other comprehensive loss 192 61 38 114 – – 34 96
total comprehensive incomeloss 30 424 205 246 334 87 190 5176
noncurrent assets 2944 3209 565 793 1769 1702 8337 8536
current assets 442 501 372 563 53 107 1382 1192
current liabilities 332 414 75 141 36 45 409 2771
noncurrent liabilities 949 904 427 573 16 34 595 425
net assets 2105 2392 435 642 1770 1730 8715 6532
– attributable to noncontrolling interests 871 988 138 203 877 862 4010 3052
– attributable to rio tinto 1234 1404 297 439 893 868 4705 3480
cashflow from operations 506 924 61 4 98 93 864 807
dividends paid to noncontrolling interests 120 106 – – – – – –
a during 2013 chalco sold its interest to chinalco its parent company these figures represent the consolidated position of both simfer jersey and simfer sa which together form
thesimandouironoreproject
b turquoise hill resources ltd holds controlling interests in ot and southgobi turquoise hill’s rights issue at the beginning of 2014 increased noncontrolling interests by
us1158 million
158 riotintocom robe river
mining co
pty ltd
2014
robe river
mining co
pty ltd
2013
other
companies
and
eliminations
c
2014
other
companies
and
eliminations
c
2013
robe river
2014
robe river
2013
revenue 1687 2074 1968 2417 3655 4491
profit after tax 766 1021 1036 1093 1802 2114
– attributable to noncontrolling interests 300 398 – – 300 398
– attributable to rio tinto 466 623 1036 1093 1502 1716
other comprehensive loss 364 620 187 348 551 968
total comprehensive income 402 401 849 745 1251 1146
noncurrent assets 4444 4545 5296 5329 9740 9874
current assets 73 149 86 176 159 325
current liabilities 112 213 271 396 383 609
noncurrent liabilities 287 314 2969 2436 3258 2750
net assets 4116 4167 2142 2673 6258 6840
– attributable to noncontrolling interests 1620 1645 – – 1620 1645
– attributable to rio tinto 2496 2522 2142 2673 4638 5195
cashflow from operations 1438 1570 1578 1801 3016 3371
dividends paid to noncontrolling interests 181 78 – – 181 78
c ‘other companies and eliminations’ includes the branch of north mining limited a wholly owned subsidiary of the group that accounts for its interest in robe river and the
goodwill of us409 million 2013 us445 million that arose on acquisition of the group’s interest in robe river during 2014 us1354 million was transferred from the branch
to the company cumulatively us2251 million has been transferred and this amount is shown within liabilities above
34 principal joint operations
at 31 december 2014
name and country of operation principal activities
group
interest 
australia
tomago aluminium joint venture aluminium smelting 516
kestrel coal mining 80
gladstone power station power generation 421
hope downs joint venture iron ore mining 50
queensland alumina limited
a b
alumina production 80
new zealand
new zealand aluminium smelters limited
a b
aluminium smelting 794
canada
alouette aluminium production 40
indonesia
grasberg expansion
c
copperandgoldmining 40
united states of america
pechiney reynolds quebec inc
b d
aluminium smelting 503
the group comprises a large number of operations and it is not practical to include all of them in this list the list therefore only includes those jointoperations
that have a more significant impact on the profit or operating assets of the group
the group’s joint operations are held by intermediate holding companies and not directly by rio tinto plc or rio tinto limited
a although the group has a 794 per cent interest in new zealand aluminium smelters limited and an 80 per cent interest in queensland alumina limited decisions about activities
that significantly affect the returns that are generated require agreement of both parties to the arrangements giving rise to joint control
b queensland alumina limited new zealand aluminium smelters limited and pechiney reynolds quebec inc are joint arrangements that are primarily designed for the provision of
output to the parties sharing joint control this indicates that the parties have rights to substantially all the economic benefits of the assets the liabilities of the arrangements are
in substance satisfied by cash flows received from the parties this dependence indicates that the parties effectively have obligations for the liabilities it is these facts and
circumstances that give rise to the classification for these entities as joint operations
c under the terms of a contractual agreement rio tinto is entitled to 40 per cent of additional material mined as a consequence of expansions and developments of the grasberg
facilities since 1998
d pechiney reynolds quebec inc has a 501 per cent interest in the aluminerie de becancour aluminium smelter which is located in canada
riotintocom 159
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
35 principal joint ventures
at 31 december 2014
company and country of incorporationoperation principal activities
number of
shares held
class of
shares held
proportion of
class held 
group
interest 
chile
minera escondida limitada
a
copper mining and refining 30 30
oman
søhar aluminium company llc
b
aluminium smeltingpower generation 37500 ordinary 20 20
the group comprises a large number of operations and it is not practical to include all of them in this list the list therefore only includes those joint ventures that
have a more significant impact on the profit or operating assets of the group
the group’s principal joint ventures are held by intermediate holding companies and not directly by rio tinto plc or rio tinto limited
a although the group has a 30 per cent interest in minera escondida limitada participant and management agreements allow for an owners’ council whereby significant
commercial and operational decisions about the relevant activities that significantly affect the returns that are generated require the joint approval of both rio tinto and bhp
billiton holders of a 575 per cent interest it is therefore determined that rio tinto participates in joint control
the year end of minera escondida limitada is 30 june the amounts included in the consolidated financial statements of rio tinto are however based on accounts of minera
escondida limitada that are coterminous with those of the group
b although the group holds a 20 per cent interest in søhar aluminium company llc decisions about relevant activities that significantly affect the returns that are generated
require agreement of all parties to the arrangement it is therefore determined that rio tinto participates in joint control
summary information for joint ventures that are material to the group
this summarised financial information is shown on a 100 per cent basis it represents the amounts shown in the joint ventures’ financial statements prepared in
accordance with ifrs under group accounting policies including fair value adjustments and amounts due to and from rio tinto
minera
escondida
limitada
c
2014
minera
escondida
limitada
c
2013
rio tinto
benga
mauritius
limited
d
2014
rio tinto
benga
mauritius
limited
e
2013
revenue 7607 8553 91 135
depreciation and amortisation 1027 720 – 43
impairment charges
e
– – – 354
other operating costs 3237 3697 220 289
operating profitloss 3343 4136 129 551
finance expense 33 17 11 3
income tax 1237 1543 – 22
profitloss after tax 2073 2610 140 532
total comprehensive incomeloss 2073 2610 140 532
noncurrent assets 12093 9823 – 389
current assets 2453 2653 – 166
current liabilities 1567 1031 – 136
noncurrent liabilities 2170 2152 – 328
net assets 10809 9293 – 91
assets and liabilities above include
cash and cash equivalents 263 319 – –
current financial liabilities 203 56 – 54
noncurrent financial liabilities 1060 1084 – 223
dividends received from joint venture rio tinto share 251 432 – –
reconciliation of the above amounts to the investment recognised in the group balance sheet
group interest 30 30
d
65
net assets 10809 9293 – 91
group’s ownership interest 3243 2788 – 59
other adjustments 6 2 – –
carrying value of group’s interest 3237 2790 – 59
160 riotintocom c in addition to its ‘investment in equity accounted unit’ the group recognises deferred tax liabilities of us546 million 2013 us511 million relating to tax on unremitted
earnings
d on 7 october 2014 rio tinto completed the sale of rio tinto coal mozambique which comprises the benga coal mine and other projects in the tete province of mozambique
seenote37
e in 2013 the group recognised a us216 million post tax impairment of its investment in rio tinto benga mauritius limited the investment was recognised at fair value on
acquisition and it is this investment that was impaired
36 principal associates
at 31 december 2014
company and country of incorporationoperation principal activities
number of
shares held
class of
shares
held
proportion of
class held 
group
interest 
australia
boyne smelters limited
a
aluminium smelting 153679560 ordinary 594 594
brasil
mineração rio do norte sa
b
bauxite mining 25000000 ordinary

125

12
47000000 preferred 118
united states of america
halco mining inc c 4500 common 45 45
the group’s principal associates are held by intermediate holding companies and not directly by rio tinto plc or rio tinto limited
the group comprises a large number of operations and it is not practical to include all of them in this list the list therefore only includes those associates that
have a more significant impact on the profit or operating assets of the group
a the parties that collectively control boyne smelters limited do so through decisions that are determined on an aggregate voting interest that can be achieved by several
combinations of the parties although each combination requires rio tinto’s approval this is not joint control as defined under ifrs 11 rio tinto is therefore determined to have
significant influence over this company
b although the group holds only 12 per cent of mineraça ¯o rio do norte sa it has representation on its board of directors and a consequent ability to participate in the financial and
operating policy decisions it is therefore determined that rio tinto has significant influence
c halco has a 51 per cent indirect interest in compagnie des bauxites de guinée a bauxite mine the core assets of which are located in guinea
summary information for associates that are material to the group
this summarised financial information is shown on a 100 per cent basis it represents the amounts shown in the associate’s financial statements prepared in
accordance with ifrs under group accounting policies including amounts due to and from rio tinto
boyne
smelters
limited
d
2014
boyne
smelters
limited
d
2013
revenue – –
profitloss after tax
f
1072 47
other comprehensive loss
e
82 –
total comprehensive incomeloss 990 47
noncurrent assets
f
1813 1086
current assets 86 111
current liabilities 108 101
noncurrent liabilities 1369 1697
net assets 422 601
d boyne smelters limited is a tolling operation as such it is dependent on its participants for funding which is provided through cash calls rio tinto aluminium has made certain
prepayments to boyne for toll processing of alumina these are charged to group operating costs as processing takes place
e “other comprehensive loss” is net of amounts recognised by subsidiaries in relation to quasi equity loans
f in 2014 a post tax impairment reversal of us589 million has been recorded see note 6
group interest 59 59
net assets 422 601
group’s ownership interest 251 357
loans to equity accounted units 228 276
carrying value of group’s interest 479 81
riotintocom 161
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
36 principal associates continued
summary information for joint ventures and associates that are not individually material to the group
joint
ventures
2014
joint
ventures
2013
associates
2014
associates
2013
carrying value of group’s interest 403 405 749 784
profitloss after tax 16 29 30 102
other comprehensive loss 30 7 14 38
total comprehensive loss income 14 36 16 64
37 purchases and sales of subsidiaries joint ventures associates and other interests in businesses
2014 acquisitions
there were no material acquisitions during the year ended 31 december 2014
2013 acquisitions
there were no material acquisitions during the year ended 31 december 2013
2012 acquisitions
consolidation of turquoise hill resources ltd
on 24 january 2012 rio tinto increased its ownership of shares in turquoise hill to a controlling 5101 per cent interest 31 december 2014 5079 per cent
interest the acquisition gave rio tinto control of the assets in turquoise hill other than those relating to oyu tolgoi ot control of which the group had
previously gained in 2010
total consideration to acquire the controlling interest in turquoise hill amounted to us839 million comprising us678 million relating to the fair value of the
group’s interest in turquoise hill prior to the acquisition date and us161 million of cash price paid to acquire the controlling interest after adjusting for amounts
attributable to ot and net intragroup balances between rio tinto and turquoise hill fair values on acquisition of turquoise hill were determined and finalised
during 2012
consolidation of richards bay minerals
on 7 september 2012 rio tinto increased its holding in rbm to 74 per cent with consolidation effective from 3 september 2012 following the completion of its
acquisition of bhp billiton’s entire interests including bhp billiton’s 37 per cent indirect equity voting interests in the rbm operating companies
the acquisition price was us19 billion before contractual adjustments for cash payments made by rbm to bhp billiton since the acquisition trigger date of
1 february 2012 this price included us06 billion for bhp billiton’s 37 per cent equity interest in rbm us10 billion for a 50 per cent interest in outstanding
rbm shareholder financing arrangements and us03 billion for a royalty stream
provisional fair values recognised on acquisition were finalised by 3 september 2013 12 months after the consolidation date no adjustments were made to
provisional fair values as a result of finalisation
2014 disposals
on 29 may 2014 rio tinto completed the sale of its 501 per cent interest in the clermont joint venture to gs coal for us1015 million before finalisation of net
debt and working capital adjustments the net assets and liabilities of clermont were included within assets and liabilities of disposal groups held for sale in the
group balance sheet at 31 december 2013
on 7 october 2014 rio tinto completed the sale of rio tinto coal mozambique which comprises the benga coal mine and other projects in the tete province of
mozambique to international coal ventures private limited for us50 million before net debt and working capital adjustments
rio tinto completed the sale of its 50 per cent share in søral to norsk hydro aluminium asa on 31 october 2014 and the sale of its 4667 per cent share in
alucam to the government of cameroon on 31 december 2014
on 26 may 2014 rio tinto and its simandou project partners signed an investment framework with the government of guinea and agreed to transfer an equity
interest in simfer sa to the state the arrangement allows the government of guinea to acquire equity interests of up to 25 per cent of simfer sa at a discount
to fair value and a further 10 per cent at full fair value arrangements to transfer an interest in a subsidiary undertaking at a discount to fair value are considered to
be a sharebased payment the discount provided or value given on the 25 per cent interest in simfer sa has been calculated in accordance with ifrs 2 “share
based payment” as a loss of us230 million
the first tranche of shares comprising 75 per cent noncontributory shares was transferred free of charge to the government of guinea on 26 may 2014
a second tranche comprising 10 per cent ordinary contributory shares may be acquired at any time for a pro rata share of historical mining cost the third tranche
of shares comprising 75 per cent noncontributory shares may be transferred at any time after 22 april 2016 free of charge the remaining two tranches of
5 per cent ordinary contributing shares may be acquired by the government of guinea at market value at any time after 22 april 2026 and 22 april 2031
respectively
disposals in the cash flow statement are presented net of cash on disposal and after adjusting for working capital and other items as specified under the sale
agreement
2013 disposals
significant divestments and disposals of interests in businesses during the year ended 31 december 2013 are summarised below
on 1 december 2013 rio tinto completed the sale of its 80 per cent interest in northparkes mine to china molybdenum co ltd for consideration of
us820 million
162 riotintocom on 23 may 2013 the initial public offering of constellium formerly alcan engineered products was launched resulting in rio tinto reducing its holding from
366 per cent to 275 per cent rio tinto subsequently divested the remainder of its holding in two further tranches total consideration from these transactions
was us671 million inclusive of a special dividend and proceeds from sale of rio tinto’s equity shareholding which are included within dividends from equity
accounted units and sales of financial assets respectively in the group’s cash flow statement
on 31 july 2013 rio tinto completed the sale of its 577 per cent interest in palabora mining company for us373 million the purchaser of was a consortium
comprising south african and chinese entities led by the industrial development corporation of south africa and hebei iron  steel group
turquoise hill resources ltd a 508 per cent owned subsidiary of rio tinto completed the sale of its 50 per cent interest in altynalmas gold and 57 per cent
interest in inova resources limited on 29 november 2013 and 1 november 2013 respectively sumeru gold bv consideration paid of us 235 million and
shanxi donghui coal coking  chemicals group co consideration paid of us81 million were the respective buyers
on 17 july 2013 rio tinto completed the sale of its 100 per cent interest in the eagle nickelcopper project to lundin mining corporation for consideration of
us315 million
2012 disposals
chalco joint venture and settlement agreement with government of guinea gog for the simandou iron ore project
on 24 april 2012 rio tinto and chalco a listed subsidiary of the aluminium corporation of china chinalco completed the formation of their joint venture to
develop and operate the simandou iron ore project in guinea following the completion of all chinese regulatory approvals to complete earn in to a 4465 per cent
net economic interest in the simandou project a consortium led by chalco made a payment to rio tinto of us135 billion in line with an agreement reached with
rio tinto on 29 july 2010 in late 2013 chalco completed the transfer of 65 per cent of their interest in simandou to their holding company chinalco who now
holds the simandou interest directly
under the settlement agreement signed by rio tinto and the gog on 22 april 2011 the gog has an option to take an interest of up to 35 per cent in simfer
sasimfer the rio tinto subsidiary that will undertake the mining portion of the simandou project
the settlement agreement provides for the transfer of ownership of railway and port infrastructure from simfer to a newly formed infrastructure entity infraco in
which the gog had indicated its intention to fund a 51 per cent interest
amendment to simfer’s mining convention and the terms of a new infrastructure convention required to give effect to the settlement agreement including the
gog participation in the project need to be finalised and will require legislative ratification
the eventual basis of accounting for infraco remains to be determined pending finalisation of the detailed infrastructure agreements
other disposals
during 2012 rio tinto completed the sale of alcan cable the specialty alumina businesses and the lynemouth power station finalisation of working capital
adjustments took place where applicable and did not result in a material impact on the group
38 directors’ and key management remuneration
aggregate remuneration calculated in accordance with the companies act 2006 of the directors of the parent companies was as follows
2014
us’000
2013
us’000
2012
us’000
emoluments 11090 14061 11165
long term incentive plans 5304 3719 –
16394 17780 11165
pension contributions defined contribution plans 55 108 66
gains made on exercise of share options – 5888 1668
the group defines key management personnel as the directors and members of theexecutivecommitteetheexecutivecommitteecomprisestheexecutive
directors product group chief executive officers pgceos and group executives
the aggregate remuneration incurred by rio tinto plc in respect of its directors was us6653000 2013 us11451000 2012 us7357000 the aggregate
pension contribution to defined contribution plans was us55000 2013 us44000 2012 usnil the aggregate remuneration including pension contributions
and other retirement benefits incurred by rio tinto limited in respect of its directors was us9796000 2013 us6437000 2012 us3874000 the aggregate
pension contribution to defined contribution plans was usnil 2013 us64000 2012 us66000
during 2014 one director 2013 three 2012 three accrued retirement benefits under defined benefit arrangements and one director 2013 two 2012 one
accrued retirement benefits under defined contribution arrangements
emoluments included in the table above have been translated from local currency at the average rate for the year with the exception of bonus payments which
together with amounts payable under long term incentive plans have been translated at the year end rate
detailed information concerning directors’ remuneration shareholdings and options is shown in the remuneration report including tables 1 to 3 onpages64to
100 of the 2014 annual report
riotintocom 163
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
38 directors’ and key management remuneration continued
aggregate compensation representing the expense recognised under ifrs as defined in note 1 of the group’s key management including directors was as
follows
2014
us’000
2013
us’000
2012
us’000
short term employee benefits and costs 30137 30696 27164
post employment benefits 1449 2741 5121
share based payments 19676 26392 32435
51262 59829 64720
the figures shown above include employment costs which comprise social security and accident premiums in the uk and us and payroll taxes in australia paid by
the employer as a direct additional cost of hire in total they amount to us2870000 2013 us2897000 2012 us2863000 and although disclosed here are
not included in table 1 of the remuneration report
more detailed information concerning the remuneration of key management is shown in the remuneration report including tables 1 to 3 on pages 64 to 100 of the
2014 annual report
39 auditors’ remuneration
2014
usm
2013
usm
2012
usm
group auditors’ remuneration
a
audit of the company 40 38 31
audit of subsidiaries 107 115 141
total audit 147 153 172
audit related assurance services 11 12 15
other assurance services
b
10 30 38
total assurance services 21 42 53
tax compliance
c
04 05 03
tax advisory services
c
05 04 04
services related to corporate finance transactions not covered above
– services in connection with bond issuescapital raising 01 04 06
– services in connection with divestment programme – 05 03
other nonaudit services not covered above 03 04 05
total nonaudit services 13 22 21
181 217 246
audit fees payable to other accounting firms
audit of the accounts of the group’s subsidiaries 27 30 29
fees in respect of pension scheme audits 04 03 01
31 33 30
a the remuneration payable to pwc the group auditors is approved by the audit committee the committee sets the policy for the award of nonaudit work to the auditors and
approves the nature and extent of such work and the amount of the related fees to ensure that independence is maintained the fees disclosed above consolidate all payments
made to member firms of pwc by the companies and their subsidiaries together with the group’s share of the payments made by joint operations nonaudit services arise largely
from assurance andor regulation related work
b other assurance services are mainly related to carveout financial statements sustainability assurance and assurance over the “taxes paid” report
c “taxation services” includes tax compliance and advisory services tax compliance involves the preparation or review of returns for corporation income sales and excise taxes
tax advisory services includes advice on nonrecurring acquisitions and disposals advice on transfer pricing and advice on employee global mobility
164 riotintocom 40 related party transactions
information about material related party transactions of the rio tinto group is set out below
subsidiary companies and joint operations
details of investments in principal subsidiary companies are disclosed in note 33 information relating to joint operations can be found in note 34
equity accounted units
transactions and balances with equity accounted units are summarised below purchases trade and other receivables and trade and other payables relate largely
to amounts charged by equity accounted units for toll processing of alumina and purchasing of bauxite and aluminium sales relate largely to charges for supply of
coal to jointly controlled marketing entities for onward sale to third party customers
income statement items
2014
usm
2013
usm
2012
usm
purchases from equity accounted units 1835 1953 2283
sales to equity accounted units 625 1569 1742
cash flow statement items usm usm usm
net funding of equity accounted units 117 88 223
balance sheet items usm usm usm
investments in equity accounted units note 15
a
4868 3957 3941
loans to equity accounted units 71 94 282
loans from equity accounted units 52 86 116
trade and other receivables amounts due from equity accounted units 423 615 722
trade and other payables amounts due to equity accounted units note 25 225 290 357
a further information about investments in equity accounted units is set out in notes 35 and 36
pension funds
information relating to pension fund arrangements is disclosed in note 45
directors and key management
details of directors’ and key management remuneration are set out in note 38 and in the remuneration report on pages 64 to 100
41 exchange rates in us
the principal exchange rates used in the preparation of the 2014 financial statements are
annual average year end
2014 2013 2012 2014 2013 2012
sterling 165 156 158 156 165 162
australian dollar 090 097 104 082 089 104
canadian dollar 091 097 100 086 094 100
south african rand 0092 0104 0122 0086 0096 0122
euro 133 133 129 122 138 132
42 bougainville copper limited bcl
the group owns 5383 per cent of the issued share capital of bcl mining has been suspended at the panguna mine since 1989 safe access by company
employees has not been possible since that time and an accurate assessment of the condition of the assets cannot therefore be made considerable funding
would be required to recommence operations to the level which applied at the time of the mine’s closure in 1989 an order of magnitude study completed by bcl
in 2013 indicated an estimated capital requirement of us52 billion to reopen the mine assuming all site infrastructure is replaced rio tinto does not have
control over bcl under ifrs as defined in note 1 as it does not have the current ability to direct the activities that affect its returns being the mining and sale of
ore from the panguna mine it is therefore not a subsidiary
on 18 august 2014 in light of developments in papua new guinea including the new mining legislation passed earlier that month by the autonomous
bougainville government the group announced a strategic review of all options in relation to the 5383 per cent stake in bcl
43 events after the balance sheet date
on 12 february 2015 the group announced a share buyback of us2 billion comprising a a500 million c us04 billion offmarket share buyback tender of
rio tinto limited shares and the balance of approximately us16 billion as an onmarket buyback of rio tinto plc shares ordinary shares of rio tinto plc have
been bought back since 18 february 2015 and announcements have been made to the relevant stock exchanges shares so purchased have been cancelled
no rio tinto limited shares have been purchased at the date of this report
other than the items above no events were identified after the balance sheet date which could be expected to have a material impact on the consolidated
financial statements
riotintocom 165
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the financial statements continued
44 share based payments
rio tinto plc and rio tinto limited the companies have a number of share based payment plans which are described in detail in the remuneration report
these plans have been accounted for in accordance with the fair value recognition provisions of ifrs 2 sharebased payment
the charge that has been recognised in the income statement for rio tinto’s sharebased compensation plans and the related liability for cashsettled plans is
set out in the table below
chargecredit recognised for the year liability at the end of the year
2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
equitysettled plans 152 142 243 – –
cashsettled plans – –3 1 1
total 152 142 240 1 1
the main rio tinto plc and rio tinto limited plans are as follows
share savings plans
awards under these plans are settled in equity and accounted for accordingly the fair value of each award on the day of grant was estimated using a latticebased
option valuation model including allowance for the exercise price being at a discount to market price
awards are no longer granted under the share savings plans as these plans were replaced by the global employee share plan in 2012 charges will continue to be
incurred until prior period awards have vested
share option plan
the group has a policy of settling awards made under the share option plan in equity although the directors at their discretion can offer a cash alternative
the awards are accounted for in accordance with the requirements applying to equitysettled sharebased payment transactions the performance conditions in
relation to total shareholder return tsr have been incorporated in the measurement of fair value for these awards by modelling the correlation between
rio tinto’s tsr and that of the hsbc global mining index the relationship between rio tinto’s tsr and the index was simulated many thousands of times to
derive a distribution which in conjunction with the latticebased option valuation model was used to determine the fair value of the options
awards are no longer granted under the share option plans as the ltip arrangements have been simplified and awards are now only made under the performance
share plan charges will continue to be incurred until prior period awards have vested
uk share plan formerly the share ownership plan
the fair values of matching and free shares made by rio tinto are taken to be the market value of the shares on the date of purchase these awards are settledin
equity
performance share plan
participants are generally assigned shares in settlement of their awards and therefore the plan is accounted for in accordance with the requirements applying to
equitysettled sharebased payment transactions
for the awards or parts of awards with tsr performance conditions the fair value of the awards was calculated using a monte carlo simulation model taking into
account the tsr performance conditions onethird of the 2013 and 2014 awards must satisfy an earnings target relative to ten global mining comparators for
vesting as this is a nonmarket related performance condition under ifrs 2 the fair value recognised is reviewed at each accounting date based on the directors’
expectations for the proportion vesting as at 31 december 2014 it was assumed 100 per cent of awards subject to the condition would vest forfeitures are
assumed prior to vesting at three per cent per annum of outstanding awards
management share plan
the management share plan was introduced during 2007 to provide conditional sharebased awards to management the vesting of these awards is dependent on
service conditions being met in general the awards will be settled in equity including the dividends accumulated from date of award to vesting the awards are
accounted for in accordance with the requirements applying to equitysettled sharebased payment transactions
the fair value of each award on the day of grant is equal to the share price on the day of grant less a small adjustment for the timing of dividends forfeitures are
assumed prior to vesting at seven per cent per annum of outstanding awards 2013 five per cent per annum
bonus deferral plan
the bonus deferral plan was originally introduced during 2009 for the mandatory deferral of the 2008 bonuses for executive directors product group executives
and for other executives additional bonus deferral awards have been made each year since 2011 made in respect of the 2010 bonus for the mandatory deferral
of 50 per cent of the bonuses for executive directors and product group executives and ten per cent of the bonuses for other executives
the vesting of these awards is dependent only on service conditions being met in general the awards will be settled in equity including the dividends
accumulated from date of award to vesting the awards are accounted for in accordance with the requirements applying to equitysettled sharebased payment
transactions the fair value of each award on the day of grant is equal to share price on the day of grant less a small adjustment for the timing of dividendsvesting
forfeitures are assumed prior to vesting at three per cent per annum of outstanding awards
global employee share plan
the global employee share plan was introduced during 2012 the company provides matching shares for each share purchased the vesting of these matching
awards is dependent on service conditions being met these awards are settled in equity the fair value of each matching share on the day of grant is equalto
share price on the date of purchase forfeitures are assumed prior to vesting at five per cent per annum of outstanding awards
166 riotintocom summary of options outstanding
a summary of the status of the companies’ equitysettled share option plans at 31 december 2014 is presented below
options outstanding at 31 december 2014 number
weighted
average
exercise price
per option
£a
weighted
average
remaining
contractual
life
years
aggregate
intrinsic
value 2014
usm
rio tinto plc share savings plan exercise price £21 – £29 299561 2632 08 2
rio tinto limited share savings plan exercise price a48 – a60 609426 5340 11 2
rio tinto plc share option plan exercise price £15 – £43 1438972 3231 52 8
rio tinto limited share option plan exercise price a30 – a77 450964 5143 35 4
2798923 16
as at 31 december 2013 there were 4216531 options outstanding with an aggregate intrinsic value of us57 million
options exercisable at 31 december 2014
rio tinto plc share option plan exercise price £15 – £43 1128973 3152 47 8
rio tinto limited share option plan exercise price a30 – a77 450964 5143 35 4
1579937 12
as at 31 december 2014 and 31 december 2013 there were no options exercisable under either the rio tinto plc or the rio tinto limited share savings plans
the management share plan performance share plan bonus deferral plan global employee share plan and uk share plan together represent 93 per cent 2013
91 per cent of the total ifrs 2 charge for rio tinto plc and rio tinto limited plans in 2014
performance share plan
rio tinto plc awards rio tinto ltd awards
2014
number
weighted
average
fair value at
grant date
2014
£
2013
number
weighted
average
fair value at
grant date
2013
£
2014
number
weighted
average
fair value at
grant date
2014
a
2013
number
weighted
average
fair value at
grant date
2013
a
nonvested shares at
1 january 3161952 2791 2705545 3040 2023519 5329 1541776 6046
awarded 950148 2273 949588 1906 626072 4440 651435 3617
forfeited 230496 2098 303008 3120 127726 4031 137408 5740
failed performance
conditions 233736 3633 14070 1361 124431 7565 2423 3274
vested 719867 3627 176103 1391 372558 7566 29861 3274
nonvested shares at
31 december 2928001 2405 3161952 2791 2024876 4587 2023519 5329
2014
number
weighted
average
share price
2014
£
2013
number
weighted
average
share price
2013
£
2014
number
weighted
average
share price
2014
a
2013
number
weighted
average
share price
2013
a
shares issued in respect of
vested awards during the
year 719867 3324 176103 3469 355548 6598 29861 6903
vested awards settled in
cash during the year –– –– 17010 6598 ––
in addition to the equitysettled awards shown above there were 1261 rio tinto plc cashsettled awards outstanding at 31 december 2014 the total liability for
these awards at 31 december 2014 was less than us1 million 2013 less than us1 million
riotintocom 167
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
44 share based payments continued
management share plan bonus deferral plan global employee share plan and uk share plan combined
rio tinto plc awards rio tinto ltd awards
2014
number
weighted
average
fair value at
grant date
2014
£
2013
number
weighted
average
fair value at
grant date
2013
£
2014
number
weighted
average
fair value at
grant date
2014
a
2013
number
weighted
average
fair value at
grant date
2013
a
nonvested awards at 1 january 2277219 3272 2073129 3721 2058902 6164 1574153 7173
awarded 1420588 3187 1420445 2909 1357091 6174 1301055 5536
forfeited 191039 3067 237265 3413 206134 5886 165591 6236
expired –– 5172 3697 –– 219 7602
vested 759422 3670 973918 3661 630778 7093 650496 7317
nonvested awards at
31 december 2747346 3089 2277219 3272 2579081 5983 2058902 6164
comprising of
– management share plan 1807727 3216 1708472 3338 1638119 5946 1505507 6293
– bonus deferral plan 202651 3358 206336 3220 199724 5824 205242 5910
– global employee share plan 693230 2672 353049 2993 741238 6108 348153 5757
– uk share plan 43738 3182 9362 2911
2014
number
weighted
average
share price
2014
£
2013
number
weighted
average
share price
2013
£
2014
number
weighted
average
share price
2014
a
2013
number
weighted
average
share price
2013
a
shares issued in respect of
vested awards during the year
including dividend shares
applied on vesting
– management share plan 631359 3184 843009 3382 461835 6370 582493 6509
– bonus deferral plan 144916 2944 106335 3223 128528 5848 65297 6477
– global employee share plan 42910 3110 12335 3092 32780 6070 10324 6034
– uk share plan 4096 3277 35250 2972
in addition to the equitysettled awards shown above there were 16985 rio tinto plc cashsettled awards outstanding at 31 december 2014 the total liability for
these awards at 31 december 2014 was less than us1 million 2013 less than us1 million
45 post retirement benefits
description of plans
the group operates a number of pension and post retirement healthcare plans around the world some of these plans are defined contribution and some are
defined benefit with assets held in separate trusts foundations and similar entities
defined benefit pension and post retirement healthcare plans expose the group to a number of risks
uncertainty in benefit payments the value of the group’s liabilities for post retirement benefits will ultimately depend on the amount of benefits paid
out this in turn will depend on the future pay increases the level of inflation for those benefits that are subject to
some form of inflation protection and how long individuals live
volatility in asset values the group is exposed to future movements in the values of assets held in pension plans to meet future benefit
payments
uncertainty in cash funding movements in the values of the obligations or assets may result in the group being required to provide higher levels of
cash funding although changes in the level of cash required can often be spread over a number of years in some
countries control over the rate of cash funding or over the investment policy for pension assets might rest to some
extent with a trustee body or other body that is not under the group’s direct control in addition the group is also
exposed to adverse changes in pension regulation
for these reasons the group has a policy of moving away from defined benefit pension provision and towards defined contribution arrangements instead
the defined benefit pension plans for salaried employees are closed to new entrants in almost all countries for unionised employees some plans remainopenbut
others are closed
the group does not usually participate in multiemployer plans in which the risks are shared with other companies using those plans the group’s participation in
such plans is immaterial and consequently no detailed disclosures are provided in this note
168 riotintocom pension plans
the majority of the group’s defined benefit pension obligations are in canada the uk the us switzerland and the eurozone
in canada the benefits for salaried staff are generally linked to final average pay and are closed to new entrants benefits for bargaining employees are reviewed in
negotiation with unions and are typically either linked to final average pay or to a flat monetary amount per year of service some of these plans have been closed
to new entrants but some remain open at present the plans are subject to the regulatory requirements that apply to canadian pension plans in the relevant
provinces and territories predominantly quebec pension committees are responsible for ensuring that the plans operate in a manner that is compliant with the
relevant regulations the pension committees generally have a number of members appointed by the sponsor and a number appointed by the plan participants
in some cases there is also an independent committee member
the defined benefit sections of the uk arrangements are linked to final pay and are closed to new members new employees are admitted to defined contribution
sections the plans are subject to the regulatory requirements that apply to uk pension plans trustees are responsible for ensuring that the plans operate in a
manner that is compliant with uk regulations trustee boards have a number of directors appointed by the sponsor and a number appointed by the plan
participants in some cases there is also an independent trustee director
a number of defined benefit pension plans are sponsored by the us entities benefits for salaried staff are generally linked to final average pay and closed to new
entrants while benefits for bargaining employees are reviewed in negotiation with unions and are typically a flat monetary amount per year of service a benefits
governance committee is responsible for ensuring that the plans are compliant with us regulations members of that committee are appointed by the sponsor
in europe there are defined benefit plans in switzerland the netherlands germany and france the largest single plan is in switzerland and providesbenefits
linked to final average pay the swiss plan is overseen by a foundation board which is responsible for ensuring that the plan complies with swiss regulations
foundation board members are appointed by the plan sponsor by employees and by retirees
in australia the main arrangements are principally defined contribution in nature but there are sections providing defined benefits linked to final pay typically paid
in lump sum form the defined benefit sections are closed to new entrants
the group also operates a number of unfunded defined benefit plans which are included in the figures below
post retirement healthcare plans
certain subsidiaries of the group mainly in the us and canada provide health and life insurance benefits to retired employees and in some cases to their
beneficiaries and covered dependants eligibility for cover is dependent upon certain age and service criteria these arrangements are generally unfunded and are
included in the figures below
plan assets
the assets of the pension plans are invested predominantly in a diversified range of equities bonds and property consequently the funding level of the pension
plans is affected by movements in the level of equity markets and also by movements in interest rates the group monitors its exposure to changes in interest
rates and equity markets and also measures its balance sheet pension risk using a value at risk approach these measures are considered when deciding whether
significant changes in investment strategy are required assetliability studies are conducted on a periodic basis for the main pension plans to determine the
optimal investment mix bearing in mind the group’s tolerance for risk the risk tolerance of the local sponsor companies and the views of the pension committees
and trustee boards who are legally responsible for the investments of the plans in canada the uk and switzerland the group works with the trustees to ensure
that the investment policy adopted is consistent with the group’s tolerance for risk in the us the group has direct control over the investment policysubjectto
the local investment regulations
the proportions of the total fair value of assets in the pension plans for each asset class at the balance sheet date were
2014 2013
equities 391 453
–quoted 354 421
–private 37 32
bonds 469 404
–governmentfixedincome 136 107
– government inflationlinked 118 103
– corporate and other publicly quoted 207 185
–private 08 09
property 101 87
– quoted property funds 60 46
– unquoted property funds 40 40
– directly held property 01 01
qualifying insurance policies 05 17
cash  other 34 39
1000 1000
the assets of the plans are managed on a daytoday basis by external specialist fund managers these managers may invest in the group’s securities subject to
limits imposed by the relevant fiduciary committees and local legislation the approximate total holding of group securities within the plans is us22 million
2013 us40 million
the holdings of quoted equities are invested either in pooled funds or segregated accounts held in the name of the relevant pension funds these equity portfolios
are well diversified in terms of the geographic distribution and market sectors
the holdings of government bonds are generally invested in the debt of the country in which a pension plan is situated corporate and other quoted bonds are
usually of investment grade private debt is mainly in north america
riotintocom 169
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
45 post retirement benefits continued
the quoted property funds are invested in a diversified range of properties the directly held property is owned by the swiss pension fund and is predominantly
invested in properties in and around zurich
the holdings of cash and other are predominantly cash and shortterm money market instruments
investments in private equity private debt unquoted property funds and directly held property are less liquid than the other investment classes listed above and
therefore the group’s investment in those asset classes is restricted to a level that does not endanger the liquidity of the pension plans
the group does not currently utilise derivatives to manage risk in its pension plans however fund managers may use derivatives to hedge currency movements
within their portfolios and in the case of bond managers to take positions that could be taken using direct holdings of bonds but more efficiently
maturity of defined benefit obligations
an approximate analysis of the maturity of the obligations is given in the table below
pension
benefits
other
benefits
2014
total

2013
total

2012
total

proportion relating to current employees 25 22 25 25 29
proportion relating to former employees not yet retired 11 2 11 11 11
proportion relating to retirees 64 76 64 64 60
total 100 100 100 100 100
average duration of obligations years 140 130 139 133 141
geographical distribution of defined benefit obligations
an approximate analysis of the geographic distribution of the obligations is given in the table below
pension
benefits
other
benefits
2014
total

2013
total

2012
total

canada 47 44 46 45 49
uk 29 2 27 27 23
us 12 52 15 14 15
switzerland 5 0 5 6 5
eurozone 4 0 4 5 5
australia 2 0 2 2 2
other 1 2 1 1 1
total 100 100 100 100 100
total expense recognised in the income statement
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
2012
total
usm
current employer service cost for defined benefit plans 187 9 196 284 270
past service incomecost –66 66 14
curtailment lossesgains 1 – 1 44 59
settlement gains 22 – 22 2–
netinterestcostondefinedbenefitliability 83 50 133 209 240
noninvestment expenses paid from the plans 19 – 19 22 20
total defined benefit expense 268 7 261 468 475
current employer service cost for defined contribution and industrywide plans 328 1 329 337 348
total expense recognised in the income statement 596 6 590 805 823
the above expense amounts are included as an employee cost within net operating costs in 2014 us2 million pretax of curtailment and settlement gains
relating to the closure of a site have been excluded from underlying earnings 2013 us21 million 2012 us34 million both relating to divestments
the curtailments shown in the table above relate primarily to headcount reductions at various operations and divestments during 2014 and previous years
the settlement gains in 2014 and 2013 relate mainly to an exercise in the us in which deferred vested participants were offered a onetime lump sum payment in
place of their future pension payments the other benefits past service income during 2014 relates to design changes to us postretirement medical plans
total amount recognised in other comprehensive income before tax
2014
usm
2013
usm
2012
usm
actuarial lossesgains 1853 1092 1235
return on assets net of interest on assets 1127 1212 903
loss on application of asset ceiling 9 44 –
total lossgain recognised in other comprehensive income 735 2260 332
170 riotintocom amounts recognised in the balance sheet
the following amounts were measured in accordance with ias 19 at 31 december
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
total fair value of plan assets 15219 – 15219 15527
present value of obligations – funded 16869 – 16869 16699
present value of obligations – unfunded 983 1047 2030 2093
present value of obligations – total 17852 1047 18899 18792
effect of asset ceiling 53 – 53 44
net deficit to be shown in the balance sheet 2686 1047 3733 3309
comprising
– deficits 3039 1047 4086 3599
– surpluses 353 – 353 290
net deficits on pension plans 2686 – 2686 2215
unfunded post retirement healthcare obligation – 1047 1047 1094
the surplus amounts shown above are included in the balance sheet as trade and other receivables see note 18
deficits are shown in the balance sheet within provisions including post retirement benefits see note 26
funding policy and contributions to plans
the group reviews the funding position of its major pension plans on a regular basis and considers whether to provide funding above the minimum level required
in each country in canada and the us the minimum level is prescribed by legislation in the uk and switzerland the minimum is negotiated with the local trustee
or foundation in accordance with the funding guidance issued by the local regulators in deciding whether to provide funding above the minimum level the group
takes into account other possible uses of cash within the group the tax situation of the local sponsoring entity and any strategic advantage that the group might
obtain by accelerating contributions the group does not generally prefund postretirement healthcare arrangements
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
2012
total
usm
contributions
contributions to defined benefit plans 291 62 353 734 727
contributions to defined contribution plans 309 1 310 317 328
contributions to industrywide plans 19 – 19 20 20
total 619 63 682 1071 1075
contributions to defined benefit pension plans for 2015 are estimated to be around us375 million this is kept under regular review and actual contributions will
be determined in line with the group’s wider financing strategy taking into account relevant minimum funding requirements as contributions to many plans are
reviewed on at least an annual basis the contributions for 2015 and subsequent years cannot be determined in advance and may be higher or lower than this
healthcare plans are generally unfunded and contributions for future years will be equal to benefit payments net of participant contributions the group’s
contributions are expected to be similar to the amounts paid in 2014
movements in the net defined benefit liability
a summary of the movement in the net defined benefit liability is shown in the first table below the subsequent tables provide a more detailed analysis of the
movements in the present value of the obligations the fair value of assets and the effect of the asset ceiling
the amounts shown below include where appropriate 100 per cent of the costs contributions gains and losses in respect of employees who participateinthe
plans and who are employed in associates and joint arrangements consequently the costs contributions gains and losses may not correspond directly to the
amounts disclosed above in respect of the group defined contribution plans and industrywide plans are excluded from the movements below
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
change in the net defined benefit liability
net defined benefit liability at start of the year 2215 1094 3309 6051
amounts recognised in income 268 7 261 468
amounts recognised in other comprehensive income 668 67 735 2260
employer contributions 291 62 353 734
divestmentsnewly included arrangements 13 – 13 19
currency exchange rate movements 161 45 206 197
net defined benefit liability at end of the year 2686 1047 3733 3309
riotintocom 171
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
45 post retirement benefits continued
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
change in present value of obligation
present value of obligation at start of the year 17698 1094 18792 20722
current employer service cost 187 9 196 284
past service cost –66 66 1
curtailments 1 – 1 44
settlements 326 – 326 131
interest on obligations 733 50 783 776
contributions by plan participants 32 5 37 41
benefits paid 975 67 1042 1086
experience gain 27 29 56 90
changes in financial assumptions lossgain 1624 94 1718 965
changes in demographic assumptions lossgain 189 2 191 37
arrangements divested 58 – 58 94
currency exchange rate gain 1226 45 1271 583
present value of obligation at end of the year 17852 1047 18899 18792
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
change in plan assets
fair value of plan assets at the start of the year 15527 – 15527 14671
settlements 304 – 304 129
interest on assets 655 – 655 567
contributions by plan participants 32 5 37 41
contributions by employer 291 62 353 734
benefits paid 975 67 1042 1086
noninvestment expenses 19 – 19 22
return on plan assets net of interest on assets 1127 – 1127 1212
arrangements divested 45 – 45 75
currency exchange rate loss 1070 – 1070 386
fair value of plan assets at the end of the year 15219 – 15219 15527
pension
benefits
other
benefits
2014
total
usm
2013
total
usm
change in the effect of the asset ceiling
effect of the asset ceiling at the start of the year 44 – 44 –
interest on the effect of the asset ceiling 5 – 5 –
movement in the effect of the asset ceiling 9 – 9 44
currency exchange rate gain 5– 5 –
effect of the asset ceiling at the end of the year 53 – 53 44
in determining the extent to which the asset ceiling has an effect the group considers the funding legislation in each country and the rules specific toeach
pension plan the calculation takes into account any minimum funding requirements that may be applicable to the plan whether any reduction in future group
contributions is available and whether a refund of surplus may be available where the plan rules and legislation both permit the employer to take a refund of
surplus the asset ceiling may have no effect although it may be the case that a refund will only be available many years in the future
172 riotintocom main assumptions rates per annum
the main assumptions for the valuations of the plans under ias 19 are set out below
canada uk us switzerland eurozone australia
other
mainly
africa
a
at 31 december 2014
rate of increase in salaries 31 38 36 23 21 40 91
rate of increase in pensions 07 26 – 00 15 21 71
discount rate 39 34 38 09 18 27 90
inflation
b
18 30 21 13 17 21 71
at 31 december 2013
rate of increase in salaries 33 50 38 23 26 44 90
rate of increase in pensions 08 30 – 02 15 27 70
discount rate 46 44 46 22 34 41 91
inflation
b
20 34 23 13 19 27 70
a the assumptions vary by location for the ‘other’ plans assumptions shown are for southern africa
b the inflation assumption shown for the uk is for the retail price index the assumption for the consumer price index at 31 december 2014 was 20 per cent 2013 24 per cent
the main financial assumptions used for the healthcare plans which are predominantly in the us and canada were discount rate 39 per cent 2013
46 per cent medical trend rate 67 per cent reducing to 51 per cent by the year 2022 broadly on a straight line basis 2013 68 per cent reducing to 51 per cent
by the year 2022 claims costs based on individual company experience
for both the pension and healthcare arrangements the post retirement mortality assumptions allow for future improvements in longevity the mortality tables
used imply that a man aged 60 at the balance sheet date has a weighted average expected future lifetime of 26 years 2013 25 years and that a man aged 60 in
2034 would have a weighted average expected future lifetime of 28 years 2013 27 years
sensitivity
the values reported for the defined benefit obligations are sensitive to the actuarial assumptions used for projecting future benefit payments and discounting
those payments in order to estimate the sensitivity of the obligations to changes in assumptions we calculate what the obligations would be if we were to
make small changes to each of the key assumptions in isolation the difference between this figure and the figure calculated using our stated assumptions is
an indication of the sensitivity to changes in each assumption the results of this sensitivity analysis are summarised in the table below note that this
approach is valid for small changes in the assumptions but will be less accurate for larger changes in the assumptions
2014 2013
approximate increase
decrease in obligations
approximate increase
decrease in obligations
assumption change in assumption
pensions
usm
other
usm
pensions
usm
other
usm
discount rate increase of 05 percentage points 1166 63 1095 62
decrease of 05 percentage points 1250 68 1169 66
inflation increase of 05 percentage points 653 23 626 32
decrease of 05 percentage points 620 20 594 29
salary increases increase of 05 percentage points 100 2 100 3
decrease of 05 percentage points 97 2 97 2
demographic – allowance for future
improvements in longevity
participants assumed to have the mortality rates of
individuals who are one year older 477 18 437 16
participants assumed to have the mortality rates of
individuals who are one year younger 477 18 437 16
medical cost trend rates increase of 10 percentage points –41 – 59
decrease of 10 percentage points –35 –54
information on the sensitivity of the group’s earnings to the main assumptions is set out in note 1 critical accounting policies and estimates sectionxon
page 122
riotintocom 173
strategic report directors’ report financial statements production reserves
and operations
additional information notes to the 2014 financial statements continued
46 rio tinto limited parent company disclosures
as at 31 december
2014
am
2013
am
assets
current assets 16523 1490
noncurrent assets 11302 11480
total assets 27825 12970
liabilities
current liabilities 8230 1336
noncurrent liabilities 38 329
total liabilities 8268 1665
net assets 19557 11305
shareholders’ equity
share capital 4113 4113
other reserves 377 272
retained earnings 15067 6920
total equity 19557 11305
profit of the parent company 9121 4861
total comprehensive income of the parent company 9122 4861
prepared under australian accounting standards aas in relation to rio tinto limited there are no significant measurement differences between aas and ifrs as
defined in note 1
rio tinto limited guarantees
rio tinto limited provides a number of guarantees in respect of group companies
rio tinto plc and rio tinto limited have jointly guaranteed the group’s external listed debt under the us shelf programme european debt issuance programme
and commercial paper programme which totalled a254 billion at 31 december 2014 31 december 2013 a260 billion in addition these entities also jointly
guarantee the group’s undrawn credit facility which was a91 billion at 31 december 2014 31 december 2013 a84 billion
rio tinto limited has guaranteed external debt held by rio tinto group entities which totalled a01billion at 31 december 2014 31 december 2013
a01 billion and provided guarantees in respect of certain derivative contracts which were in a liability position of a6 million at 31 december 2014
31 december 2013 anil
in addition rio tinto limited has provided a guarantee of certain obligations of rio tinto finance limited a wholly owned subsidiary
pursuant to the dlc merger both rio tinto plc and rio tinto limited issued deed poll guarantees by which each company guaranteed contractual obligations
incurred by the other or guaranteed by the other
174 riotintocom rio tinto plc
company balance sheet
at 31 december
note
2014
usm
2013
usm
fixed assets
investments b 36139 36107
36139 36107
current assets
amounts owed by subsidiaries 940 119
cash at bank and in hand 3 3
943 122
creditors – amounts falling due within one year
amounts owed to subsidiaries c 11922 13082
dividends payable 17 9
11939 13091
net current liabilities 10996 12969
total assets less current liabilities 25143 23138
creditors – amounts falling due after more than one year – 58
net assets 25143 23080
capital and reserves
called up share capital d 230 230
share premium account e 4288 4269
other reserves e 11982 11982
profit and loss account e 8643 6599
equity shareholders’ funds 25143 23080
a the rio tinto plc company balance sheet has been prepared in accordance with uk generally accepted accounting practice uk gaap note a explains the principal accounting
policies
b profit after tax for the year amounted to us4821 million 2013 us1805 million profit as permitted by section 408 of the united kingdom companiesact2006noprofitand
loss account for the rio tinto plc parent company is shown the company is not required to prepare a cash flow statement under the terms of frs 1 revised 1996 the company
is also not required under the terms of frs 8 to disclose related party transactions with wholly owned subsidiaries
the rio tinto plc company balance sheet profit and loss account and the related notes were approved by the directors on 4 march 2015 and the balance sheetis
signed on their behalf by
jan du plessis sam walsh ao chris lynch
chairman chief executive chief financial officer
rio tinto plc
registered number 719885
riotintocom 175
strategic report directors’ report financial statements production reserves
and operations
additional information rio tinto plc continued
a principal accounting policies under uk gaap
a basis of accounting
the rio tinto plc entity financial statements have been prepared under uk gaap using the historical cost convention except for financial guarantees which have
been measured at fair value as set out in note e below and in accordance with applicable uk accounting standards and the companies act 2006 the directors
have reviewed the company’s existing accounting policies and consider that they are consistent with the requirements of financial reporting standard frs 18
“accounting policies” and with last year the financial statements have been prepared on a going concern basis
the principal accounting policies have been applied consistently throughout the year and are set out below
b deferred tax
full provision is made for deferred taxation on all timing differences that have arisen but not reversed at the balance sheet date except that deferred tax assets are
only recognised to the extent that it is more likely than not that they will be recovered deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance
sheet date deferred tax is measured on an undiscounted basis there are no unprovided amounts relating to deferred tax
c currency translation
the company’s local or ‘functional’ currency is the us dollar transactions denominated in other currencies including the issue of shares are translated at the
rate of exchange ruling on the date of the transaction monetary assets and liabilities denominated in other currencies are translated at the rate of exchange ruling
at the end of the financial year exchange rates used are consistent with the rates used by the group as disclosed in the consolidated financial statements see
note 41 exchange differences are charged or credited to the profit and loss account in the year in which they arise
d investments
fixed asset investments are valued at cost less impairment provisions investments are reviewed for impairment if events or changes in circumstancesindicate
that the carrying amount may not be recoverable when a review for impairment is conducted the recoverable amount is assessed by reference to the net present
value of expected future cash flows of the relevant income generating unit or disposal value if higher the discount rate applied is based upon the company’s
weighted average cost of capital with appropriate adjustment for the risks associated with the relevant unit
e financial guarantees
obligations for financial guarantees issued by the company to other group companies are reflected as liabilities at fair value in accordance with frs 26 “financial
instruments – measurement” such obligations result in corresponding increases in the carrying value of amounts owed by subsidiaries payments received are set
off against the asset recognised which is initially recorded at fair value
f share based payments
the fair value of the grant is recognised as an addition to the cost of the investment in the subsidiary in which the relevant employees work the fair value is
recognised over the relevant vesting period with a corresponding adjustment to the profit and loss account reserve payments received from the company’s
subsidiaries in respect of these share based payments result in a credit to reduce the cost of the investment the fair value of the share plans is determined at the
date of grant taking into account any market based vesting conditions attached to the award eg total shareholder return when market prices are not available
the company uses fair values provided by independent actuaries using a lattice based option valuation model
nonmarket vesting conditions eg earnings per share targets are taken into account in estimating the number of awards likely to vest the estimate ofthe
number of awards likely to vest is reviewed at each balance sheet date up to the vesting date at which point the estimate is adjusted to reflect the actualawards
issued no adjustment is made after the vesting date even if the awards are forfeited or not exercised
g revenue recognition
interest is accounted for on the accruals basis dividend income is recognised when the right to receive payment is established
h dividends
dividends payable are recognised when they meet the criteria for a present obligation ie when they have been approved
i treasury shares
the consideration paid for shares repurchased by the company and held as treasury shares is recognised as a reduction in shareholders’ funds through the profit
and loss account reserve
b rio tinto plc fixed assets
2014
usm
2013
usm
fixed asset investments
shares in group companies
at 1 january 36107 36111
additions 78 69
other adjustments 46 73
at 31 december 36139 36107
the directors believe that the carrying value of the individual investments is supported by their underlying net assets
176 riotintocom c amounts owed to subsidiaries
amounts owed to subsidiaries are subject to interest rates based on libor and are unsecured and repayable on demand
d rio tinto plc called up share capital
2014
usm
2013
usm
allotted and fully paid up share capital
a
at 1 january 230 230
ordinary shares purchased and cancelled
b
– –
at 31 december 230 230
a 971 new shares were issued during the year 2013 951 new shares and 1450659 shares 2013 1436542 shares were reissued from treasury pursuant to share plans
b during the year no shares were purchased from rio tinto limited 2013 nil
e rio tinto plc share premium and reserves
at 31 december 2014
share
premium
account
usm
other
reserves
usm
profit and
loss
account
usm
at 1 january 4269 11982 6599
adjustment for share based payments and other items
a
19 – 80
profit for the financial year – – 4821
dividends paid –– 2857
at 31 december 4288 11982 8643
at 31 december 2013
share
premium
account
usm
other
reserves
usm
profit and
loss
account
usm
at 1 january 4244 11982 7259
adjustment for share based payments and other items 25 – 49
profit for the financial year – – 1805
dividends paid – – 2514
at 31 december 4269 11982 6599
a other reserves include us11936 million which represents the difference between the nominal value and issue price of the shares issued arising from rio tinto plc’s rights issue
completed in july 2009
f rio tinto plc guarantees
rio tinto plc provides a number of guarantees in respect of group companies
rio tinto plc and rio tinto limited have jointly guaranteed the group’s external listed debt under the us shelf programme european debt issuance programme
and commercial paper programme which totalled us208 billion at 31 december 2014 31 december 2013 us232 billion in addition these entities also jointly
guarantee the group’s undrawn credit facility which was us75 billion at 31 december 2014 31 december 2013 us75 billion rio tinto plc has provided
guarantees in respect of certain derivative contracts that are in a liability position of us55 million at 31 december 2014 31 december 2013 us47 million
rio tinto plc has provided a number of guarantees in relation to various pension funds subject to certain conditions rio tinto plc would pay any contributions due
from group companies participating in these funds in the event that the companies fail to meet their contribution requirements the guarantees were not called
upon in 2014 the aggregate of the company contributions to these plans in 2014 was us65 million
other guarantees issued by rio tinto plc in relation to rio tinto group entities as at 31 december 2014 amount to us439 million 31 december 2013
us445 million included within this balance is us59 million 31 december 2013 us53 million in relation to nonwholly owned subsidiaries
pursuant to the dlc merger both rio tinto plc and rio tinto limited issued deed poll guarantees by which each company guaranteed contractual obligations
incurred by the other or guaranteed by the other
g events after the balance sheet date
on 12 february 2015 the group announced a share buyback of us2 billion comprising a a500 million c us04 billion offmarket share buyback tender of
rio tinto limited shares and the balance of approximately us16 billion as an onmarket buyback of rio tinto plc shares ordinary shares of rio tinto plc have
been bought back since 18 february 2015 and announcements have been made to the relevant stock exchanges shares so purchased have been cancelled
no rio tinto limited shares have been purchased at the date of this report
riotintocom 177
strategic report directors’ report financial statements production reserves
and operations
additional information rio tinto financial information by business unit
gross revenue
a
for the year ended 31 december
ebitda
b
for the year ended 31 december
net earnings
c
for the year ended 31 december
rio tinto
interest

2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
iron ore
pilbara d 21482 23633 22185 13701 16511 15143 7956 9568 9142
iron ore company of canada 587 1696 2258 1972 516 927 665 144 305 230
product group operations 23178 25891 24157 14217 17438 15808 8100 9873 9372
evaluation projectsother 103 103 122 27 4 129 7 15 125
23281 25994 24279 14244 17442 15679 8107 9858 9247
aluminium e
bauxite 1956 2012 1710 752 765 648 429 377 326
alumina 2158 2090 2274 54 226 237 209 265 343
intrasegment 834 739 687
bauxite  alumina 3280 3363 3297 698 539 411 220 112 17
primary metal 5867 5771 5623 1604 976 806 629 200 65
pacific aluminium 2483 2348 2447 524 252 66 291 126 92
intersegment  other 2087 2087 2006 43 8 53 6 15 18
integrated operations 9543 9395 9361 2783 1775 1230 1134 453 62
other product group items 2373 2866 2650 36 32 74 26 28 52
product group operations 11916 12261 12011 2819 1807 1304 1160 481 10
evaluation projectsother 207 202 159 111 87 66 88 76 64
12123 12463 12170 2930 1894 1370 1248 557 54
copper
kennecott utah copper 1000 2186 2194 2412 958 840 977 523 428 511
escondida 300 2282 2566 2566 1292 1453 1597 612 777 835
grasberg joint venture f 49 39 17 6 22 17 21 17
oyu tolgoi g 1736 55 – 401 225 – 14 90 –
palabora h – 526 1072 – 105 64 – 42 3
northparkes h – 351 453 – 227 247 – 141 144
product group operations 6253 5731 6520 2657 2402 2887 1104 1277 1476
evaluation projectsother 29 185 141 321 652 1040 192 456 417
6282 5916 6661 2336 1750 1847 912 821 1059
energy
rio tinto coal australia i 3560 4413 4998 450 1041 1030 21 367 402
rio tinto coal mozambique j 59 88 10 96 114 64 93 142 92
rössing 686 221 309 352 10 44 3 7 4 21
energy resources of australia 684 345 339 416 97 67 65 119 95 131
product group operations 4185 5149 5776 267 1038 1034 198 134 158
evaluation projectsother 123 305 286 16 132 218 12 101 151
4308 5454 6062 251 906 1252 210 33 309
diamonds  minerals
diamonds k 901 852 741 315 257 106 104 53 25
rio tinto iron  titanium l 2168 2251 2232 689 728 793 248 264 409
rio tinto minerals 675 657 656 212 205 215 121 131 140
dampier salt 684 398 404 416 67 43 23 18 74
product group operations 4142 4164 4045 1283 1233 1137 491 455 520
simandou iron ore project – –– 97 71 328 55 43 262
evaluation projectsother 8 29 11 42 77 129 35 62 109
4150 4193 4056 1144 1085 680 401 350 149
other operations m 241 1761 3898 291 401 527 243 281 582
intersegment transactions 344 1182 1560 – 4 10 – 4 8
product group total 50041 54599 55566 20614 22672 20291 10215 11334 10228
refer to notes a to p on page 182
178 riotintocom gross revenue
a
for the year ended 31 december
ebitda
b
for the year ended 31 december
net earnings
c
for the year ended 31 december
rio tinto
interest

2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
product group total 50041 54599 55566 20614 22672 20291 10215 11334 10228
other items 755 995 928 593 730 750
exploration and evaluation 194 168 118 156 145 97
net interest 161 242 112
underlying ebitdaearnings 19665 21509 19245 9305 10217 9269
items excluded from underlying
ebitdaearnings
– 24 31 825 556 350 2778 6552 12297
ebitdanet earnings 18840 20953 19595 6527 3665 3028
reconciliation to group income
statement
share of equity accounted unit
sales and intrasubsidiary
equity accounted units sales 2377 3404 4655
depreciation  amortisation in
subsidiaries excluding
capitalised depreciation 4828 4470 4563
impairment charges 221 7545 16918
depreciation  amortisation in
equity accounted units 472 401 460
taxation and finance items in
equity accounted units 759 625 49
consolidated sales revenue
profitloss on ordinary
activities before finance
items and tax 47664 51171 50942 12560 7912 2395
refer to notes a to p on page 182
riotintocom 179
strategic report directors’ report financial statements production reserves
and operations
additional information rio tinto financial information by business unit continued
capital expenditure
n
for the year
ended 31 december
depreciation
 amortisation
for the year
ended 31 december
operating assets
o
as at 31 december
employees
for the year
ended 31 december
rio tinto
interest

2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
number
2013
number
2012
number
iron ore
pilbara d 4038 6480 6410 1789 1461 1356 19524 19498 19367 12032 12143 10913
iron ore company of canada 587 173 334 742 164 166 129 1460 1553 1674 2580 2620 2591
other – –– – –– 3 11 16 – 18 18
4211 6814 7152 1953 1627 1485 20987 21062 21057 14612 14781 13522
aluminium e
bauxite 122 144 190 126 130 128 1366 1454 1590 2613 2525 2381
alumina 166 166 369 212 232 239 3166 3609 4385 2228 2163 2310
bauxite  alumina 288 310 559 338 362 367 4532 5063 5975 4841 4688 4691
primary metal 1781 1767 1980 692 666 717 11455 12165 12477 9270 10414 10896
pacific aluminium 129 134 196 135 109 183 1421 405 690 2395 2377 2444
intersegment and other 177 15 20 15 14 20 889 1181 1319 311 318 583
integrated operations 2021 2226 2755 1180 1151 1287 18297 18814 20461 16817 17797 18614
copper
kennecott utah copper 1000 642 783 896 324 296 300 2603 2634 2490 1976 2093 2438
escondida 300 947 947 765 308 216 249 2999 2524 1913 1344 1248 1151
grasberg joint venture f 193 176 136 36 38 31 878 761 618 2955 2441 2463
oyu tolgoi g o 157 749 2271 340 272 67 4693 4863 5323 2854 2831 2431
palabora h – 18 45 – –71 – –– – 1145 2290
northparkes h – 18 61 – 25 44 – – 405 – 269 373
other 19 122 281 43 115 32 592 1288 1572 711 1146 1230
1958 2813 4455 1051 962 794 10581 12070 12321 9840 11173 12376
energy
rio tinto coal australia i 165 547 1527 406 486 432 3099 3945 5628 3187 3826 3954
rio tinto coal mozambique j 2 32 109 – 28 29 7 119 556 183 263 312
rössing 686 37 47 75 25 23 30 65 99 141 850 1141 1528
energy resources of australia 684 17 106 166 110 229 279 66 120 129 389 513 624
other 3 –– 7 –– 557 589 715 729 27 19
224 732 1877 548 766 770 3794 4872 7169 5338 5770 6437
diamonds  minerals
diamonds k 148 319 680 168 168 144 1124 1279 1307 1268 1255 1622
rio tinto iron  titanium l 185 274 274 233 264 205 4424 4859 5300 4787 4955 4426
rio tinto minerals 69 115 97 41 36 31 650 669 593 1024 1110 1246
dampier salt 684 21 28 46 28 29 30 193 228 291 479 512 497
simandou iron ore project 85 273 717 14 14 10 864 808 567 958 1011 977
other – –– – 21 53 57 3 78 92 88
508 1009 1814 484 513 421 7308 7900 8061 8594 8935 8856
other operations m 56 278 432 34 67 214 418 544 979 849 3891 7359
product group total 8866 13872 18485 5250 5086 4971 61385 65262 70048 56050 62347 67164
intersegment transactions 238 276 213
net assets of disposal groups held for
sale p – –– – –– 48 771 351 – ––
other items 416 145 161 82 106 113 2784 2352 4836 3725 3984 4055
less equity accounted units 1032 1073 1071 472 401 460
total 7418 12944 17575 4860 4791 4624 58791 63957 65776 59775 66331 71219
180 riotintocom capital expendituren
for the year
ended 31 december
depreciation
 amortisation
for the year
ended 31 december
operating assets
o
as at 31 december
employees
for the year
ended 31 december
rio tinto
interest

2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
usm
2013
usm
2012
usm
2014
number
2013
number
2012
number
total 7418 12944 17575 58791 63957 65776
add back proceeds from disposal of
property plant and equipment 744 57 40
total capital expenditure per cash
flow statement 8162 13001 17615
less net debt 12495 18055 19192
less eau funded balances excluded
from net debt 11 16 31
equity attributable to owners of
rio tinto 46285 45886 46553
riotintocom 181
strategic report directors’ report financial statements production reserves
and operations
additional information notes to financial information by business unit
business units are classified according to the group’s management structure where presentational revisions are made comparative amounts are adjusted
accordingly
a includes 100 per cent of subsidiaries’ sales revenue and the group’s share of the sales revenue of equity accounted units after adjusting for salesto
subsidiaries
b ebitda of subsidiaries and the group’s share of ebitda relating to equity accounted units represents profit before tax net finance items depreciation
and amortisation charged to the income statement in the year underlying ebitda excludes the same items that are excluded from underlying
earnings
c represents profit after tax for the period attributable to the owners of rio tinto business unit earnings are stated before finance items but after the
amortisation of discount related to provisions earnings attributed to business units do not include amounts that are excluded in arriving at underlying
earnings
d pilbara represents the group’s 100 percent holding in hamersley and 65 per cent holding of robe river iron associates 30 per cent of robe river iron
associates is held through a 60 per cent owned subsidiary and therefore the group’s net beneficial interest is 53 per cent
e presented on an integrated operations basis splitting activities between bauxite and alumina primary metal pacific aluminium and other integrated
operations which in total reflect the results of the integrated production of aluminium and other product group items which relate to other
commercial activities following reintegration in 2013 the four aluminium smelters and the gove bauxite mine previously grouped within pacific
aluminium in other operations are included within the aluminium group the gove alumina refinery is reported within other operations
f under the terms of a contractual agreement rio tinto is entitled to 40 per cent of additional material mined as a consequence of expansions and
developments of the grasberg facilities since 1998
g rio tinto’s interest in oyu tolgoi llc is held indirectly through its 508 per cent investment in turquoise hill resources ltd which in turn owns
66 per cent of oyu tolgoi
h rio tinto completed the divestment of its 577 per cent interest in palabora mining company on 31 july 2013 and of its 80 per cent interest in the
northparkes mine on 1 december 2013
i includes rio tinto’s 80 per cent interest in coal  allied through which rio tinto holds its beneficial interests in bengalla mount thorley and
warkworth of 32 per cent 64 per cent and 445 per cent respectively
j on 7 october 2014 rio tinto disposed of its interest in rio tinto coal mozambique rtcm including its interests in the benga project a 6535 joint
venture with tata steel limited zululand anthracite colliery zac which was retained is reported within other energy
k includes rio tinto’s interests in argyle 100 per cent diavik 60 per cent and murowa 778 per cent
l includes rio tinto’s interests in rio tinto fer et titane 100 per cent qit madagascar minerals 80 per cent and richards bay minerals attributable
interest of 74 per cent
m other operations include rio tinto’s 100 per cent interest in the gove alumina refinery refer to note e and rio tinto marine
n 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 the details provided include 100 per cent of subsidiaries’ capital expenditure and rio tinto’s share
of the capital expenditure of equity accounted units
o operating assets of subsidiaries comprise net assets excluding post retirement assets and liabilities net of tax and are before deducting net debt
operating assets are stated after deduction of noncontrolling interests which are calculated by reference to the net assets of the relevant companies
ie inclusive of such companies’ debt and amounts due to or from rio tinto group companies in addition oyu tolgoi’s operating assets are shown
net of turquoise hill’s public shareholders’ interest in intragroup receivables from oyu tolgoi previously shown in other copper comparative
amounts have been adjusted accordingly
p comprising rio tinto’s interests in the blair athol thermal coal mine and assets and liabilities relating to the anticipated disposal of southgobi
resources limited net assets held for sale at 31 december 2013 comprised the clermont and blair athol thermal coal mines and zac which is no
longer reported as held for sale amounts are presented after deducting noncontrolling interests including the noncontrolling interests’ shareof
third party net debt and balances owed with rio tinto group subsidiaries
182 riotintocom australian corporations act – summary of asic relief
pursuant to section 340 of the corporations act 2001 ‘corporations act’ the australian securities and investments commission issued an order dated 9 january
2015 that granted relief to rio tinto limited from certain requirements of the corporations act in relation to the company’s financial statements and associated
reports the order essentially continues the relief that has applied to rio tinto limited since the formation of the group’s dual listed companies dlc structure in
1995 the order applies to rio tinto limited’s financial reporting obligations for the financial year ended 31 december 2014
in essence instead of being required under the corporations act to prepare consolidated financial statements covering only itself and its controlled entities the
order allows rio tinto limited to prepare consolidated financial statements in which it rio tinto plc and their respective controlled entities are treated as a single
economic entity in addition those consolidated financial statements are to be prepared
– in accordance with the principles and requirements of international financial reporting standards as adopted by the european union eu ifrs rather than the
australian accounting standards aas except for one limited instance in the case of any concise report and in accordance with united kingdom financial
reporting obligations generally
– on the basis that the transitional provisions of international financial reporting standard 1 firsttime adoption of international financial reporting standards
should be applied using the combined financial statements previously prepared for rio tinto limited rio tinto plc and their respective controlled entities under
generally accepted accounting principles in the united kingdom under which the dlc merger between rio tinto limited and rio tinto plc was accounted for
using ‘merger’ rather than ‘acquisition’ accounting reflecting that neither rio tinto limited nor rio tinto plc was acquired by or is controlled by the other and
meaning that the existing carrying amounts rather than fair values of assetsandliabilitiesatthetimeofthedlcmergerwereusedtomeasurethoseassets
and liabilities at formation
– on the basis that rio tinto limited and rio tinto plc are a single company with their respective shareholders being the shareholders in that single
company and
– with a reconciliation from eu ifrs to aas of the following amounts consolidated profit for the financial year total consolidated income for the financial year
and total consolidated equity at the end of the financial year see page 109
those consolidated financial statements must also be audited in relation to their compliance with relevant australian and united kingdom requirements rio tinto
limited must also prepare a directors’ report which satisfies the content requirements of the corporations act applied on the basis that for these purposes the
consolidated entity is the group and the consolidated financial statements cover the group this includes a remuneration report see pages 64 to 100 prepared
in accordance with the requirements of the corporations act
rio tinto limited is also required to comply generally with the lodgement and distribution requirements of the corporations act including timing requirements in
relation to those consolidated financial statements including any concise financial statements the auditor’s report and the directors’ report the corporations
act also requires that a nonbinding resolution to adopt the remuneration report be voted on by shareholders at the company’s annual general meeting
rio tinto limited is not required to prepare separate consolidated financial statements solely for it and its controlled entities rio tinto limited is also not required
to prepare and lodge parent entity financial statements for itself in respect of each relevant financial year
however rio tinto limited must in accordance with the corporations act include in the consolidated financial statements for the group as a note various parent
entity information regarding rio tinto limited including in relation to assets liabilities shareholders’ equity profit and loss income guarantees contingent
liabilities and contractual commitments prepared in accordance with aas see page 174
riotintocom 183
strategic report directors’ report financial statements production reserves
and operations
additional information directors’ declaration
directors’ statement of responsibilities in relation to the group financial statements rio tinto plc financial statements and
rio tinto limited financial statements
the directors are responsible for preparing the annual report the remuneration report and the financial statements in accordance with applicable law and
regulations
uk and australian company law requires the directors to prepare financial statements for each financial year under uk laws the directors have elected to prepare
the group financial statements in accordance with international financial reporting standards ifrss as adopted by the european union and the rio tinto plc
financial statements in accordance with united kingdom generally accepted accounting practice united kingdom accounting standards and applicable law
under australian law the directors are also required to prepare certain rio tinto limited parent company financial statements in accordance with australian
accounting standards aas in preparing the group financial statements the directors have also elected to comply with ifrss issued by the international
accounting standards board iasb
under uk and australian company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair viewofthe
state of affairs of the group and the companies as at the end of the financial year and of the profit or loss of the companies and group for the period as
applicable
in preparing these financial statements the directors are required to
– select suitable accounting policies and then apply them consistently
– make judgments and estimates that are reasonable and prudent
– state whether ifrss as adopted by the european union applicable uk accounting standards and aas have been followed subject to any material departures
disclosed and explained in the group and parent company financial statements respectively and
– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the companies will continue in business
the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the transactions of the companies and the group
and disclose with reasonable accuracy at any time the financial position of the companies and the group and enable them to ensure that
– the group financial statements comply with the uk companies act 2006 the australian corporations act 2001 as amended by the australian securities and
investments commission order dated 9 january 2015 and article 4 of the ias regulation
– the rio tinto plc financial statements comply with the companies act 2006
– the rio tinto limited parent company disclosures comply with the corporations act as amended by the australian securities and investments commission
order dated 9 january 2015 and
– the remuneration report complies with the companies act 2006 and the corporations act 2001 as amended by the australian securities and investments
commission order dated 9 january 2015
they are also responsible for safeguarding the assets of the companies and the group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities
the directors are responsible for the maintenance and integrity of the group’s website legislation governing the preparation and dissemination of financial
statements may differ between jurisdictions in which the group reports
each of the current directors whose names and function are listed on pages 49 to 51 in the governance section confirm that to the best of their knowledge
– the rio tinto group financial statements and notes which have been prepared in accordance with ifrs as adopted by the eu the corporations act 2001 as
amended by the australian securities and investments commission order dated 9 january 2015 the companies act 2006 and article 4 of the ias regulation
give a true and fair view of the assets liabilities financial position and loss of the group
– the rio tinto plc financial statements and notes which have been prepared in accordance with united kingdom generally accepted accounting practicegivea
true and fair view of the assets liabilities financial position and profit of the company
– the rio tinto limited parent company disclosures which have been prepared in accordance with australian accounting standards aas and corporations act
2001 as amended by the australian securities and investments commission order dated 9 january 2015 give a true and fair view of the assets liabilities
financial position and profit of the company
– the overview and performance sections of the annual report include a fair review of the development and performance of the business and the position ofthe
group together with a description of the principal risks and uncertainties that it faces and
– there are reasonable grounds to believe that each of the rio tinto group rio tinto plc and rio tinto limited will be able to pay its debts as and when they
become due and payable
the directors have been given the declarations by the chief executive and chief financial officer required by section 295a of the corporations act 2001asamended
by the australian securities and investments commission order dated 9 january 2015
disclosure of information to auditors
thedirectorsinofficeatthedateofthisreporthaveeachconfirmedthat
– so far as he or she is aware there is no relevant audit information of which the group’s auditors are unaware and
– he or she has taken all the steps that he or she ought to have taken as a director to make himself or herself aware of any relevant audit information and to
establish that the group’s auditors are aware of that information
this declaration is made in accordance with a resolution of the board
jan du plessis sam walsh ao chris lynch
chairman chief executive chief financial officer
4 march 2015 4 march 2015 4 march 2015
184 riotintocom auditor’s independence declaration
as lead auditor for the audit of rio tinto limited for the year ended 31 december 2014 i declare that to the best of my knowledge and belief there have been
a no contraventions of the auditor independence requirements of the corporations act 2001 in relation to the audit and
b no contraventions of any applicable code of professional conduct in relation to the audit
this declaration is in respect of rio tinto limited and the entities it controlled during the period
paul bendall
partner
pricewaterhousecoopers
melbourne
4 march 2015
liability limited by a scheme approved under professional standards legislation
riotintocom 185
strategic report directors’ report financial statements production reserves
and operations
additional information independent auditors’ report of pricewaterhousecoopers llp to
the members of rio tinto plc and pricewaterhousecoopers to the
members of rio tinto limited
for the purpose of this report the terms “we” and “our” denote pricewaterhousecoopers llp in relation to uk legal professional and regulatory responsibilities
and reporting obligations to the members of rio tinto plc and pricewaterhousecoopers in relation to australian legal professional and regulatory responsibilities
and reporting obligations to the members of rio tinto limited
the relevant legislation governing the companies is the united kingdom companies act 2006 for rio tinto plc and the corporations act 2001 as amended by the
asic order dated 9 january 2015 the “asic order” for rio tinto limited
report on the financial statements
opinion of pricewaterhousecoopers llp on the financial statements to the members of rio tinto plc
in our opinion
– the financial statements defined below give a true and fair view of the state of the group’s and of rio tinto plc’s affairs as at 31 december 2014 and of the
group’sprofitandcashflowsfortheyearthenended
– the group financial statements have been properly prepared in accordance with international financial reporting standards “ifrss” as adopted bythe
european union
– the rio tinto plc company financial statements have been properly prepared in accordance with united kingdom generally accepted accounting practice and
– the financial statements have been prepared in accordance with the requirements of the companies act 2006 and as regards the group financial statements
article 4 of the ias regulation
separate opinion of pricewaterhousecoopers llp in relation to ifrss as issued by the iasb
as explained in note 1 to the financial statements the group in addition to applying ifrss as adopted by the european union has also applied ifrss as issued by
the international accounting standards board iasb
in our opinion the group financial statements comply with ifrss as issued by the iasb
opinion of pricewaterhousecoopers on the financial report to the members of rio tinto limited
in our opinion
– the financial report of rio tinto limited is in accordance with the corporations act 2001 as amended by the asic order including
i giving a true and fair view of the group’s financial position as at 31 december 2014 and of its performance for the year ended on that date
ii complying with the australian accounting standards including the australian accounting interpretations and the corporations regulations 2001
and
– the group’s financial report also complies with ifrss as disclosed in note 1
what we have audited
the rio tinto group financial statements comprise
– the group balance sheet as at 31 december 2014
– the group income statement and statement of comprehensive income for the year then ended
– the group cash flow statement for the year then ended
– the group statement of changes in equity for the year then ended
– notes 1 – 46 to the financial statements which include a summary of significant accounting policies and other explanatory information
– the outline of dual listed companies structure and basis of financial statements and
– the rio tinto financial information by business unit
the group’s financial statements and the rio tinto plc company financial statements are referred to in this report as the “financial statements”
certain required disclosures have been presented elsewhere in the annual report rather than in the notes to the financial statements these are crossreferenced
from the financial statements and are identified as audited
pricewaterhousecoopers llp has audited the rio tinto plc company financial statements for the year ended 31 december 2014 which comprise the rio tintoplc
company balance sheet and the related notes pricewaterhousecoopers has audited the reconciliation with australian accounting standards and the rio tinto
limited financial report which comprises the financial statements and the directors’ declaration on page 184
the financial reporting framework that has been applied in the preparation of the group financial statements is applicable law in the united kingdom applicable
law in australia as amended by the asic order described in the annual report under the heading “australian corporations act – summary of asic relief” and
international financial reporting standards ifrss as adopted by the european union and as issued by the iasb
the financial reporting framework that has been applied in the preparation of the rio tinto plc company financial statements is applicable law and united kingdom
accounting standards united kingdom generally accepted accounting practice
186 riotintocom our audit approach
overview
materiality overall group materiality 600 million which represents 5 of profit before tax adjusted for items excluded from underlying
earnings as defined in note 2 to the financial statements
scope we identified 3 business units which in our view required an audit of their complete financial information either due to their
size or their risk characteristics those business units were hamersley iron robe river and escondida
specific audit procedures on certain balances and transactions were performed at a further 14 business units
areas of focus – impairment assessments including indicators of impairment and impairment reversal of indefinitelived intangible assets
rio tinto alcan and property plant  equipment both rio tinto alcan and oyu tolgoi
– taxation including provisions for uncertain tax positions and accounting for the consequences of the repeal of the mineral
resource rent tax mrrt
– provisions for closedown restoration and environmental obligations
– defined benefit pension plan surpluses and deficits
– impact of finance transformation including shared services transition on the control environment
the scope of our audit and our areas of focus
we conducted our audit in accordance with international standards on auditing uk and ireland “isas uk  ireland” and australian auditing standards
“asas”
we designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements in particular we looked at where
the directors made subjective judgements for example in respect of significant accounting estimates that involved making assumptions and considering future
events that are inherently uncertain as in all of our audits we also addressed the risk of management override of internal controls including evaluating whether
there was evidence of bias by the directors that represented a risk of material misstatement due to fraud
the risks of material misstatement that had the greatest effect on our audit including the allocation of our resources and effort are identified as “areas of focus” in
the table below we have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a
whole and any comments we make on the results of our procedures should be read in this context this is not a complete list of all risks identified by our audit
area of focus how our audit addressed the area of focus
impairmentreversal of impairment assessment
rio tinto has goodwill of 1228 million indefinitelived intangible assets of
1981 million and property plant  equipment of 68693 million as at
31 december 2014 contained within 54 cash generating units “cgus”
impairment charges to goodwill indefinitelived intangible assets and property
plant  equipment have been recognised in prior periods
for the cgus which contain rio tinto’s goodwill indefinitelived intangible assets
and property plant and equipment the determination of recoverable amount
being the higher of valueinuse and fairvaluelesscoststodisposerequires
judgement on the part of management in both identifying and then valuing the
relevant cgus recoverable amounts are based on management’s view of
variables such as future commodity prices timing and approval of future capital
and operating expenditure and the most appropriate discount rate
all cgus containing goodwill and indefinitelived intangible assets must be
tested for impairment on an annual basis
management must also determine the recoverable amount for other assets
including property plant  equipment when impairment indicators are identified
as at 30 september 2014 being management’s testing date the oyu tolgoi cgu
had a carrying value of 8163 million and management identified an impairment
indicator due to the ongoing delays in the development of the underground
project and therefore performed a full impairment assessment to determine the
recoverable amount of these assets
as well as considering indicators of impairment for assets other than goodwill
and indefinitelived intangible assets management must determine whether any
indicators of reversal of previous impairments are apparent in particular for
certain business units within rio tinto alcan management assessed whether
previously recorded impairments against property plant  equipment should be
reversed in light of improved profitability and cash flows
refer to note 6 for management’s conclusions
we satisfied ourselves as to the appropriateness of management’s
identification of the group’s cgus and controls over the impairment
assessment process including indicators of impairment and
impairment reversal
we benchmarked key market related assumptions in management’s
valuation models including commodity prices foreign exchange rates and
discount rates against external data where available using our valuations
expertise
we verified the mathematical accuracy of the cash flow models and agreed
relevant data to the latest life of mineproduction plans and budgets
for oyu tolgoi we also read the latest feasibility study and assessed through
sensitivity analysis the potential impact of further delays to the restart of the
underground project
in assessing potential impairment reversals within the primary metal – pacific
aluminium cgu of rio tinto alcan we considered the sustainability of cost
improvements and regional and product price premia in the determination of
the cgu’s recoverable amount
we validated the appropriateness of the related disclosures in note 6 of the
financial statements including the sensitivities provided with respect to
oyu tolgoi
riotintocom 187
strategic report directors’ report financial statements production reserves
and operations
additional information independent auditors’ report of pricewaterhousecoopers llp to the members of rio tinto plc and
pricewaterhousecoopers to the members of rio tinto limited continued
area of focus how our audit addressed the area of focus
taxation
provisions for uncertain tax positions
the group operates across a large number of jurisdictions and is subject to
periodic challenges by local tax authorities on a range of tax matters during the
normal course of business including transfer pricing indirect taxes and
transaction related tax matters as at 31 december 2014 the group has current
and noncurrent taxes payable of 1170 million where the amount of tax
payable or recoverable is uncertain rio tinto establishes provisions based on the
group’s judgement of the probable amount of the liability or recovery
minerals resource rent tax
in 2014 the australian government repealed the minerals resource rent tax
mrrt with effect from 30 september 2014 the nature of mrrt and the
complexity of the associated accounting considerations made this an area of
focus
we assessed the group’s process for identifying uncertain tax positions and
the related accounting policy of provisioning for tax exposures
we used our specialist tax knowledge to gain an understanding of the current
status of tax investigations and monitored changes in ongoing disputes by
reading recent rulings and correspondence with local tax authorities as well
as external advice received by the group where relevant to establish that the
tax provisions had been appropriately adjusted to reflect the latest external
developments
we verified the accuracy of the utilisation of the mrrt deferred tax asset
from 1 january 2014 to the date of repeal and the subsequent writeoff of the
remaining mrrt deferred tax asset at that date
we also satisfied ourselves that the classification of the writeoff of the mrrt
deferred tax asset as an exclusion from underlying earnings was consistent
with the group’s accounting policies and appropriately disclosed in the
financial statements
closedown restoration and environmental obligations
rio tinto has provisions for closedown restoration and environmental
obligations of 8630 million at 31 december 2014
the calculation of these provisions requires management judgement in
estimating these future costs given the unique nature of each site and the
potential associated obligations taking into account for example likely advances
in technology prior to the work commencing and determining the timing of any
such work taking place these calculations also require management to
determine an appropriate rate to discount these future costs back to their net
present value
the judgement required to estimate such costs is further compounded by the
fact that the restoration and rehabilitation of each site is relatively unique and
there has been limited restoration and rehabilitation activity and historical
precedent against which to benchmark estimates of future costs
the group reviews the closedown restoration and environment obligations on a
semiannual basis using experts to provide support in its assessment as
appropriate this review incorporates the effects of any changes in local
regulations and management’s expected approach to restoration and
rehabilitation
we assessed management’s process for the review of provisions and
performed detailed testing of the movements in the provision during the year
for 5 business units based on the associated risk of misstatement and
materiality
as part of our testing we evaluated the legal andor constructive obligations
with respect to the restoration and rehabilitation for each of these business
units to assess the appropriateness of the intended method of restoration
and rehabilitation and associated cost estimate
we also considered the competence and objectivity of management’s
experts whether internal or external to rio who produced the cost estimates
we validated the accuracy of calculations and the appropriateness of the
discount rate
defined benefit pension plan surpluses and deficits
the group has approximately 60 defined benefit pension plans the total fair
value of plan assets is 15219 million and total present value of obligations is
17852 million which are significant in the context of the overall balance sheet
of the group
the valuation of the pension liabilities requires judgement in determining
appropriate assumptions such as inflation levels discount rates and mortality
rates movements in these assumptions can have a material impact on the
determination of the liability management uses external actuaries to assist in
assessing these assumptions
judgement is also involved in the measurement of the fair value of certain
pension assets
we used our actuarial expertise to satisfy ourselves that the assumptions
used in calculating the pension plan liabilities including comparing salary
increases and mortality rate assumptions were consistent with relevant
national and industry benchmarks we also verified that the discount and
inflation rates used in the valuation of the pension liabilities were consistent
with our internally developed benchmarks and with other companies
reporting as at 31 december 2014
for pension plan assets we obtained third party confirmations of ownership
and valuations of pension assets and reperformed a sample of the
valuations independently
188 riotintocom area of focus how our audit addressed the area of focus
finance transformation – shared services transition
the shared services transition element of rio tinto’s finance transformation
programme includes the centralisation and outsourcing of certain back office
finance activities excluding key controls to a thirdparty provider the
programme commenced in 2014 and is expected to run during 2015 and
into 2016
certain of the activities being transitioned were previously undertaken in
rio tinto’s own shared services centres a number of business unit finance
processes have also been or are being transitioned
this centralisation of processes and transfer of responsibilities creates a risk of
loss of knowledge which could adversely affect the controls during the transition
period there is also a risk that controls over financial reporting which rely on
those activities that have been or are to be transitioned may not be designed
andor operate effectively
we obtained a detailed understanding of the group’s shared services
transition plans including the timing of business unit transitions and extent
of activities being transferred we assessed the implementation of
management’s plans through the following procedures
– we visited the outsourced shared service centre to observe the manner in
which the knowledge transfer was being conducted
– we assessed the design effectiveness of internal controls over financial
reporting in the processes impacted at both the group and business
unit levels
– we tested the operating effectiveness of key controls which operate within
rio tinto’s retained organisation
– in respect of the thirdparty outsourced service provider
– we evaluated the ‘statement of works’ governing the service level
agreements with rio tinto and the associated key performance indicators
– we obtained a report from an independent third party on the service
organisation controls performed in accordance with the statement on
standards for attestation engagements ssae no 16 this provided
evidence about the operating effectiveness of governance and entity
level controls operated by the outsourced service provider
how we tailored the audit scope
we tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole taking into
account the geographic structure of the group the accounting processes and controls and the industry in which the group operates
the group is organised into five product groups being aluminium copper diamonds  minerals energy and iron ore which are all supported by centralised
functions each product group is made up of a number of operating businesses which represent separate business units the group financial statements are a
consolidation of business units comprising the group’s operating businesses and centralised functions based on this we determined the appropriate business
units to perform work over based on factors such as the size of the balances the areas of focus as noted above known or historical accounting issues and the
desire to include some unpredictability in our audit procedures
in establishing the overall approach to the group audit we determined the type of work that needed to be performed at business units by us as the group
engagement team or component auditors from either other pwc network firms or nonpwc firms operating under our instruction where the work was performed
by component auditors we determined the level of involvement we needed to have in the audit work at those business units to be able to conclude whether
sufficient appropriate audit evidence had been obtained as a basis for our opinion on the group financial statements as a whole in 2014 we identified3business
units which in our view required an audit of their complete financial information either due to their size or their risk characteristics those business units were
hamersley iron robe river and escondida specific audit procedures on certain balances and transactions were performed at a further 14 business units
we performed work centrally in the areas of it general controls manual journals taxation pensions and treasury related procedures in 2014 we also performed
procedures on the shared services transition as noted above
our group engagement team involvement included site visits conference calls with our component audit teams review of our component auditor work papers
attendance at component audit clearance meetings and other forms of communication as considered necessary depending on the significance of the component
and the extent of accounting and audit issues arising
materiality
the scope of our audit is influenced by our application of materiality we set certain quantitative thresholds for materiality these together with qualitative
considerations helped us to determine the scope of our audit and the nature timing and extent of our audit procedures and to evaluate the effect of
misstatements both individually and on the financial statements as a whole
based on our professional judgement we determined materiality for the financial statements as a whole as follows
overall group materiality 600 million 2013 600 million
howwedeterminedit 5 of profit before tax adjusted for items excluded from underlying earnings as defined in note 2 to the
financial statements
rationale for benchmark applied we consider an adjusted measure to be the most relevant in assessing the recurring financial performance of
the group
we agreed with the audit committee that we would report to them misstatements identified during our audit above 50 million 2013 50 million as well as
misstatements below that amount that in our view warranted reporting for qualitative reasons
going concern
under the listing rules we are required to review the directors’ statement set out on page 101 in relation to going concern we have nothing to report having
performed our review
as noted in the directors’ statement the directors have concluded that it is appropriate to prepare the financial statements using the going concern basis of
accounting the going concern basis presumes that the group and parent companies in respect of rio tinto plc and rio tinto limited have adequate resources
to remain in operation and that the directors intend them to do so for at least one year from the date the financial statements were signed as part of our audit we
have concluded that the directors’ use of the going concern basis is appropriate
riotintocom 189
strategic report directors’ report financial statements production reserves
and operations
additional information independent auditors’ report of pricewaterhousecoopers llp to the members of rio tinto plc and
pricewaterhousecoopers to the members of rio tinto limited continued
however because not all future events or conditions can be predicted these statements are not a guarantee as to the group’s and parent companies’ ability to
continue as a going concern
other required reporting – pricewaterhousecoopers llp
consistency of other information
companies act 2006 opinion
in our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements
isas uk  ireland reporting
under isas uk  ireland we are required to report to you if in our opinion
information in the annual report is
– materially inconsistent with the information in the audited financial statements or
– apparently materially incorrect based on or materially inconsistent with our knowledge of the group and company acquired in the
course of performing our audit or
– otherwise misleading
we have no exceptions
to report arising from
this responsibility
the statement given by the directors on page 63 in accordance with provision c11 of the uk corporate governance code “the code”
that they consider the annual report taken as a whole to be fair balanced and understandable and provides the information necessary for
members to assess the group’s and rio tinto plc’s performance business model and strategy is materially inconsistent with our
knowledge of the group and company acquired in the course of performing our audit
we have no exceptions
to report arising from
this responsibility
the section of the annual report on page 57 as required by provision c38 of the code describing the work of the audit committee does
not appropriately address matters communicated by us to the audit committee
we have no exceptions
to report arising from
this responsibility
adequacy of accounting records and information and explanations received
under the companies act 2006 we are required to report to you if in our opinion
– we have not received all the information and explanations we require for our audit or
– adequate accounting records have not been kept by rio tinto plc or returns adequate for our audit have not been received from branches not visited by us or
– the rio tinto plc financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and
returns
we have no exceptions to report arising from this responsibility
directors’ remuneration
directors’ remuneration report – companies act 2006 opinion
in our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the companies act 2006
other companies act 2006 reporting
under the companies act 2006 we are required to report to you if in our opinion certain disclosures of directors’ remuneration specified by law are not made
we have no exceptions to report arising from this responsibility
corporate governance statement
under the listing rules we are required to review the part of the corporate governance statement relating to rio tinto plc’s compliance with ten provisions of the
uk corporate governance code we have nothing to report having performed our review
other required reporting – pricewaterhousecoopers
directors’ remuneration
directors’ remuneration report – corporations act 2001 opinion
under the corporations act 2001 in respect of rio tinto limited we are required to express an opinion on the directors’ remuneration report based on our audit
conducted in accordance with australian auditing standards the directors of rio tinto limited are responsible for the preparation and presentationofthe
remuneration report in accordance with section 300a of the corporations act 2001 as amended by the asic order
in our opinion the remuneration report included in the accompanying annual report complies with the requirements of section 300a of the corporationsact
2001 as amended by the asic order
directors’ report
consistency of information in directors’ report – corporations act 2001 opinion
in our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial
statements
independence
in conducting our audit we have complied with the independence requirements of the corporations act 2001
responsibilities for the financial statements and the audit
our responsibilities and those of the directors
as explained more fully in the directors’ responsibilities statement set out on page 184 the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that is free from material misstatement whether due to fraud or error
our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and isas uk  ireland and australian auditing
standards those standards require us to comply with the auditing practices board’s ethical standards for auditors and relevant ethical requirements relating to
audit engagements in australia
190 riotintocom this report including the opinions has been prepared for and only for the members of rio tinto plc and rio tinto limited as a body in accordance with chapter 3
of part 16 of the companies act 2006 in respect of rio tinto plc and the corporations act 2001 as amended by the asic order in respect of rio tinto limited
and for no other purpose we do not in giving these opinions accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing
what an audit of financial statements involves
an audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement whether caused by fraud or error this includes an assessment of
– whether the accounting policies are appropriate to the group’s and the companies’ circumstances and have been consistently applied and adequately disclosed
– the reasonableness of significant accounting estimates made by the directors and
– the overall presentation of the financial statements
the procedures selected depend on the auditors’ judgement including the assessment of the risks of material misstatement of the financial statements whether
due to fraud or error in making those risk assessments the auditors consider internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion onthe
effectiveness of the entity’s internal control
we primarily focus our work in these areas by assessing the directors’ judgements against available evidence forming our own judgements and evaluating the
disclosures in the financial statements
we test and examine information using sampling and other auditing techniques to the extent we consider necessary to provide a reasonable basis for ustodraw
conclusions we obtain audit evidence through testing the effectiveness of controls substantive procedures or a combination of both
webelievethattheauditevidencewehaveobtained is sufficient and appropriate toprovideabasisforourauditopinion
in addition we read all the financial and nonfinancial information in the annual report to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect based on or materially inconsistent with the knowledge acquired by us in the course of
performing the audit if we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report
richard hughes senior statutory auditor
for and on behalf of pricewaterhousecoopers llp
chartered accountants and statutory auditors
london united kingdom
4 march 2015
paul bendall partner
for and on behalf of pricewaterhousecoopers
chartered accountants and statutory auditors
melbourne australia
4 march 2015
a the maintenance and integrity of the rio tinto group website is the responsibility of the directors the work carried out by the auditors does not involve consideration of these
matters and accordingly the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the
website
b legislation in the united kingdom and australia governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
riotintocom 191
strategic report directors’ report financial statements production reserves
and operations
additional information financial summary 20052014
usm 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
gross sales revenue
a
20742 25440 33518 56905 42734 59008 65298 55597 54575 50041
share of equity accounted
units’ sales revenue and
items excluded from
underlying earnings 1709 2975 3818 4044 2472 3837 4769 4655 3404 2377
consolidated sales
revenue 19033 22465 29700 52861 40262 55171 60529 50942 51171 47664
underlying profit before
interest and tax pbit 7301 9912 10517 17683 9843 21128 23662 13467 16039 13851
finance costs
c
207 193 570 1706 1058 909 759 616 794 967
exchange differences and
derivatives
d
191 83 253 322 528 529 2 695 3362 2021
other exclusions from
underlying earnings 409 438 364 6477 1453 257 9633 15977 8378 1311
profitloss before tax
pbt 7312 10240 9836 9178 7860 20491 13272 2431 3505 9552
tax on exclusions 33 357 60 988 91 42 135 2896 2642 423
tax on underlying pbt 1847 2016 2150 4730 1985 5338 6607 3485 5068 3476
loss after tax from
discontinued operations – – – 827 449 97 10 7 – –
attributable to non
controlling interests 283 429 434 933 463 860 955 1 2586 28
net earningsloss 5215 7438 7312 3676 4872 14238 5835 3028 3665 6527
underlyingadjusted
earnings
b
4955 7338 7443 10303 6298 13987 15572 9269 10217 9305
earningsloss per share
basic – continuing
operations
n
3126c 4562c 4649c 2868c 3017c 7310c 3039c 1634c 1984c 3531c
underlying earnings per
share basic – continuing
operations
n
2970c 4501c 4732c 6562c 3571c 7133c 8097c 5013c 5531c 5034c
dividends per share
declared for year
e
rio tinto shareholders
us cents 6546c 8507c 11123c 11122c 4500c 10800c 14500c 16700c 19200c 21500c
rio tinto plc pence 3691p 4422p 5620p 6749p 2884p 6735p 9047p 10677p 12010p 13488p
rio tinto limited
aus cents 8626c 11069c 12572c 14622c 5156c 11121c 13401c 16018c 21314c 25607c
net assets
fixed assets
f
20848 25803 75888 67651 72706 83895 91529 90580 81554 80669
other assets less liabilities 2587 3026 11609 8469 10078 4394 1632 8478 8224 4596
provisions including
deferred tax 6383 7007 16013 14987 17998 19706 25935 22126 18221 18176
net debt 1313 2437 45191 38672 18861 4071 8342 19192 18055 12495
noncontrolling interests 791 1153 1521 1823 2094 6265 6685 11187 7616 8309
equity attributable to
owners of rio tinto 14948 18232 24772 20638 43831 58247 52199 46553 45886 46285
capital expenditure
g
2590 3992 5000 8574 5388 4591 12573 17615 13001 8162
acquisitions 2 303 37539 9 396 907 4156 1335 4 –
disposals 323 24 13 2572 2424 3800 386 251 1896 887
net cash generated from
operating activities
h
6717 7803 8491 14883 9212 18277 20235 9430 15078 14286
cash flows before
financing activities
i
4460 3714 34251 8702 5855 16566 3245 8813 4132 7783
ratios
operating margin
j
37 42 34 32 24 37 37 25 30 28
netdebttototalcapital
k
8 11 63 63 29 6 12 25 25 19
underlying earnings
owners’ equity
l
37 44 35 45 20 27 28 19 22 20
interest cover
m
59 89 20 10 9 27 27 13 13 13
192 riotintocom a gross sales revenue includes 100 per cent of subsidiaries’ sales revenue and the group’s share of the sales revenue of equity accounts units after adjusting for sales to
subsidiaries
b underlying earnings is an additional measure of earnings which is reported by rio tinto with its ifrs as defined in note 1 results to provide greater understanding of the
underlying business performance of its operations it is defined in note 2 to the financial statement underlying profit before interest and tax pbit is similar to underlying
earnings except that it is stated before tax and interest
c finance costs include net interest and amortisation of discount
d under ifrs as defined in note 1 certain gains and losses on exchange and on revaluation of derivatives are included in the group’s net earnings these items are excluded from
underlying earnings
e dividends per share are the amounts declared in respect of each financial year these usually include an interim dividend paid in the year and a final dividend paid after the end of
the year the special dividend of 90 us cents per share paid in 2006 is not included in the table 2005 to 2008 ordinary dividends per share have been restated using a number of
shares which reflects the discounted price of the july 2009 rights issues the bonus factor
f fixed assets include property plant and equipment intangible assets goodwill and investments in and long term loans to equity accounted units
g capital expenditure is presented gross before taking into account any disposals of property plant and equipment
h net cash generated from operating activities represents the cash generated by the group’s consolidated operations after payment of interest taxes and dividends to non
controlling interests in subsidiaries
i cash flow before financing activities is stated before deducting dividends payable to owners of rio tinto
j operating margin is the percentage of underlying pbit after excluding tax on equity accounted units to gross sales revenue
k total capital comprises equity attributable to owners of rio tinto plus net debt and noncontrolling interests
l underlying earnings owners’ equity represents underlying earnings expressed as a percentage of the mean of opening and closing equity attributable to owners of rio tinto
m interest cover represents the number of times interest payable less receivable excluding the amortisation of discount but including capitalised interest is covered by underlying
operating profit less amortisation of discount plus dividends from equity accounted units underlying operating profit is similar to underlying earnings but is stated before tax
interest and share of profit after tax of equity accounted units
n 2009 earnings per share from continuing operations and underlying earnings per share have been calculated using a number of shares which reflects the discounted price of the
july rights issues the bonus factor 2004 to 2008 comparatives have been restated accordingly
riotintocom 193
strategic report directors’ report financial statements production reserves
and operations
additional information summary financial data in australian dollars sterling and
us dollars
2014
am
2013
am
2014
£m
2013
£m
2014
usm
2013
usm
55430 56353 30367 34882 gross sales revenue 50041 54575
52797 52838 28925 32706 consolidated sales revenue 47664 51171
10581 3619 5797 2240 profit before tax from continuing operations 9552 3505
7199 1114 3944 690 profit for the year from continuing operations 6499 1079
7230 3784 3961 2342 net earnings attributable to owners of rio tinto 6527 3665
10307 10550 5647 6530 underlying earnings
a
9305 10217
3911c 2049c 2143p 1268p basic earnings per ordinary share from continuing operations
b
3531c 1984c
5576c 5711c 3055p 3535p basic underlying earnings per ordinary share
ab
5034c 5531c
dividends per share to owners of rio tinto
22323c 18467c 12272p 11462p – paid 2045c 1780c
15298c 12014c 7798p 6582p – proposed final dividend 1190c 1085c
8621 4267 4723 2641 cash flow before financing activities 7783 4132
15243 20240 8026 10929 net debt 12495 18055
56463 51438 29729 27775 equity attributable to owners of rio tinto 46285 45886
a underlying earnings exclude net impairment and other charges of us2778 million 2013 charges of us6552 million which are analysed on page 125
b basic earnings per ordinary share and basic underlying earnings per ordinary share do not recognise the dilution resulting from share options in issue
the financial data above has been extracted from the financial information set out on pages 103 to 174 the australian dollar and sterling amounts are based on the us dollar amounts
retranslated at average or closing rates as appropriate except for the dividends which are the actual amounts payable
194 riotintocom metals and minerals production
2014 production 2013 production 2012 production
rio tinto
share
a
total
rio tinto
share total
rio tinto
share total
rio tinto
share
alumina ‘000 tonnes
jonquière vaudreuil canada b 1000 1444 1444 1439 1439 1397 1397
queensland alumina australia 800 3568 2854 3384 2707 3693 2954
são luis alumar brazil 100 3639 364 3425 343 3409 341
yarwun australia 1000 2688 2688 2446 2446 2175 2175
jonquière vaudreuil specialty plant canada 1000 108 108 103 103 101 101
7458 7037 6968
other aluminium
gove refinery australia c 1000 676 676 2270 2270 2742 2742
specialty plants francegermany d – –– – – 331 331
676 2270 3073
rio tinto total 8134 9307 10041
aluminium ‘000 tonnes
alma canada 1000 455 455 440 440 208 208
alouette septîles canada 400 583 233 582 233 593 237
alucam edéa cameroon e – 93 43 75 35 52 24
arvida canada 1000 173 173 175 175 177 177
arvida ap60 canada f 1000 59 59 99 – –
bécancour canada 251 446 112 435 109 429 107
bell bay australia 1000 188 188 187 187 185 185
boyne island australia 594 553 328 561 333 569 338
dunkerque france 1000 270 270 258 258 256 256
grandebaie canada 1000 222 222 224 224 223 223
isal reykjavik iceland 1000 206 206 197 197 190 190
kitimat canada 1000 125 125 172 172 182 182
laterrière canada 1000 244 244 239 239 233 233
lochaber uk 1000 42 42 44 44 45 45
saintjeandemaurienne france g – –– 85 85 93 93
shawinigan canada h 1000 –– 74 74 81 81
sohar oman 200 364 73 354 71 360 72
søral husnes norway i – 76 38 89 45 92 46
tiwai point new zealand 794 327 260 324 257 325 258
tomago australia 516 561 289 545 281 546 281
3361 3468 3236
other aluminium
lynemouth uk j 1000 –– – – 15 15
sebree us k – –– 87 87 205 205
87 220
rio tinto total 3361 3555 3456
see notes on page 198
riotintocom 195
strategic report directors’ report financial statements production reserves
and operations
additional information metals and minerals production continued
2014 production 2013 production 2012 production
rio tinto
share
a
total
rio tinto
share total
rio tinto
share total
rio tinto
share
bauxite ’000 tonnes
gove australia 1000 6528 6528 8029 8029 7944 7944
porto trombetas mrn brazil 120 16376 1965 15729 1887 15512 1861
sangaredi guinea 230
l
15803 7111 15437 6947 14001 6301
weipa australia 1000 26266 26266 26341 26341 23257 23257
rio tinto total 41871 43204 39363
borates ’000 tonnes m
rio tinto minerals – boron us 1000 508 508 495 495 453 453
rio tinto minerals – tincalayu argentina n – –– –– 9 9
rio tinto total 508 495 463
coal hard coking ’000 tonnes
rio tinto coal australia
hail creek coal australia 820 6492 5324 6839 5608 7174 5882
kestrel coal australia 800 2163 1730 2553 2043 2468 1974
total australian hard coking coal 7054 7651 7857
rio tinto coal mozambique
benga o – 641 416 867 564 289 188
rio tinto total hard coking coal 7471 8214 8044
coal semisoft coking ’000 tonnes
rio tinto coal australia
hunter valley australia 800 1935 1548 2634 2107 2119 1695
mount thorley australia 640 1952 1250 1846 1182 1584 1014
warkworth australia 445 933 415 1281 569 1296 576
rio tinto total semisoft coking coal 3213 3859 3286
coal thermal ’000 tonnes
rio tinto coal australia
bengalla australia 320 8558 2739 8232 2634 7026 2248
blair athol australia p 712 –– – – 2587 1843
clermont australia q – 4832 2421 11782 5903 8189 4103
hail creek coal australia r 820 2304 1890 191 157 – –
hunter valley australia 800 11924 9539 11002 8802 9836 7869
kestrel coal australia 800 564 451 463 371 350 280
mount thorley australia 640 2241 1434 2357 1508 2497 1598
warkworth australia 445 6803 3027 6995 3110 5477 2435
total australian thermal coal 21501 22485 20376
rio tinto coal mozambique
benga o – 593 385 754 490 419 272
rio tinto total thermal coal 21886 22975 20648
see notes on page 198
196 riotintocom 2014 production 2013 production 2012 production
rio tinto
share
a
total
rio tinto
share total
rio tinto
share total
rio tinto
share
copper mined ’000 tonnes
bingham canyon us 1000 2043 2043 2110 2110 1632 1632
escondida chile 300 11376 3413 11215 3365 10474 3142
grasberg – joint venture indonesia s 400 192 77 157 63 00 00
northparkes australia t – –– 506 404 538 431
oyu tolgoi mongolia u 335 1484 498 767 257 – –
palabora south africa v – –– 222 116 491 283
rio tinto total 6031 6315 5488
copper refined ’000 tonnes
escondida chile 300 3015 905 3053 916 3103 931
kennecott utah copper us 1000 2041 2041 1936 1936 1627 1627
palabora south africa v – –– 258 149 409 236
rio tinto total 2946 3001 2794
diamonds ’000 carats
argyle australia 1000 9188 9188 11359 11359 8471 8471
diavik canada 600 7233 4340 7243 4346 7230 4338
murowa zimbabwe 778 442 344 414 322 403 313
rio tinto total 13872 16027 13122
gold mined ’000 ounces
barneys canyon us 1000 04 04 04 04 12 12
bingham canyon us 1000 2598 2598 2067 2067 1998 1998
escondida chile 300 901 270 942 283 976 293
grasberg – joint venture indonesia s 400 56 23 00 00 00 00
northparkes australia t – –– 616 493 722 577
oyu tolgoi mongolia u 335 5887 1973 1570 526 – –
palabora south africa v – –– 55 31 109 63
rio tinto total 4868 3404 2943
gold refined ’000 ounces
kennecott utah copper us 1000 2522 2522 1923 1923 2792 2792
iron ore ’000 tonnes
hamersley mines australia w 163163 163163 143347 143347 135932 135932
hamersley – channar australia 600 10913 6548 11047 6628 10947 6568
hope downs australia 500 42715 21358 33788 16894 30793 15396
iron ore company of canada canada 587 14775 8676 15368 9024 14079 8267
robe river – pannawonica australia 530 34535 18304 33308 17654 32304 17121
robe river – west angelas australia 530 29264 15510 29093 15419 29404 15584
rio tinto total 233557 208966 198869
molybdenum ’000 tonnes
bingham canyon us 1000 115 115 57 57 94 94
salt ‘000 tonnes
dampier salt australia 684 9938 6793 9841 6728 9996 6833
silver mined ’000 ounces
bingham canyon us 1000 2935 2935 2876 2876 2086 2086
escondida chile 300 4883 1465 4032 1210 3501 1050
grasberg – joint venture indonesia sx 400 00 0000
oyu tolgoi mongolia u 335 893 299 489 164 – –
others – 00 687 515 685 521
rio tinto total 4699 4765 3657
see notes on page 198
riotintocom 197
strategic report directors’ report financial statements production reserves
and operations
additional information metals and minerals production continued
2014 production 2013 production 2012 production
rio tinto
share
a
total
rio tinto
share total
rio tinto
share total
rio tinto
share
silver refined ’000 ounces
kennecott utah copper us 1000 2811 2811 2158 2158 2451 2451
titanium dioxide feedstock ’000 tonnes
rio tinto iron  titanium
canadasouth africa yz 1000 1443 1443 1622 1622 1594 1594
uranium ’000 lbs u
3
o
8

energy resources of australia australia aa 684 2569 1757 6525 4462 8179 5594
rössing namibia bb 686 3401 2333 5312 3643 5951 4082
rio tinto total 4089 8105 9675
production data notes
mine production figures for metals refer to the total quantity of metal produced in
concentrates leach liquor or doré bullion irrespective of whether these products are then
refined onsite except for the data for bauxite and iron ore which can represent
production of marketable quantities of ore plus concentrates and pellets production
figures are sometimes more precise than the rounded numbers shown hence small
differences may result from calculation of rio tinto share of production
a rio tinto percentage share shown above is as at the end of 2014 the footnotes
below include all ownership changes over the three years the rio tinto share
varies at individual mines and refineries in the “others” category and thus no value
is shown
b jonquière’s vaudreuil’s production shows smelter grade alumina only and
excludes hydrate produced and used for specialty alumina
c the curtailment of production at the gove refinery was completed on 28 may 2014
d rio tinto sold its interest in these specialty alumina assets with an effective date of
1 august 2012 production data are shown up to that date
e rio tinto sold its 467 per cent interestinthealucamedéasmelterwithan
effective date of 31 december 2014 production data are shown up to that date
f rio tinto started production at the arvida ap60 technology centre in the fourth
quarter of 2013
g rio tinto sold its 100 per cent interest in the saintjeandemaurienne smelter
with an effective date of 16 december 2013 production data are shown up to that
date
h the shawinigan smelter ceased production on 29 november 2013
i rio tinto sold its 50 per cent interest in the søral husnes smelter with an
effective date of 31 october 2014 production data are shown up to that date
j rio tinto closed the lynemouth aluminium smelter on 29 march 2012
k rio tinto sold its 100 per cent interest in the sebree aluminium smelter with an
effective date of 1 june 2013 production data are shown up to that date
l rio tinto has a 2295 per cent shareholding in the sangaredi mine but benefits
from 450 per cent of production
m borate quantities are expressed as b
2
o
3

n rio tinto sold its interest in borax argentina with an effective date of 21 aug 2012
production data are included up to that date
o rio tinto completed the sale of rio tinto coal mozambique and its 65 per cent
interest in the benga mine with an effective date of 7 october 2014 production
data are shown up to that date commercial production had commenced in the
third quarter of 2012
p blair athol closed in the last quarter of 2012 rio tinto agreed to sell its 712 per
cent interest in blair athol in october 2013
q rio tinto sold its 501 per cent interest in the clermont mine with an effective date
of 29 may 2014 production data are shown up to that date
r hail creek commenced production of thermal coal from a processing plant by
product stream following completion of a successful trial in the third quarter
of 2013
s through a joint venture agreement with freeportmcmoran fcx rio tinto is
entitled to 40 per cent of additional material mined as a consequence of
expansions and developments of the grasberg facilities since 1998 total
production reflects the quantities attributable to the joint venture
t rio tinto sold its 80 per cent interest in northparkes with an effective date of
1 december 2013 production data are shown up to that date
u rio tinto owns a 3352 per cent indirect interest in oyu tolgoi through its
5079 per cent interest in turquoise hill resources ltd production included in the
table is from 1 may 2013
v the sale of rio tinto’s 577 per cent interest in palabora mining company
was completed on 31 july 2013 production data have been reported up to
30 june 2013
w includes 100 per cent of production from paraburdoo mt tom price marandoo
yandicoogina brockman nammuldi and the eastern range mines whilst
rio tinto owns 54 per cent of the eastern range mine under the terms of the
joint venture agreement hamersley iron manages the operation and is obliged to
purchase all mine production from the joint venture and therefore all of the
production is included in rio tinto’s share of production
x the 2014 silver production from grasberg did not exceed the metal attributable to
pt freeport indonesia per the joint venture agreement for the year accordingly
rio tinto’s share of joint venture silver production was zero for the year 2014
y on 7 september 2012 rio tinto increased its stake in richards bay minerals
rbmfrom37percentto74percentthrough the acquisition of bhp billiton’s
interest in rbm
z quantities comprise 100 per cent of rio tinto fer et titane and rio tinto’s share of
richards bay minerals’ production ilmenite mined in madagascar is being
processed in canada
aa era production has been restated from “produced ready for packing” to
“drummed” u
3
o
8
 in line with production reported by energy resources of
australia ltd to the australian stock exchange asx
bb rössing production has been restated from “produced ready for packing” to
“drummed” u
3
o
8
 to allow reporting of aggregated production
198 riotintocom ore reserves
ore reserves and mineral resources for rio tinto managed operations are reported in accordance with the australasian code for reporting of exploration results
mineral resources and ore reserves december 2012 the jorc code as required by the australian securities exchange asx codes or guidelines similar to
jorc with only minor regional variations have been adopted in south africa canada the us chile peru the philippines the uk ireland and europe together
these codes represent current best practice for reporting ore reserves and mineral resources
the jorc code envisages the use of reasonable investment assumptions including the use of projected longterm commodity prices in calculating ore reserve
estimates however for us reporting the us securities and exchange commission requires historical price data to be used for this reason some ore reserves
reported to the sec in the form 20f may differ from those reported below
ore reserve and mineral resource information in the tables below is based on information compiled by competent persons as defined by jorc most of whom
are full time employees of rio tinto or related companies each has had a minimum of five years’ relevant estimation experience and is a member of a recognised
professional body whose members are bound by a professional code of ethics each competent person consents to the inclusion in this report of information they
have provided in the form and context in which it appears competent persons responsible for the estimates are listed on pages xx and xx by operation along
with their professional affiliation employer and accountability for ore reserves andor mineral resources where operations are not managed by riotintotheore
reserves are published as received from the managing company the ore reserve figures in the following tables are as of 31 december 2014 summary data for
year end 2013 are shown for comparison metric units are used throughout the figures used to calculate rio tinto’s share of ore reserves are often more precise
than the rounded numbers shown in the tables hence small differences might result if the calculations are repeated using the tabulated figures
proved ore reserves
at end 2014
probable ore reserves
at end 2014
total ore reserves 2014
compared with 2013
rio tinto
share
type of
mine
a
tonnage grade tonnage grade tonnage grade
interest

recoverable
mineral
2014 2013 2014 2013
bauxite b
millions
of tonnes  al
2
o
3
millions
of tonnes  al
2
o
3
millions
of tonnes
millions
of tonnes al
2
o
3
al
2
o
3
millions
of tonnes
reserves at operating mines
gove australia op 135 494 11 492 146 150 494 493 1000 146
porto trombetas mrn brazil op 73 493 22 499 94 104 495 495 120 11
sangaredi guinea op 98 494 180 495 278 303 494 496 230 64
weipa australia op 501 522 983 527 1485 1511 525 525 1000 1485
total 1706
marketable
product
borates c
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
reserves at operating mine
rio tinto minerals – boron us op 11 11 22 23 1000 22
reserves marketable reserves marketable reserves
marketable
coal quality
average 
yield
to give
marketable
reserves
coal
type
d
proved
probable
at end
2014 proved
probable
at end
2014
total
2014
total
2013
e e
marketable
reserves
coal f
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
calorific
value
mjkg
sulphur
content

millions
of tonnes
reserves at operating mines
rio tinto coal australia
bengalla g h oc sc 163 106 131 86 217 120 2740 050 81 320 69
clermont i oc sc – 153 – –– – –
hail creek j oc sc  mc 107 20 72 13 85 60 2574 035 67 820 70
hunter valley operations k h oc sc  mc 391 190 274 130 404 277 2925 056 69 800 323
kestrel coal ug mc 37 95 32 79 110 112 3160 059 84 800 88
mount thorley operations l oc sc  mc 19 7 13 5 18 21 2978 044 68 640 12
warkworth m oc sc  mc 192 154 125 101 226 233 2980 045 65 445 100
subtotal 662
rio tinto coal mozambique
benga n oc sc  mc – 112 – –– – –
total reserves at operating mines 662
other undeveloped reserves o
rio tinto coal australia
mount pleasant p h oc sc 625 474 474 326 2724 050 76 800 379
see notes on page 202
riotintocom 199
strategic report directors’ report financial statements production reserves
and operations
additional information ore reserves continued
proved ore reserves at
end 2014
probable ore reserves
at end 2014
total ore reserves 2014
compared with 2013
average
mill
recovery

rio tinto
share
type of
mine
a
tonnage grade tonnage grade tonnage grade interest 
recoverable
metal
2014 2013 2014 2013
copper
millions
of tonnes  cu
millions
of tonnes  cu
millions
of tonnes
millions
of tonnes cu cu
millions
of tonnes
reserves at operating mines
bingham canyon us
– open pit and stockpiles op 226 040 467 047 693 748 045 047 88 1000 2717
escondida chile
– sulphide op 3506 074 1603 059 5109 5063 069 071 83 300 8856
– sulphide leach q op 1613 045 607 039 2220 2004 043 044 32 300 0922
– oxide r op 84 080 48 064 133 152 074 079 67 300 0199
grasberg indonesia op  ug 804 117 1464 093 2269 2358 102 101 88 s 6773
oyu tolgoi mongolia
– oyut open pit t op 383 054 612 040 995 1014 045 046 79 335 1195
–oyutstockpilesut 26 037 26 18 037 037 83 335 0027
total 20689
reserves at development projects
oyu tolgoi mongolia
– hugo dummett north ug 464 166 464 460 166 180 92 335 2371
– hugo dummett north extension v ug 35 159 35 31 159 173 92 300 0153
total 2524
recoverable
diamonds
diamonds b
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
millions
of tonnes
carats
per tonne
carats
per tonne
millions
of carats
reserves at operating mines
argyle australia w ug 41 24 41 49 24 24 1000 976
diavik canada x op  ug 13 30 50 27 18 16 29 29 600 320
murowa zimbabwe y op 40 10 40 44 10 09 778 30
total 1326
recoverable
metal
gold
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
millions
of ounces
reserves at operating mines
bingham canyon us
– open pit and stockpiles op 226 014 467 019 693 748 018 019 67 1000 2615
grasberg indonesia op  ug 804 100 1464 074 2269 2358 083 084 67 s 11904
oyu tolgoi mongolia
– oyut open pit t op 383 039 612 023 995 1014 029 031 70 335 2200
–oyutstockpilesut 26 023 26 18 023 021 79 335 0051
total 16770
reserves at development projects
oyu tolgoi mongolia
– hugo dummett north ug 464 034 464 460 034 037 83 335 1408
– hugo dummett north extension v ug 35 055 35 31 055 062 84 300 0156
total 1564
see notes on page 202
200 riotintocom proved ore reserves
at end 2014
probable ore reserves
at end 2014
total ore reserves 2014
compared with 2013
average
mill
recovery

rio tinto
share
type of
mine
a
tonnage grade tonnage grade tonnage grade
interest

marketable
product
2014 2013 2014 2013
iron ore
b z
millions
of tonnes  fe
millions
of tonnes  fe
millions
of tonnes
millions
of tonnes fe fe
millions
of tonnes
reserves at operating mines
hamersley iron australia
– brockman 2 brockman ore aa op 30 627 32 628 62 41 628 619 1000 62
– brockman 4 brockman ore op 365 623 151 607 516 516 619 620 1000 516
– marandoo marra mamba ore op 170 636 23 614 193 205 633 632 1000 193
– mt tom price brockman ore bb op 11 640 36 638 46 53 638 636 1000 46
– mt tom price marra mamba ore op 8 609 1 588 9 9 608 608 1000 9
– nammuldi marra mamba ore op 73 629 91 624 164 165 626 626 1000 164
– paraburdoo brockman ore cc op 8 617 8 636 16 14 627 635 1000 16
– western turner syncline brockman ore op 241 624 78 612 319 331 621 620 1000 319
– yandicoogina pisolite ore hg dd op 246 587 1 591 247 298 587 587 1000 247
channar jv australia
– brockman ore ee op 27 628 33 614 60 40 620 629 600 36
eastern range jv australia
– brockman ore ff op 45 623 14 613 59 47 620 627 540 32
hope downs jv australia
– hope downs 1 marra mamba ore op 5 614 206 616 212 225 616 616 500 106
– hope downs 4 brockman ore gg op 64 630 90 632 154 138 631 631 500 77
robe river jv australia
– pannawonica pisolite ore hh op 128 572 88 563 216 260 568 569 530 115
– west angelas marra mamba ore op 129 620 56 602 185 196 615 615 530 98
iron ore company of canada canada ii op 276 650 280 650 556 592 650 650 587 326
total 2363
reserves at development projects
hamersley iron australia
– koodaideri brockman ore jj op 253 621 213 615 467 418 618 618 1000 467
– silvergrass east marra mamba ore op 113 627 33 604 146 144 621 622 1000 146
– turee central brockman ore op 72 620 6 614 78 78 619 619 1000 78
simandou guinea kk op 1844 655 1844 1844 655 655 466 859
total 1549
recoverable
metal
molybdenum
millions
of tonnes  mo
millions
of tonnes  mo
millions
of tonnes
millions
of tonnes mo mo
millions
of tonnes
reserves at operating mine
bingham canyon us
– open pit and stockpiles ll op 226 0035 467 0036 693 748 0036 0043 67 1000 0165
total 0165
silver
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
millions
of ounces
reserves at operating mines
bingham canyon us
– open pit and stockpiles op 226 175 467 219 693 748 204 208 67 1000 30499
grasberg indonesia op  ug 804 458 1464 418 2269 2358 432 426 70 s 77868
oyu tolgoi mongolia mm
– oyut open pit t op 383 141 612 112 995 – 123 – 76 335 10026
–oyutstockpilesut 26 035 26 – 035 – 77 335 0076
total 118469
reserves at development projects
oyu tolgoi mongolia mm
– hugo dummett north ug 464 337 464 – 337 – 86 335 14579
– hugo dummett north extension v ug 35 372 35 – 372 – 86 300 1079
total 15657
see notes on page 202
riotintocom 201
strategic report directors’ report financial statements production reserves
and operations
additional information ore reserves continued
proved ore reserves
at end 2014
probable ore reserves
at end 2014
total ore reserves 2014
compared with 2013
average
mill
recovery

rio tinto
share
type of
mine
a
tonnage grade tonnage grade tonnage grade
interest

marketable
product
2014 2013 2014 2013
titanium dioxide
feedstock nn
millions
of tonnes
ti
minerals
millions
of tonnes
ti
minerals
millions
of tonnes
millions
of tonnes
ti
minerals
ti
minerals
millions
of tonnes
reserves at operating mines
qmm madagascar do 405 38 78 31 483 519 37 37 800 64
rbm south africa do 1049 21 798 25 1847 1909 23 23 740 139
rtft canada oo op 121 839 121 143 839 831 1000 447
total 650
recoverable
metal
uranium
millions
of tonnes  u
3
0
8
millions
of tonnes  u
3
0
8
millions
of tonnes
millions
of tonnes u
3
0
8
u
3
0
8
millions
of tonnes
reserves at operating mines
energy resources of australia
australia
– ranger 3 stockpiles 50 0123 50 55 0123 0123 84 684 0004
rössing sj namibia pp op 15 0031 106 0035 121 148 0034 0032 82 686 0024
total 0027
marketable
product
zircon qq
millions
of tonnes  zircon
millions
of tonnes  zircon
millions
of tonnes
millions
of tonnes zircon zircon
millions
of tonnes
reserves at operating mines
qmm madagascar do 405 02 78 01 483 519 02 02 800 05
rbm south africa do 1049 03 798 04 1847 1909 03 03 740 32
total 37
notes
a type of mine op  open pit oc  open cut ug  underground do  dredging
operation
b reserves of iron ore bauxite and diamonds are shown as recoverable reserves of
marketable product after accounting for all mining and processing losses mill
recoveries are therefore not shown
c reserves of borates are expressed in terms of marketable product b
2
o
3
afterall
mining and processing losses
d coal type sc steamthermal coal mc metallurgicalcoking coal
e coals have been analysed on an “air dried” moisture basis in accordance with
australian standards and gross calorific value and sulphur content are reported
here on that basis marketable reserves tonnages are reported on a product
moisture basis
f for coal the yield factors shown reflect the impact of further processing where
necessary to provide marketable coal
g the increase in bengalla marketable reserves tonnes follows the conversion of
resources to reserves
h bengalla hunter valley operations and mount pleasant have had material
reserves changes since previous publication a jorc table 1 in support of these
changes was released to the market on 28 november 2014 and a copy can be
found at riotintocomfactsheetsjorc
i rio tinto sold its 501 per cent interest in the clermont mine with an effective date
of 29 may 2014
j hail creek marketable reserves tonnes increased due to the inclusion of a thermal
coal product derived from coarse plant rejects a jorc table 1 in support of this
change will be released to the market contemporaneously with the release of this
annual report and can be viewed at riotintocomfactsheetsjorc
k reserves tonnes have increased at hunter valley operations following
reoptimisation and the subsequent inclusion of the southern pit and extension of
the cheshunt pit the end 2014 reserves include production depletion and mine
design changes subsequent to the jorc table 1 release
l marketable reserves tonnes at mount thorley operations decreased following
expit production
m an appeal of the project approval for warkworth reserves west of wallaby scrub road
was upheld disapproved by the nsw land and environment court in april 2013
a 350 metre modification within this area was subsequently secured in january 2014
and rio tinto coal australia management are working through a process that should
result in further approval in 2015 should this not occur there is a potential reduction
in reserves of approximately 113 million tonnes rom consisting of 30 million tonnes
rom proved and 83 million tonnes rom probable
n rio tinto completed the sale of rio tinto coal mozambique and its 65 per cent
interest in the benga mine with an effective date of 7 october 2014
o the term “other undeveloped reserves” is used here to describe material that is
economically viable on the basis of technical and economic studies but for which
mining and processing permits may have yet to be requested or obtained there is
a reasonable but not absolute certainty that the necessary permits will be issued
and that mining can proceed when required
p the increase in marketable reserves at mount pleasant follows a reoptimisation
ofthemineplan
q escondida – sulphide leach reserves tonnes increased due to a model update and
reclassification of material
r escondida – oxide reserves tonnes decreased following a model update
s under the terms of a joint venture agreement between rio tinto and fcx
rio tinto is entitled to a direct 40 per cent share in reserves discovered after
31 december 1994 and it is this entitlement that is shown
t oyut was previously reported as south oyu
u oyut stockpiles reserves increased following expit production
v hugo dummett north extension reserves tonnes increased following a
model update
w argyle reserves tonnes have decreased following production depletion mine and
operational design changes along with adjustments to geotechnical performance
dilution and recovery assumptions argyle reserves are based on a nominal
1 millimetre lower cutoff size and a final recrushing size of 8 millimetres
202 riotintocom x diavik reserves tonnes increased following the conversion of a21 pipe resources
to open pit reserves which are reported for the first time a jorc table 1 summary
supporting this reserve increase will be released to the market
contemporaneously with the release of this annual report and can be viewed at
riotintocomfactsheetsjorc diavik reserves are based on a nominal 1 millimetre
lower cutoff size and a final recrushing size of 5 millimetres
y murowa reserves are based on a nominal 1 millimetre lower cutoff size and a final
recrushing size of 19 millimetres
z australian and guinean iron ore reserves tonnes are reported on a dry
weight basis
aa the brockman 2 brockman ore reserves tonnes increase is due to an updated
geological model and pit design modifications
bb mt tom price brockman ore reserves tonnes decreased following production
depletion and updated geological models
cc paraburdoo brockman ore reserves tonnes decreased following production
depletion and updated geological models
dd production depletion reduced the yandicoogina pisolite ore hg reserves tonnes
ee the channar jv – brockman ore reserves tonnes increase is a result of cutoff
grade changes updated geological models and pit redesign
ff the eastern range jv – brockman ore reserves tonnes increase is a result of
cutoff grade changes and updated geological models
gg the hope downs 4 brockman ore reserves tonnes increase follows updated
pit designs
hh the reserves tonnage decrease at pannawonica follows a geological model update
and production depletion
ii reserves at iron ore company of canada are reported as marketable product
60 per cent pellets and 40 per cent concentrate for sale at a natural moisture
content of two per cent using process upgrade factors derived from current ioc
concentrating and pellet operations the marketable product is obtained from
mined material comprising 686 million dry tonnes at 385 per cent iron proved
and 703 million dry tonnes at 379 per cent iron probable
jj the increase in reserves tonnes at koodaideri follows pit design modifications and
updated geological models a jorc table 1 in support of this change will be released
to the market contemporaneously with the release of this annual report and can be
viewed at riotintocomfactsheetsjorc
kk with the signing of the investment framework in may 2014 the republic of guinea
acquired a 75 per cent share in simandou with all other joint venture partners’
shares decreasing proportionally subsequently rio tinto’s interest in simandou
decreased from 504 per cent to 466 per cent
ll bingham canyon reserves molybdenum grades interpolated from exploration
drilling assays have been factored based on a long reconciliation history to blast
hole and mill samples the grade factor applied in 2014 was decreased based on
an update of the reconciliation between resource and production drilling and mill
sample assays a further reduction in molybdenum recovery has also been applied
based on modified processing assumptions
mm silver is reported here for the first time to align with the reporting policies of the
oyu tolgoi mine operators
nn this year titanium dioxide feedstock reserves are expressed as in situ tonnes the
marketable product tio
2
slag is shown after all mining and processing losses
to improve reporting clarity and consistency rio tinto now also reports ti
minerals aggregated grade across these operations the equivalent 2013 figures
have been included for comparison
oo rtft reserve tonnes decreased following a pit redesign
pp rossing sj reserves tonnes have decreased following adjustments to processing
and recovery assumptions
qq to improve reporting clarity and consistency rio tinto now reports zircon across
these operations the equivalent 2013 figures have been included for comparison
riotintocom 203
strategic report directors’ report financial statements production reserves
and operations
additional information mineral resources
as required by the australian securities exchange the following tables contain details of other mineralisation that has a reasonable prospect of being economically
extracted in the future but which is not yet classified as proved or probable ore reserves this material is defined as mineral resources under the jorc code
estimates of such material are based largely on geological information with only preliminary consideration of mining economic and other factors while in the
judgment of the competent person there are realistic expectations that all or part of the mineral resources will eventually become proved or probable ore
reserves there is no guarantee that this will occur as the result depends on further technical and economic studies and prevailing economic conditions in the
future as in the case of ore reserves managed operations’ estimates are completed using or testing against rio tinto longterm pricing and market forecasts
scenarios mineral resources are stated as additional to the ore reserves reported earlier where operations are not managed by rio tinto the mineral resources
are published as received from the managing company where new project mineral resources or ore reserves are footnoted as being reported for the first time
additional information about them can be viewed on the rio tinto website
likely
mining
method
a
measured resources
at end 2014
indicated resources
at end 2014
inferred resources
at end 2014
total resources 2014
compared with 2013
rio tinto
interest
 tonnage grade tonnage grade tonnage grade tonnage grade
bauxite
millions
of tonnes  al
2
o
3
millions
of tonnes  al
2
o
3
millions
of tonnes  al
2
o
3
2014
millions
of tonnes
2013
millions
of tonnes
2014
al
2
o
3
2013
al
2
o
3
gove australia op 16 492 32 494 37 501 52 48 494 496 1000
porto trombetas mrn brazil op 293 496 40 489 134 499 468 440 496 500 120
sangaredi guinea op 62 455 4088 475 1537 463 5687 5771 471 465 230
weipa australia op 95 494 1320 514 490 520 1905 1965 515 513 1000
borates b
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
rio tinto minerals – boron us c op – 01 1000
jadar serbia ug 18 18 18 1000
coal
type
d
coal resources at end 2014 total resources 2014 compared with 2013
measured indicated inferred 2014 2013
coal e
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
rio tinto coal australia
bengallafg ocug scmc 57 49 80 187 246 320
blair athol h oc sc 10 02 10 10 712
clermont i oc sc – 15 –
hailcreek ocscmc 607933 172 172 820
hunter valley operations j g oc  ug sc  mc 269 379 725 1373 904 800
kestrel coal ug mc 3 3 3 800
kestrel west ug sc 106 33 139 139 800
lake elphinstone oc sc  mc 120 42 162 162 820
mount pleasant oc  ug sc  mc 97 217 257 571 612 800
mount thorley operations oc  ug sc  mc 19 94 113 113 640
oaklands oc sc 596 584 90 1270 1270 800
valeria oc sc 698 64 762 762 712
warkworth oc  ug sc  mc 6 125 343 475 475 445
winchester south oc mc 17 175 192 192 750
rio tinto coal mozambique
benga k oc sc  mc – 360 –
zambeze l oc sc  mc – 1988 –
see notes on page 208
204 riotintocom likely
mining
method
a
measured resources
at end 2014
indicated resources
at end 2014
inferred resources
at end 2014
total resources 2014
compared with 2013
rio tinto
interest

tonnage grade tonnage grade tonnage grade tonnage grade
2014 2013 2014 2013
copper
millions
of tonnes  cu
millions
of tonnes  cu
millions
of tonnes  cu
millions
of tonnes
millions
of tonnes cu cu
bingham canyon us
–openpitm op 40030 26026 14020 80 17 027 027 1000
– north rim skarn ug 10 350 90 360 10 370 20 20 365 365 1000
escondida chile
– chimborazo – sulphide op 139 050 84 060 223 223 054 054 300
– escondida – sulphide n op 39 061 412 041 10232 051 10683 6909 051 051 300
– escondida – mixed n op 20 050 75 044 77 89 044 045 300
– escondida – oxide n op 20 053 90 057 36 058 65 41 056 054 300
– pampa escondida – sulphide op 294 053 1150 055 6000 043 7444 7444 045 045 300
– pinta verde – sulphide op 23 050 37 045 60 60 047 047 300
– pinta verde – oxide op 109 060 64 053 15 054 188 188 057 057 300
grasberg indonesia o op  ug 472 075 2017 065 77 039 2567 2749 066 060 p
la granja peru op 130 085 4190 050 4320 4390 051 052 1000
oyu tolgoi mongolia q
– heruga etg r ug 1700 039 1700 910 039 048 300
– heruga ot s ug 117 041 117 60 041 048 335
– hugo dummett north t ug 41 156 365 115 807 077 1213 1006 091 107 335
– hugo dummett north
extension u ug 89 157 173 099 263 180 119 143 300
– hugo dummett south v ug 839 077 839 490 077 105 335
– oyut open pit w op 12 039 90 034 389 029 491 624 030 034 335
– oyut underground w ug 14 040 94 035 158 039 265 – 038 – 335
resolution us ug 1766 151 1766 1737 151 152 550
diamonds
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
millions
of tonnes
carats
per tonne
carats
per tonne
argyle australia
– ak1 pipe x ug 11 35 22 37 61 36 40 42 36 36 1000
bunder india y op 47 07 47 42 07 07 1000
diavik canada z op  ug 04 26 31 26 35 73 26 27 600
murowa zimbabwe aa op 46 03 46 43 03 03 778
gold
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
bingham canyon us
–openpitm op 40018 26015 14011 80 17 016 013 1000
– north rim skarn ug 10 210 90 170 10 150 20 20 162 162 1000
escondida chile
– pampa escondida –
sulphide bb op 294 007 1150 010 6000 004 7444 – 005 – 300
grasberg indonesia o op  ug 472 066 2017 058 77 031 2567 2749 059 054 p
oyu tolgoi mongolia q
– heruga etg r ug 1700 037 1700 910 037 049 300
– heruga ot s ug 117 029 117 60 029 037 335
– hugo dummett north t ug 41 041 365 030 807 027 1213 1006 028 031 335
– hugo dummett north
extension u ug 89 053 173 035 263 180 041 043 300
– hugo dummett south v ug 839 007 839 490 007 009 335
– oyut open pit w op 12 036 90 023 389 016 491 624 018 031 335
– oyut underground w ug 14 077 94 059 158 032 265 – 044 – 335
wabu indonesia cc op – 44 – 247 p
see notes on page 208
riotintocom 205
strategic report directors’ report financial statements production reserves
and operations
additional information mineral resources continued
likely
mining
method
a
measured resources
at end 2014
indicated resources
at end 2014
inferred resources
at end 2014
total resources 2014
compared with 2013
rio tinto
interest

tonnage grade tonnage grade tonnage grade tonnage grade
2014 2013 2014 2013
iron ore dd
millions
of tonnes  fe
millions
of tonnes  fe
millions
of tonnes  fe
millions
of tonnes
millions
of tonnes fe fe
hamersley iron australia
– brockman ee op 426 628 520 626 2051 617 2998 2317 620 620 1000
– brockman process ore ee op 329 576 180 573 628 573 1137 813 574 574 1000
– marra mamba op 216 624 439 618 813 616 1468 1401 618 617 1000
– detrital ee op 3 634 142 612 497 612 642 560 612 612 1000
– channel iron deposit op 830 574 216 577 2312 570 3358 3334 572 572 1000
channar jv australia
– brockman ff op 36 619 23 617 1 615 60 34 618 617 600
– brockman process ore op 21 580 7 580 28 29 580 579 600
eastern range jv australia
– brockman gg op 15 622 8 616 8 617 31 28 619 617 540
– brockman process ore gg op 20 573 7 572 3 579 30 41 573 572 540
hope downs jv australia
– brockman op 12 617 104 622 424 623 540 522 623 622 500
– brockman process ore op 58 568 89 568 194 566 341 319 567 567 500
– marra mamba op 5 611 128 621 262 617 395 414 619 618 500
– detrital hh op 3 599 50 593 53 47 594 591 500
rhodes ridge jv australia
– brockman op 565 639 1476 625 2041 2043 629 629 500
– brockman process ore op 176 576 460 565 636 636 568 568 500
– marra mamba op 404 624 1912 620 2316 2339 621 621 500
– detrital op 65 605 226 601 291 292 602 602 500
robe jv australia
– brockman ii op 46 619 46 15 619 613 530
– brockman process ore ii op 32 570 32 15 570 571 530
– marra mamba op 101 620 190 615 288 615 579 581 616 616 530
– detrital ii op 3 597 95 606 98 68 606 608 530
– channel iron deposit jj op 213 567 1740 584 2320 557 4273 3757 568 574 530
iron ore company of canada
canada kk op 375 386 1626 378 705 373 2706 3193 378 376 587
simandou guinea ll op 5 671 107 643 723 651 835 796 650 651 466
lithium
millions
of tonnes  li
2
o
millions
of tonnes  li
2
o
millions
of tonnes  li
2
o
millions
of tonnes
millions
of tonnes li
2
o li
2
o
jadar serbia ug 117 18 117 118 18 18 1000
see notes on page 208
206 riotintocom likely
mining
method
a
measured resources
at end 2014
indicated resources
at end 2014
inferred resources
at end 2014
total resources 2014
compared with 2013
rio tinto
interest

tonnage grade tonnage grade tonnage grade tonnage grade
2014 2013 2014 2013
molybdenum
millions
of tonnes  mo
millions
of tonnes  mo
millions
of tonnes  mo
millions
of tonnes
millions
of tonnes mo mo
bingham canyon us
– open pit mm m op 40 0063 26 0077 14 0008 80 17 0058 0028 1000
oyu tolgoi mongolia q
– heruga etg r ug 1700 0011 1700 910 0011 0014 300
– heruga ot s ug 117 0011 117 60 0011 0013 335
resolution us ug 1766 0035 1766 1737 0035 0035 550
nickel
millions
of tonnes  ni
millions
of tonnes  ni
millions
of tonnes  ni
millions
of tonnes
millions
of tonnes ni ni
sulawesi indonesia nn op – 162 – 162 –
silver
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
bingham canyon us
–openpitm op 40160 26150 14142 80 17 154 153 1000
– north rim skarn ug 10 2000 90 2100 10 2100 20 20 2095 2095 1000
grasberg indonesia o op  ug 472 380 2017 356 77 175 2567 2749 355 339 p
oyu tolgoi mongolia q
– heruga etg r ug 1700 139 1700 – 139 – 300
– heruga ot s ug 117 156 117 – 156 – 335
– hugo dummett north t ug 41 371 365 284 807 234 1213 – 254 – 335
– hugo dummett north
extension u ug 89 407 173 272 263 – 318 – 300
– hugo dummett south v ug 839 178 839 – 178 – 335
– oyut open pit w op 12 121 90 106 389 087 491 – 091 – 335
– oyut underground w ug 14 116 94 119 158 086 265 – 099 – 335
wabu indonesia cc op – 44 – 233 p
titanium dioxide
feedstock oo
millions
of tonnes
ti
minerals
millions
of tonnes
ti
minerals
millions
of tonnes
ti
minerals
millions
of tonnes
millions
of tonnes
ti
minerals
ti
minerals
qmm madagascar do 56 36 1109 42 186 32 1351 1323 40 40 800
rbm south africa pp do  op 17 153 17 36 153 193 740
rtft canada op 11 849 11 11 849 849 1000
uranium
millions
of tonnes  u
3
o
8
millions
of tonnes  u
3
o
8
millions
of tonnes  u
3
o
8
millions
of tonnes
millions
of tonnes u
3
o
8
u
3
o
8
energy resources of australia
australia
– jabiluka ug 12 0887 14 0520 10 0545 25 25 0547 0547 684
– ranger 3 mine qq ug 28 0321 63 0276 35 0245 13 10 0277 0328 684
– ranger 3 stockpiles rr 38 0047 38 50 0047 0046 684
rössing namibia
– rössing sj op 87 0026 120 0023 65 0021 135 144 0023 0023 686
– rössing z20 op 87 0028 115 0026 202 202 0027 0027 686
zircon ss
millions
of tonnes  zircon
millions
of tonnes  zircon
millions
of tonnes  zircon
millions
of tonnes
millions
of tonnes zircon zircon
qmm madagascar do 56 02 1109 03 186 03 1351 1323 03 03 800
rbm south africa pp do  op 17 85 17 36 85 113 740
see notes on page 208
riotintocom 207
strategic report directors’ report financial statements production reserves
and operations
additional information mineral resources continued
notes
a likely mining method op  open pit oc  open cut ug  underground do 
dredging operation
b borates resources are reported as in situ b
2
o
3
 rather than marketable product as
in reserves
c the resources at rio tinto minerals – boron have been reclassified as probable
reserves following completion of a drilling and assaying campaign
d coal type scsteamthermal coal mcmetallurgicalcoking coal
e riotintoreportscoalresourcesonaninsitumoisturebasis
f the decrease in bengalla resources reflects conversion of resources to reserves
g bengalla and hunter valley operations have had material resources changes
since previous publication a jorc table 1 in support of these changes was
released to the market on 28 november 2014 and a copy can be found at
riotintocomfactsheetsjorc
h blair athol closed in the last quarter of 2012 rio tinto agreed to sell its 712 per
cent interest in blair athol in october 2013 and completion of the sale is expected
within the first half of 2015
i rio tinto sold its 501 per cent interest in the clermont mine with an effective date
of 29 may 2014
j hunter valley operations resources have increased following reevaluation of
mining options resulting in the transfer of former underground resources into
open cut resources
k rio tinto completed the sale of rio tinto coal mozambique and its 65 per cent
interest in the benga mine with an effective date of 7 october 2014
l rio tinto completed the sale of rio tinto coal mozambique and its 100 per cent
interest in zambeze with an effective date of 7 october 2014
m bingham canyon – open pit resources increased significantly with the transfer of
reserves now excluded from the mine design following a geotechnical review
n the increase in resources and improved resources confidence at escondida
resulted from a revised estimate that included 303000m of additional drill hole
data this increase was published on 16 april 2014 in the bhp billiton operational
review for the nine months ended 31 march 2014 along with a jorc table 1 and
is available to view at bhpbillitoncom
o the grasberg resources grade increase resulted from the implementation of a
new model depletion methodology for the block cave operations which returns
higher average grades
p under the terms of a joint venture agreement between rio tinto and fcx
rio tinto is entitled to a direct 40 per cent share in resources discovered after
31 december 1994
q the oyu tolgoi project resources were formally updated and released to the
market by turquoise hill resources in october 2014 within a canadian instrument
43101 technical report which can be viewed at wwwturquoisehillcom silver is
reported here for the first time to align with the reporting policies of the oyu tolgoi
mine operators
r changes in heruga etg resources tonnes and grade reflect a lowering of the cut
off grade following an economic reevaluation
s heruga ot was previously reported as heruga ivn changes in heruga ot
resources tonnes and grade reflect a lowering of the grade following an economic
reevaluation
t changes in hugo dummett north resources tonnes and grade reflect a lowering of
the cutoff grade following an economic reevaluation measured resources are
reported for the first time based on infill drilling a new block model and
classification method
u changes in hugo dummett north extension resources tonnes and grade reflect a
lowering of the cutoff grade following an economic reevaluation
v changes in hugo dummett south resources tonnes and grade reflect a lowering
of the cutoff grade following an economic reevaluation
w oyut open pit was previously reported as south oyu the open pit resources
tonnes and grade decreased following a transfer of material to underground
resources which are now reported for the first time at a higher cutoff grade
x ak1 pipe resources are based on a nominal 05 millimetre lower cutoff size and a
final recrushing size of 6 millimetres
y bunder resources are based on a nominal 1 millimetre lower cutoff size and a
final recrushing size of 6 millimetres following a review of potential mine designs
an increase in resources tonnes is reported
z supported by technical and economic studies and additional drilling diavik
resources decreased following transfer of the a21 pipe resources to open pit
reserves diavik resources are based on a nominal 1 millimetre lower cutoff size
and a final recrushing size of 5 millimetres
aa murowa resources are based on a nominal 1 millimetre lower cutoff size and a
final recrushing size of 19 millimetres
bb pampa escondida is a classed as a copper deposit however gold is declared for the
first time as a potential byproduct
cc the wabu resource is no longer reported by rio tinto following advice from pt
freeport indonesia that it has no intention to mine wabu in the future
dd australian and guinean iron ore resources tonnes are reported on a dry
weight basis
ee hamersley iron – brockman brockman process ore and detrital resources tonnes
have increased as a result of additional drilling and updated geological models
these figures also include the first declaration of yandi braid deposit a jorc table
1 in support of these will be released to the market contemporaneously with the
release of this annual report and can be viewed at riotintocomfactsheetsjorc
ff channar jv – brockman resources tonnes have increased as a result of additional
drilling updated geological models and pit design modifications
gg eastern range jv – brockman resources tonnes increased and brockman process
ore tonnes decreased as a result of additional drilling updated geological models
and modifications to pit designs
hh hope downs jv – detrital resources tonnes have increased as a result of
additional drilling and updated geological models
ii robe jv – brockman brockman process ore and detrital resources tonnes have
increased as a result of additional drilling updated geological models and pit
design changes
jj robe jv – channel iron deposit resources tonnes have increased as a result of
additional drilling updated geological models and technical studies at
jimmawurrada and other deposits a jorc table 1 in support of these changes will
be released to the market contemporaneously with the release of this annual
report and can be viewed at riotintocomfactsheetsjorc
kk iron ore company of canada resources tonnes reduced following geological
model updates changes to resource classification methodology and partial
conversion of wabush 3 resources to reserves resources are quoted on an in situ
dry tonnes and grades basis and would produce a marketable product 60 per cent
pellets and 40 per cent concentrate for sale at two per cent moisture content of
148 million tonnes at 65 per cent iron measured 638 million tonnes at 65 per
cent iron indicated and 276 million tonnes at 65 per cent iron inferred
ll with the signing of the investment framework in may 2014 the republic of guinea
acquired a 75 per cent share in simandou with all other joint venture partners’
shares decreasing proportionally subsequently rio tinto’s interest in simandou
decreased from 504 per cent to 466 per cent
mm bingham canyon resources molybdenum grade has increased following the
transfer of higher grade reserves to resources after revision of the mine design
molybdenum grades interpolated from exploration drilling assays have been
factored based on a long reconciliation history to blast hole and mill samples
nn the sale of rio tinto’s 38 per cent interest in sulawesi was completed in july 2014
oo this year titanium dioxide feedstock resources are expressed as in situ tonnes to
improve reporting clarity and consistency rio tinto now reports ti minerals
aggregated grade across these operations the equivalent 2013 figures have been
included for comparison
pp rbm resources tonnes and grade decreased following conversion of resources to
reserves and depletion due to mine production
qq ranger 3 mine underground resources tonnes decreased and grade increased
following additional drilling and a new orebody model a jorc table 1 in support of
these changes was released to the market by energy resources of australia
limited on 6 february 2015 and can be viewed at wwwenergyrescomau
rr ranger 3 stockpiles resources decreased following reclassification of low grade
material for proposed open pit mine backfill
ss to improve reporting clarity and consistency rio tinto now reports zircon across
these operations the equivalent 2013 figures have been included for comparison
208 riotintocom mineral resources and ore reserves corporate governance
rio tinto has established a governance process supporting the generation and
publication of mineral resources and ore reserves which includes a series of
structures and processes independent of the operational reporting through
business units and product groups
the audit committee has in its remit the governance of resources and
reserves this includes an annual review of mineral resources and ore
reserves at a group level as well as review of findings and progress from the
group resources and reserves internal audit programme within the regular
meeting schedule
rio tinto also has an ore reserve steering committee orsc which meets at
least quarterly chaired by the group executive technology  innovation and
comprises senior representatives from technical financial and business
groups within the company the orsc role includes oversight of the
appointment of competent persons nominated by the business units review
of exploration results mineral resources or ore reserve data prior to public
reporting and development of group resource and reserves standards
and guidance
the resource and reserve internal audit programme is conducted by
independent external consulting personnel in a programme managed by
group audit  assurance with the assistance of the orsc in 2014 six internal
audits were completed material findings are reported outside of the product
group reporting line to the audit committee and all reports and action plans
are reviewed by the orsc for alignment to internal and external
reporting standards
mineral resources and ore reserves from externally managed operations
where rio tinto holds a minority share are reported as received from the
managing entity figures from rio tinto managed operations are the
responsibility of the managing directors of the business units and estimates
are carried out by competent persons as defined by jorc
rio tinto has continued the development of internal systems and controls in
order to meet jorc 2012 compliance in all external reporting including the
preparation of all reported data by competent persons as members of the
australasian institute of mining and metallurgy the ausimm australian
institute of geoscientists aig or recognised professional organisations
rpos jorc table 1 reports for new or materially upgraded significant
deposits are released to market by rio tinto and are also available on the
group’s website jorc table 1 and ni 43101 technical reports generated by
nonmanaged units or joint venture partners are referenced within the
reporting footnotes with the location and initial reporting date identified
as well as the establishment of an enhanced governance process there have
been a number of process improvements and training initiatives introduced by
the orsc over recent years including a webbased group reporting and
signoff database annual internal competent person reports and competent
person development and training
riotintocom 209
strategic report directors’ report financial statements production reserves
and operations
additional information competent persons
primary commodity name association
a
employer accountability deposits
bauxite
jpc de melo franco ausimm
mineração rio do norte
reserves
porto trombetas
rs aglinskas ausimm resources
d butty eurogeol aluminpro associate resources reserves sangaredi
l mcandrew ausimm
rio tinto
reserves
gove weipa
j bower ausimm resources
borates
r torres ausimm
rio tinto
resources
rio tinto minerals – boron
b griffiths sme reserves
coal
g doyle ausimm
rio tinto
reserves rio tinto coal australia – hunter valley operations
g doyle ausimm resources rio tinto coal australia – blair athol
a prentice ausimm reserves rio tinto coal australia – bengalla mount pleasant
a waltho ausimm resources rio tinto coal australia – lake elphinstone oaklands
r ruddock ausimm resources
rio tinto coal australia – bengalla hail creek
hunter valley operations kestrel  kestrel west
mount pleasant mount thorley operations valeria
warkworth winchester south
m hillard ausimm reserves rio tinto coal australia – hail creek
a swiericzuk ausimm reserves rio tinto coal australia – kestrel
h bell ausimm reserves
rio tinto coal australia – mount thorley operations
warkworth
copper
j vickery ausimm
rio tinto
resources reserves
kennecott utah copper b c d g austin ausimm resources
r hayes ausimm resources
m howson immm
mineral resources
professional limited
resources
la granja
p salazar ausimm rio tinto resources
a zuzunaga ausimm
minera escondida ltda
reserves escondida
l soto ausimm resources
escondida pampa escondida b pinta verde
m cortes ausimm resources
l vaccia ausimm resources chimborazo
g crook ausimm
rio tinto
resources
oyu tolgoi b c d
j dudley ausimm reserves
b sirait ausimm reserves
o togtokhbayar ausimm resources
a issel apgo
freeportmcmoran inc
resources reserves
pt freeport – grasberg b d
g macdonald sme resources reserves
c hehnke ausimm rio tinto resources resolution c
210 riotintocom primary commodity name association
a
employer accountability deposits
diamonds s brennan ausimm
rio tinto
resources reserves
argyle d ford aig resources reserves
m rayner ausimm resources reserves
m rayner ausimm rio tinto resources bunder
cyip ausimm
rio tinto
resources reserves
diavik
k thompson napeg resources reserves
m rayner ausimm rio tinto resources
murowa
e harvey saimm euan harvey consulting reserves
iron ore m blake pegnl
rio tinto
resources
iron ore company of canada r williams pegnl reserves
t leriche pegnl resources reserves
b sommerville ausimm
rio tinto
resources
rio tinto iron ore – hamersley channar eastern
range  hope downs robe rhodes ridge
p savory ausimm resources
l fouche ausimm reserves
rio tinto iron ore – hamersley channar eastern
range hope downs robe
c tabb ausimm reserves
r taylor ausimm rio tinto resources reserves
simandou – oueleba pic de fon
m franks ausimm amec foster wheeler resources
lithium j garcia eurogeol rio tinto resources rio tinto minerals – jadar e
titanium dioxide feedstock c ware sacnasp
rio tinto
reserves
richards bay minerals f
j nel sacnasp resources
j dumouchel apegga rio tinto resources reserves
qmm madagascar minerals f rio tinto fer et
titane – havresaintpierre
y bourque oiq rio tinto resources reserves rio tinto fer et titane – havresaintpierre
uranium g rogers ausimm
rio tinto
resources energy resources of australia – jabiluka
s pevely ausimm resources energy resources of australia – ranger 3 jabiluka
j murphy ausimm reserves energy resources of australia – ranger 3
tg murasiki saimm
rio tinto
resources rössing – sj z20
wd wieland saimm reserves rössing – sj
a ausimm australasian institute of mining and metallurgy aig australasian institute of geoscientists eurogeol european geologist member of the european federation of
geologists immm institute of materials minerals and mining saimm south african institute of mining and metallurgy sme society of mining metallurgy and exploration aipg
american institute of professional geologists napeg association of professional engineers geologists and geophysicists of the northwest territories pegnl professional
engineers and geoscientists newfoundland and labrador cimm canadian institute of mining and metallurgy apegga association of professional engineers geologists and
geophysicists of alberta oiq ordre des ingénieurs du québec sacnasp south african council for natural scientific professions
b includes gold
c includes molybdenum
d includes silver
e includes borates
f includes zircon
riotintocom 211
strategic report directors’ report financial statements production reserves
and operations
additional information mines and production facilities
group mines as at 31 december 2014
rio tinto’s interest 100 per cent unless otherwise shown
mine location access titlelease
bauxite
cbg sangaredi 2295 sangaredi guinea road air and port mining concession expires in 2040
gove gove northern territory
australia
road air and port all leases were renewed in 2011 for a further period of 42 years the residue disposal area is
leased from the arnhem land aboriginal land trust the northern territory government is the
lessor of the balance of the leases however on expiry of the 42year renewed term the land
subject of the balances of the leases will all vest to the arnhem land aboriginal land trust
mrn porto trombetas 12 porto trombetas
para brazil
air or port mining concession granted under the brazilian mining code with no expiration date
weipaely weipa queensland
australia
road air and port the queensland government comalco ml7024 lease expires in 2041 with an option of a
21year extension then two years’ notice of termination the ely alcan queensland pty limited
agreement act 1965 ml7031 expires in 2048 with a 21year right of renewal with a twoyear
notice period
copper
escondida 30 atacama desert chile pipeline and road to
deep sea port at
coloso road and rail
rights conferred by government under chilean mining code
grasberg joint venture
40 share of production
above specified levels
papua indonesia pipeline road and
port
indonesian government contracts of work expire in 2021 with option of two tenyear
extensions
kennecott utah copper
bingham canyon
near salt lake city
utah us
pipeline road and rail owned
oyu tolgoi 51 of turquoise
hill resources ltd which owns
66 of oyu tolgoi llc
gobi desert mongolia air and road three mining licences are held by oyu tolgoi llc and two further licences are held in joint
venture with entrée gold llc the licence term under the minerals law of mongolia is 30 years
with two 20year extensions first renewals are due in 2033 and 2039 for the oyu tolgoi and
entrée gold licences respectively
diamonds  minerals
diamonds
argyle diamonds kimberley ranges
western australia
road and air mining tenement held under diamond argyle diamond mines joint venture agreement act
1981 lease extended for 21 years from 2004 with option to renew
diavik 60 northwest territories
nwt canada
air ice road in winter mining leases from nwt government expiring in 2017 and 2018 with options to renew
murowa 778 zvishavane zimbabwe road and air mining leases under zimbabwe mines and minerals act issued in 2001 and valid for 25 years
industrial minerals
dampier salt 684 dampier lake macleod
and port hedland
western australia
road and port state agreements mining leases expiring in 2034 at dampier 2018 at port hedland and 2021
at lake macleod with options to renew at the latter two sites
rio tinto minerals – boron california us road and rail owned
rio tinto fer et titane lac tio havresaintpierre
quebec canada
rail and port
st lawrence river
mining covered by two concessions granted by state in 1949 and 1951 which subject to certain
mining act restrictions confer rights and obligations of an owner
212 riotintocom history type of mine power source
bauxite mining commenced in 1973 shareholders are 51 halco and 49 government of guinea rio tinto has held
45 of halco since 2004 current annual capacity is 14 million tonnes rio tinto has a 45 per cent interest in the
mine’s production
open cut onsite generation fuel oil
bauxite mining commenced in 1970 feeding both the gove refinery and export market capped at two million tonnes per
annum bauxite export ceased in 2006 with feed intended for the expanded gove refinery bauxite exports recommenced
in 2008 and will increase in the coming years following the curtailment of the refinery production in 2014
open cut onsite diesel fired power
station
mineral extraction commenced in april 1979 initial production capacity 34 million tonnes annually from october 2003
production capacity up to 163 million tonnes per year on a dry basis capital structure currently vale 40 bhp
billiton 148 rio tinto 12 cba 10 alcoaabalco 182 and norsk hydro 5
open cut onsite generation
heavy oil diesel
bauxite mining commenced in 1961 at weipa major upgrade completed at weipa in 1998 rio tinto interest increased
from 724 to 100 in 2000 in 1997 ely bauxite mining project agreement signed with local aboriginal land owners
bauxite mining and exchange agreement signed in 1998 with comalco to allow for extraction of ore at ely the western
cape communities coexistence agreement an indigenous land use agreement was signed in 2001 in 2004 a mine
expansion was completed at weipa that lifted annual capacity to 215 million tonnes mining commenced on the adjacent
ely mining lease in 2006 in accordance with the 1998 agreement with alcan first ore extracted at ely in 2007 a second
shiploader that increases the shipping capability was commissioned in 2006 at weipa annual production capacity has
now reached 26 million tonnes
open cut onsite generation new power
station commissioned in 2006
production started in 1990 and expanded in phases to 2002 when the new concentrator was completed production from
norte started in 2005 and the sulphide leach produced the first cathode during 2006
open pit supplied from sing grid under
various contracts with local
generating companies
joint venture interest acquired 1995 capacity expanded to over 200000 tonnes of ore per day in 1998 addition of
underground production of more than 35000 tonnes per day in 2003 expansion to 50000 tonnes per day in mid2007
and to 80000 tonnes in 2010
open pit and
underground
longterm contract with
usindonesian consortium
operated purposebuilt
coalfired generating station
interest acquired in 1989 in 2012 the pushback of the south wall commenced extending the mine life from 2018
to 2030
open pit onsite generation
supplemented by longterm
contracts with rocky mountain
power
oyu tolgoi was first discovered in 1996 construction began in late 2009 after signing of an investment agreement with
the government of mongolia and first concentrate was produced in december 2012 first sales of concentrate were
made to chinese customers on 9 july 2013
open pit and
underground
grid power from china and
supplementary diesel power
generation site
interest increased from 597 following purchase of ashton mining in 2000 underground mine project approved in 2005
to extend mine life to 2020
underground
previously open pit
longterm contract with ord
hydro consortium and onsite
generation
deposits discovered 19941995 construction approved 2000 diamond production started 2003 second dike closed off
in 2005 for mining of additional orebody the underground mine started production in 2010 ramping up to full
production in 2013
underground
previously open pit
onsite diesel generators
installed capacity 44mw and
92mw of wind capacity
discovered in 1997 smallscale production started in 2004 open pit supplied by zesa with diesel
generator backup
construction of the dampier field started in 1969 first shipment in 1972 lake macleod was acquired in 1978 as an
operating field port hedland was acquired in 2001 as an operating field
solar evaporation of
seawater dampier and
port hedland and
underground brine lake
macleod dredging of
gypsum from surface of
lake macleod
dampier supply from
hamersley iron pty ltd
lake macleod from
western power and onsite
generation units port hedland
from western power
deposit discovered in 1925 and acquired by rio tinto in 1967 open pit onsite cogeneration units
and local power grid
production started 1950 interest acquired in 1989 open pit longterm contract with
hydroquébec
riotintocom 213
strategic report directors’ report financial statements production reserves
and operations
additional information mines and production facilities continued
214 riotintocom
group mines as at 31 december 2014 continued
rio tinto’s interest 100 per cent unless otherwise shown
mine location access titlelease
industrial minerals continued
qit madagascar minerals 80 fortdauphin madagascar road and port mining lease granted by central government
richards bay minerals 74 richards bay kwazulunatal
south africa
rail road and port mineral rights for reserve 4 and reserve 10 issued by state and
converted to new order mining rights from 9 may 2012 mining rights
run until 8 may 2041 for both lease areas
energy
energy resources of australia
684
ranger
northern territory australia road rail and port mining tenure granted by federal government
rio tinto coal australia new south wales and
queensland australia
road rail conveyor and port leases granted by respective state governments
bengalla 32
hail creek 82
hunter valley operations 80
kestrel 80
mount thorley operations 64
warkworth 4446
rössing uranium 686 erongo region namibia rail road and port mining licence granted by national government
zululand anthracite colliery pty ltd 
74
mahlabatini district
kwazulunatal south africa
road rail and port okhukho reserve no 14376 over mineral leases 1 2 and 6 awarded to
zac as a new order mining right no 462007 on 10 april 2007 expiry
date 9 april 2027 protocol number 14612010 an extended mining
right over the remainder of reserve no 20 no 15840 and portions 10
11 and 12 of reserve 12 no 15832 awarded 11 november 2010 and
valid through to 10 november 2030
iron ore
hamersley iron hamersley ranges western
australia
railway and port
owned by hamersley iron and
operated by pilbara iron
agreements for life of mine with government of western australia
brockman 2
brockman 4
marandoo
mount tom price
nammuldi
paraburdoo
western turner syncline
yandicoogina
channar 60
eastern range 54
hope downs 1
50 mine 100 infrastructure
pilbara region
western australia
railway owned by hamersley
ironandoperatedbypilbara
iron
agreements for life of mine with government of western australia
hope downs 4
50 mine 100 infrastructure
pilbara region
western australia
railway owned by hamersley
ironandoperatedbypilbara
iron
agreements for life of mine with government of western australia
iron ore company of canada ioc
587
labrador city province of
labrador and newfoundland
railway and port facilities in
septîles quebec owned and
operated by ioc
sublease with the labrador iron ore royalty corporation which has
lease agreements with the government of newfoundland and labrador
that are due to be renewed in 2020 and 2022
robe river iron associates
53
pilbara region
western australia
railway and port
owned by robe river and
operated by pilbara iron
agreements for life of mine with government of western australia
mesa j
mesa a
west angelas history type of mine power source
exploration project started in 1986 construction approved 2005 ilmenite and zirsil production started at the end of
2008 qmm intends to extract ilmenite and zirsil from heavy mineral sands over an area of about 6000 hectares
along the coast over the next 40 years
mineral sand dredging onsite heavy fuel oil generators
production started 1977 initial interest acquired 1989 fifth mining plant commissioned in 2000 one mining plant
decommissioned in 2008 in september 2012 rio tinto doubled its holding in richards bay minerals to 74 per cent
following the acquisition of bhp billiton’s entire interests
dune sand dredging contract with eskom
mining commenced 1981 interest acquired through acquisition of north 2000 open pit mining ended
december 2012
stockpile onsite dieselsteam
power generation
kestrel mine in queensland rio tinto coal australia’s sole underground mine was acquired and recommissioned in
1999 and hail creek mine in queensland was officially opened in 2003 blair athol mine ceased operations in 2012
and a conditional sale and purchase agreement for the mine was signed in october 2013
rio tinto completed the privatisation of coal  allied during 2011 wich is now owned 8020 with mitsubishi
development and which rio tinto continues to manage
open cut and underground stateowned grid
production began in 1976 open pit supplied by nampower via
grid network
operations commenced at zululand anthracite colliery pty ltd on 13 august 1984 rio tinto took ownership of the
mine as from 8 april 2011 zululand anthracite colliery became a rio tinto fully managed company as from
1 april 2014
underground anthracite
mine with five active shafts
eskom grid with diesel generator
backup
mount tom price began operations in 1966 followed by paraburdoo in 1974 in the 1990s channar brockman 2
marandoo and yandicoogina achieved first ore annual capacity increased to 68 million tonnes during the 1990s and
has more than doubled in the past 25 years since 2000 eastern ranges nammuldi brockman 4 and western
turner syncline have joined the network of hamersley iron mines the brownfield mine expansion at such sites as
paraburdoo brockman 2 nammuldi and yandicoogina will enable production to meet expanded port and rail
capacity in the coming years
open pit supplied through the integrated
hamersley and robe power
network operated by pilbara iron
joint venture between rio tinto and hancock prospecting construction of stage 1 to 22 million tonnes per annum
commenced april 2006 and first production occurred november 2007 stage 2 to 30 million tonnes per annum
completed 2009
open pit supplied through the integrated
hamersley and robe power
network operated by pilbara iron
joint venture between rio tinto and hancock prospecting construction of wet plant processing to 15 million tonnes
per annum commenced april 2011 and first production occurred april 2013
open pit supplied through the integrated
hamersley and robe power
network operated by pilbara iron
interest acquired in 2000 through north current operation began in 1962 and has processed over one billion tonnes
of crude ore since annual capacity 233 million tonnes of concentrate of which 125 million tonnes can be
pelletised
open pit supplied by newfoundland hydro
first shipment in 1972 from robe valley interest acquired in 2000 through north first ore was shipped from west
angelas in 2002 in 2014 total production of the robe river iron associates joint venture was 64 million tonnes
open pit supplied through the integrated
hamersley and robe power
network operated by pilbara iron
riotintocom 215
strategic report directors’ report financial statements production reserves
and operations
additional information mines and production facilities continued
group smelters and refineries
rio tinto’s interest 100 per cent unless otherwise shown
smelterrefinery location titlelease plant typeproduct
capacity as of
31 december 2014
based on 100
ownership
aluminium
alma alma quebec canada 100 freehold aluminium smelter producing aluminium rod
tfoundry molten metal high purity remelt
455000 tonnes
peryearaluminium
alouette 40 septîles quebec canada 100 freehold aluminium smelter producing aluminium high
purity remelt
595000 tonnes
peryearaluminium
arvida saguenay quebec canada 100 freehold aluminium smelter producing aluminium billet
molten metal remelt
176000 tonnes
peryearaluminium
arvida ap60 saguenay quebec canada 100 freehold aluminium smelter producing aluminium high
purity remelt
60000 tonnes
peryearaluminium
bécancour 251 bécancour quebec canada 100 freehold aluminium smelter producing aluminium slab
billet tfoundry remelt molten metal
446000 tonnes
peryearaluminium
bell bay bell bay northern
tasmania australia
100 freehold aluminium smelter producing aluminium slab
molten metal small form and tfoundry remelt
192000 tonnes
peryearaluminium
boyne smelters 594 boyne island queensland
australia
100 freehold aluminium smelter producing aluminium billet
ec grade small form and tfoundry remelt
571000 tonnes
peryearaluminium
dunkerque dunkerque france 100 freehold aluminium smelter producing aluminium slab
small form foundry remelt
270000 tonnes
peryearaluminium
grandebaie saguenay quebec canada 100 freehold aluminium smelter producing aluminium slab
molten metal high purity remelt
225000 tonnes
peryearaluminium
isal reykjavik iceland 100 freehold aluminium smelter producing aluminium slab
remelt billet
205000 tonnes
peryearaluminium
jonquière vaudreuil jonquière quebec canada 100 freehold refinery producing specialty alumina and
smelter grade alumina
1555000 tonnes
peryearalumina
kitimat a kitimat british columbia
canada
100 freehold aluminium smelter producing aluminium slab
remelt
127000 tonnes
peryearaluminium
laterrière saguenay quebec canada 100 freehold aluminium smelter producing aluminium slab
remelt molten metal
244000 tonnes
peryearaluminium
lochaber fort william scotland uk 100 freehold aluminium smelter producing aluminium
slab remelt
47000 tonnes
peryearaluminium
queensland alumina 80 gladstone queensland
australia
733 freehold 267 leasehold of which
more than 80 expires in 2026 and after
refinery producing alumina 3950000 tonnes
peryearalumina
são luis alumar 10 são luis maranhão brazil 100 freehold refinery producing alumina 3639000 tonnes
peryearalumina
sohar 20 sohar oman 100 leasehold expiring 2039 aluminium smelter producing aluminium high
purity remelt
372000 tonnes
peryearaluminium
tiwai point new zealand
aluminium smelters
794
invercargill southland
new zealand
196 freehold 804 leasehold expiring
in 2029 and use of certain crown land
aluminium smelter producing aluminium billet
slab small form foundry high purity remelt
365000 tonnes
peryearaluminium
tomago 516 tomago new south wales
australia
100 freehold aluminium smelter producing aluminium billet
slab remelt
561000 tonnes
peryearaluminium
yarwun gladstone queensland
australia
97 freehold 3 leasehold
expiring 2101 and after
refinery producing alumina 3400000 tonnes
peryearalumina
216 riotintocom smelterrefinery location titlelease plant typeproduct
capacity as of
31 december 2014
based on 100
ownership
other aluminium
gove gove northern
territory australia
100 leasehold all leases were renewed in
2011 for a further period of 42 years the
residue disposal area is leased from the
arnhem land aboriginal land trust the
northern territory government is the lessor
of the balance of the leases however on
expiry of the 42year renewed term the land
subject of the balances of the leases will all
vest to the arnhem land aboriginal
land trust
refinery producing alumina 2650000 tonnes
peryearalumina
the group curtailed
production at gove
as of may 2014
copper
kennecott utah copper magna salt lake city
utah us
100 freehold flash smelting furnaceflash convertor furnace
copper refinery
335000 tonnes per
year refined copper
diamonds  minerals
boron california us 100 freehold borates refinery 576000 tonnes per
year boric oxide
rio tinto fer et titane
sorel plant
soreltracy quebec
canada
100 freehold ilmenite smelter 1300000 tonnes
peryeartitanium
dioxide slag
1000000 tonnes
peryeariron
richards bay minerals
74
richards bay
south africa
100 freehold ilmenite smelter 1050000 tonnes
peryeartitanium
dioxide slag
565000 tonnes per
year iron
iron ore
ioc pellet plant
587
labrador city
newfoundland and
labrador canada
100 leaseholds expiring in 2020 2022
and 2025 with rights of renewal for further
terms of 30 years
pellet induration furnaces producing multiple
iron ore pellet types
125 million tonnes
peryearpellet
notes
a capacity as at 31 december 2014 reflects the closures of four potlines in preparation for the kitimat modernisation project the nameplate capacity of the kitimat smelter remains
at 282000 tonnes per year
riotintocom 217
strategic report directors’ report financial statements production reserves
and operations
additional information mines and production facilities continued
information on group power plants
rio tinto’s interest 100 per cent unless otherwise shown
power plant location titlelease plant typeproduct
capacity as of
31 december 2014
based on 100
ownership
aluminium
gladstone power station 42
gladstone queensland australia 100 freehold thermal power station 1680mw
gove power station nhulunbuy northern territory
australia
100 leasehold dieselfired power station 24mw
highlands power stations lochaber kinlochleven uk 100 freehold hydroelectric power 105mw
kemano power station kemano british columbia canada 100 freehold hydroelectric power 865mw
quebec power stations saguenay quebec canada
chuteàcaron chuteàla
savane chutedespasses
chutedudiable islemaligne
shipshaw
100 freehold
except péribonka lease
to 2058
hydroelectric power 3147mw
yarwun alumina refinery
cogeneration plant
gladstone queensland australia 100 freehold gas turbine and heat recovery steam
generator
160mw
weipa power stations lorim point andoom queensland
australia
100 leasehold onsite generation diesel 36mw
copper
kennecott utah copper
power stations
salt lake city utah us 100 freehold thermal power station 175mw
steam turbine running off waste heat boilers
at the copper smelter
318mw
combined heat and power plant supplying
steam to the copper refinery
62mw
218 riotintocom power plant location titlelease plant typeproduct
capacity as of
31 december 2014
based on 100
ownership
diamonds  minerals
boron cogeneration plant boron california us 100 freehold cogeneration uses natural gas to generate
steam and electricity used to run boron’s
refining operations
48mw
energy
energy resources of australia
rio tinto 684
ranger mine jabiru
northern territory australia
lease five diesel generator sets rated at 51mw
1 diesel generator rated at 19mw
274mw
iron ore
ioc power station sept îles quebec canada statutory grant hydroelectric power 22mw
paraburdoo power station paraburdoo western australia
australia
lease lm6000 pc gas fired turbines 153mw
yurralyi maya
power station
rio tinto 58 
dampier western australia
australia
miscellaneous licence lm6000 pd gas fired turbines 220mw
 rio tinto has a 100 share in the additional purchase of a 40mw open cycle gas turbine
riotintocom 219
strategic report directors’ report financial statements production reserves
and operations
additional information shareholder information
organisational structure
the rio tinto group consists of rio tinto plc which is registered in england
and wales under company number 719885 and is listed on the london stock
exchange and rio tinto limited which is registered in australia under
abn 96 004 458 404 and is listed on the australian securities exchange
rio tinto is headquartered in london and has executive offices in melbourne
rio tinto plc has a sponsored adr facility and the underlying shares are
registered with the us securities and exchange commission and are listed on
the new york stock exchange
nomenclature and financial data
rio tinto plc and rio tinto limited operate together and are referred to in this
report as rio tinto the rio tinto group or more simply the group these
collective expressions are used for convenience only since both companies
and the individual companies in which they directly or indirectly own
investments are separate and distinct legal entities “limited” “plc” “pty”
“inc” “limitada” “llc” “as” or “sa” have generally been omitted from
group company names except to distinguish between rio tinto plc and
rio tinto limited financial data in us dollars us is derived from and
should be read in conjunction with the 2014 financial statements in general
financial data in pounds sterling £ and australian dollars a have been
translated from the consolidated financial statements and have been provided
solely for convenience exceptions arise where data can be extracted directly
from source records certain key information has been provided in all three
currencies in the 2014 financial statements
history
rio tinto plc was incorporated on 30 march 1962 then called the rio tinto
zinc corporation limited rtz and was formed by the merger of the
rio tinto company and the consolidated zinc corporation the rio tinto
company was incorporated in 1873 to reopen ancient copper workings in
spain the consolidated zinc corporation’s origins trace back to the australian
mining industry in the early twentieth century operating out of broken hill in
new south wales it came to prominence with the mining of silver lead and
zinc deposits and later expanded into lead and zinc smelting
rio tinto limited was incorporated on 17 december 1959 then called the
rio tinto mining company of australia limited and in 1962 the australian
interests of consolidated zinc corporation and the rio tinto company limited
of the united kingdom were merged to form conzinc riotinto of australia
limited as a limited liability company under the laws of the state of victoria
australia in 1980 conzinc riotinto of australia limited changed its name to
cra limited
between 1962 and 1995 both rtz and cra discovered important mineral
deposits developed major mining projects and also grew through acquisition
rtz and cra began operating in 1995 through a dual listed companies
structure in 1997 the rtz corporation became rio tinto plc and cra limited
became rio tinto limited together known as the rio tinto group
in 2007 rio tinto completed an agreed takeover of the canadian aluminium
producer alcan inc
dual listed companies structure
in 1995 rio tinto shareholders approved the terms of the dual listed
companies merger the dlc structure which was designed to place the
shareholders of both companies in substantially the same position as if they
held shares in a single entity owning all of the assets of both companies
following the approval of the dlc structure both companies entered into a
dlc merger sharing agreement the sharing agreement through which each
company agreed to ensure that the businesses of rio tinto plc and rio tinto
limited are managed on a unified basis to ensure that the boards of directors
of each company are the same and to give effect to certain arrangements
designed to provide shareholders of each company with a common economic
interest in the dlc structure
in order to achieve this third objective the sharing agreement provided for the
ratio of dividend voting and capital distribution rights attached to each
rio tinto plc share and to each rio tinto limited share to be fixed in an
equalisation ratio which has remained unchanged at 11 the sharing
agreement has provided for this ratio to be revised in special circumstances
where for example certain modifications are made to the share capital of one
company such as rights issues bonus issues share splits and share
consolidations but not to the share capital of the other outside these
specified circumstances the equalisation ratio can only be altered with the
approval of shareholders under the class rights action approval procedure
described under voting rights below in addition any adjustments are required
to be confirmed by the group’s external auditors
consistent with the creation of the dlc structure directors of each company
seek to act in the best interests of rio tinto as a whole the class rights
action approval procedure is intended to deal with instances where there may
be a conflict of interest between the shareholders of each company
to ensure that the boards of both companies are identical resolutions to
appoint or remove directors must be put to shareholders of both companies
as a joint electorate as joint decisions as described under voting rights it is
a requirement of the constitution of each company that a person can only be a
director of one company if that person is also a director of the other company
so for example if a person was removed as a director of rio tinto plc he or
she would also cease to be a director of rio tinto limited
one consequence of the dlc merger is that rio tinto is subject to a wide
range of laws rules and regulatory review across multiple jurisdictions where
these rules differ rio tinto as a group aims to comply with the strictest
applicable level
dividend rights
the sharing agreement provides for dividends paid on rio tinto plc and
rio tinto limited shares to be equalised on a net cash basis that is without
taking into account any associated tax credits dividends are determined in
us dollars and are then except for adr holders translated and paid in sterling
and australian dollars the companies are also required to announce and pay
their dividends and other distributions as close in time to each other
as possible
in the unlikely event that one company did not have sufficient distributable
reserves to pay the equalised dividend or the equalised capital distribution it
would be entitled to receive a topup payment from the other company the
topup payment could be made as a dividend on the dlc dividend share or
by way of a contractual payment
if the payment of an equalised dividend would contravene the law applicable
to one of the companies then they may depart from the equalisation ratio
however should such a departure occur then the relevant company will put
aside reserves to be held for payment on the relevant shares at a later date
rio tinto shareholders have no direct rights to enforce the dividend
equalisation provisions of the sharing agreement
thedlcdividendsharescanalsobeutilisedtoprovidethegroupwith
flexibility for internal funds management by allowing dividends to be paid
between the two parts of the group such dividend payments are of no
economic significance to the shareholders of either company as they will
have no effect on the group’s overall resources
voting rights
in principle the sharing agreement provides for the shareholders of rio tinto
plc and rio tinto limited to vote as a joint electorate on all matters which
affect shareholders of both companies in similar ways these are referred to
as joint decisions such joint decisions include the creation of new classes of
share capital the appointment or removal of directors and auditors and the
receiving of the annual financial statements all shareholder resolutions
including joint decisions are voted on a poll
220 riotintocom the sharing agreement also provides for the protection of shareholders of
each company by requiring their separate approval for decisions that do not
affect the shareholders of both companies equally matters requiring this
approval procedure are referred to as class rights actions and are voted on a
poll for example fundamental elements of the dlc merger cannot be
changed unless approved separately by shareholders of both companies
under the class rights action approval procedure
exceptions to these principles can arise in situations such as where legislation
requires the separate approval of a decision by the appropriate majority of
shareholders in one company and approval of the matter by shareholders of
the other company is not required
where a matter has been expressly categorised as either a joint decision or a
class rights action the directors do not have the power to change that
categorisation if a matter falls within both categories it is treated as a class
rights action in addition the directors can determine that matters not
expressly listed in either category should be put to shareholders for their
approval under either procedure
to facilitate the joint voting arrangements each company has entered into
shareholder voting agreements each company has issued a special voting
share to a special purpose company held in trust by a common trustee
rio tinto plc has issued its special voting share rtp special voting share to
rtl shareholder svc and rio tinto limited has issued its special voting share
rtl special voting share to rtp shareholder svc the total number of votes
cast on joint decisions by the shareholders of one company are voted at the
parallel meeting of the other company the role of these special purpose
companies in achieving this is described below
in exceptional circumstances certain shareholders of the companies can be
excluded from voting at the respective company’s general meetings because
they have acquired shares in one company in excess of a given threshold
without making an offer for all the shares in the other company if this should
occur the votes cast by these excluded shareholders will be disregarded
following the companies’ general meetings the overall results of the voting
are announced to the stock exchanges to the media in the uk and australia
and published on the rio tinto website
at a rio tinto plc shareholders’ meeting at which a joint decision is
considered each rio tinto plc share carries one vote and the holder of its
special voting share has one vote for each vote cast by the public
shareholders of rio tinto limited the holder of the special voting share is
required to vote strictly and only in accordance with the votes cast by public
shareholders for and against the equivalent resolution at the parallel rio tinto
limited shareholders’ meeting
the holders of rio tinto limited ordinary shares do not actually hold any
voting shares in rio tinto plc by virtue of their holding in rio tinto limited and
cannot enforce the voting arrangements relating to the special voting share
at a rio tinto limited shareholders’ meeting at which a joint decision is
considered each rio tinto limited share carries one vote and the holder of its
special voting share will have one vote for each vote cast by the public
shareholders of rio tinto plc in their parallel meeting the holder of the
special voting share is required to vote strictly and only in accordance with
the votes cast for and against the equivalent resolution at the parallel
rio tinto plc shareholders’ meeting
the holders of rio tinto plc ordinary shares do not actually hold any voting
shares in rio tinto limited by virtue of their holding in rio tinto plc and
cannot enforce the voting arrangements relating to the special voting share
capital distribution rights
if either of the companies goes into liquidation the sharing agreement
provides for a valuation to be made of the surplus assets of both companies if
the surplus assets available for distribution by one company on each of the
shares held by its shareholders exceed the surplus assets available for
distribution by the other company on each of the shares held by its
shareholders then an equalising payment between the two companies shall
be made to the extent permitted by applicable law such that the amount
available for distribution on each share held by shareholders of each company
conforms to the equalisation ratio the objective is to ensure that the
shareholders of both companies have equivalent rights to the assets of the
combined group on a per share basis taking account of the equalisation ratio
the sharing agreement does not grant any enforceable rights to the
shareholders of either company upon liquidation of a company
limitations on ownership of shares and merger obligations
the laws and regulations of the uk and australia impose restrictions and
obligations on persons who control interests in publicly listed companies in
excess of defined thresholds that under certain circumstances include
obligations to make a public offer for all of the outstanding issued shares of
the relevant company the threshold applicable to rio tinto plc under uk law
and regulations is 30 per cent and to rio tinto limited under australian law
and regulations is 20 per cent on a standalone basis or taking into account
only rio tinto plc interests on a joint decision basis
as part of the dlc merger the articles of association of rio tinto plc and the
constitution of rio tinto limited were amended with the intention of
extending these laws and regulations to the combined enterprise and in
particular to ensure that a person cannot exercise control over one company
without having made offers to the public shareholders of both companies it is
consistent with the creation of the single economic enterprise and the equal
treatment of the two sets of shareholders that these laws and regulations
should operate in this way the articles of association of rio tinto plc and the
constitution of rio tinto limited impose restrictions on any person who
controlsdirectlyorindirectly20percentormoreofthevotesonajoint
decision if however such a person only has an interest in either rio tinto
limited or rio tinto plc then the restrictions will only apply if they control
directly or indirectly 30 per cent or more of the votes at that company’s
general meetings
if one of the thresholds specified above is breached then subject to certain
limited exceptions and notification by the relevant company such persons
may not attend or vote at general meetings of the relevant company may not
receive dividends or other distributions from the relevant company and may
be divested of their interest by the directors of the relevant company these
restrictions continue to apply until such persons have either made a public
offer for all of the publicly held shares of the other company or have reduced
their controlling interest below the thresholds specified or have acquired
through a permitted means at least 50 per cent of the publicly held shares of
each company
these provisions are designed to ensure that offers for the publicly held
shares of both companies would be required in order to avoid the restrictions
set out above even if the interests which breach the thresholds are only held
in one of the companies the directors do not have the discretion to exempt a
person from the operation of these rules
under the sharing agreement the companies agree to cooperate to
enforcetheaboverestrictionscontained in their articles of association
and constitution
riotintocom 221
strategic report directors’ report financial statements production reserves
and operations
additional information shareholder information continued
guarantees
in 1995 each company entered into a deed poll guarantee in favour of
creditors of the other company pursuant to the deed poll guarantees each
company guaranteed the contractual obligations of the other company and
the obligations of other persons which are guaranteed by the other company
subject to certain limited exceptions beneficiaries under the deed poll
guarantees may make demands upon the guarantor thereunder without first
having recourse to the company or persons whose obligations are being
guaranteed the obligations of the guarantor under each deed poll guarantee
expire upon termination of the sharing agreement and under other limited
circumstances but only in respect of obligations arising after such termination
and in the case of other limited circumstances the publication and expiry of
due notice the shareholders of the companies cannot enforce the provisions
of the deed poll guarantees
markets
rio tinto plc
the principal market for rio tinto plc shares is the london stock exchange
with the shares trading through the stock exchange electronic trading service
sets system
rio tinto plc american depositary receipts are listed on the new york stock
exchange further details relating to rio tinto plc american depositary
receipts are available in rio tinto’s annual report on form 20f
rio tinto limited
rio tinto limited shares are listed on the australian securities exchange
asx the asx is the principal trading market for rio tinto limited shares
the asx is a national stock exchange with an automated trading system
share ownership
substantial shareholders
under the uk disclosure and transparency rules and the australian
corporations act any shareholder of rio tinto plc with voting rights of three
per cent or more or any person with voting power of five per cent or more in
rio tinto limited is required to provide the relevant companies with notice
the shareholders who have provided such or an equivalent notice as of
16 february 2015 are
rio tinto plc date of notice number of shares
percentage of
issued share
capital
axa sa 29 jan 2008 48493873 486
blackrock inc 4 dec 2009 127744871 838
shining prospect
pte ltd 13 mar 2012 182550329 127
the capital group
companies inc 21 jan 2014 57950440 410
the capital group
companies inc 3 april 2014 55307243 391
rio tinto limited
shining prospect
pte ltd a 10 june 2009 – –
a in its substantial holding notice filed on 10 june 2009 shining prospect pte ltd
a singaporebased entity owned by chinalco aluminium corporation of
china disclosed a holding in rio tinto plc shares which at that time through the
operation of the australian corporations act as modified gave these entities and
theirassociatesvotingpowerof93percentintheriotintogrouponajoint
decision matter making them substantial shareholders of rio tinto limited as well
as of rio tinto plc shining prospect pte ltd currently holds 182550329 rio tinto
plc shares which gives these entitiesandtheirassociatesvotingpowerof
99 per cent in the rio tinto group on a joint decision matter
as far as is known rio tinto plc and rio tinto limited are not directly or
indirectly owned or controlled by another corporation or by any government or
natural person rio tinto is not aware of any arrangement which may result in
a change in control no shareholder possesses voting rights that differ from
those attaching to rio tinto plc’s and rio tinto limited’s securities
as of 16 february 2015 the total amount of the group’s voting securities
owned by the directors in rio tinto plc was 101487 ordinary shares of
10p each or adrs and in rio tinto limited was 196163 ordinary shares in
aggregate representing less than one per cent of the group’s total number of
shares in issue
222 riotintocom analysis of ordinary shareholders
rio tinto plc rio tinto limited
as at 16 february 2014
no of
accounts  shares 
no of
accounts  shares 
1 to 1000 shares 33798 7633 10868329 076 167764 8387 49999117 1147
1001 to 5000 shares 8176 1847 16231425 114 28905 1445 57684606 1324
5001 to 10000 shares 751 170 5194677 036 2262 113 15682973 360
10001 to 25000 shares 415 094 6415051 045 845 042 12473215 286
25001 to 125000 shares 534 121 31031572 218 192 010 8631735 198
125001 to 250000 shares 188 042 33567144 236 18 001 3131953 072
250001 to 1250000 shares 273 062 160494512 1126 32 002 17456643 401
1250001 to 2500000 shares 66 015 115502545 810 3 0005979698137
2500001 shares and over a 73 016 1046072386
b
7339 11 001 264718780 6075
1425377641
c
10000 435758720
d
10000
number of holdings less than
marketable parcel of a500 3740
a excludes shares held in treasury
b this includes 117166113 shares held in the name of a nominee on the share register the shares are listed on the nyse in the form of american depositary receipts adrs
c the total issued share capital is made up of 1414463210 publicly held shares 10914431 shares held in treasury
d publicly held shares in rio tinto limited
twenty largest registered shareholders
in accordance with the asx listing rules below are the names of the 20 largest registered holders of rio tinto limited shares and the number of shares andthe
percentage of issued capital each holds as at 16 february 2015
rio tinto limited
number of
shares
percentage of
issued share
capital
hsbc custody nominees australia limited 86885437 1994
jp morgan nominees australia limited 73026709 1676
national nominees limited 48223245 1107
citicorp nominees pty limited 25280388 580
bnp paribas noms pty ltd drp 11123931 255
citicorp nominees pty limited colonial first state inv ac 5377081 123
australian foundation investment company limited 3651753 084
hsbc custody nominees australia limited nt – comnwlth super corp ac 3259363 075
amp life limited 2704072 062
ubs wealth management australia nominees pty ltd 2676062 061
argo investments limited 2510739 058
ubs nominees pty ltd 2052514 047
bnp paribas nominees pty ltd agency lending drp ac 1993697 046
rbc investor services australia nominees pty limited pi pooled ac 1933487 044
national nominees limited db ac 1132958 026
computershare trustee jey limited re 3000091 ac 1074855 025
warbont nominees pty limited accumulation entrepot ac 1059570 024
australian united investment company limited 950000 022
computershare trustee jey limited re 3000086 ac 910949 021
navigator australia ltd mlc investment sett ac 908710 021
large registered shareholders are nominees who hold securities on behalf of beneficial shareholders
riotintocom 223
strategic report directors’ report financial statements production reserves
and operations
additional information shareholder information continued
dividends
both companies have paid dividends on their ordinary shares every year since
incorporation in 1962 the rights of rio tinto shareholders to receive dividends
are explained under the description of the dual listed companies structure on
page 220
dividend policy
the aim of our progressive dividend policy is to maintain or increase the us
dollar value of ordinary dividends per share the rate of the total dividend in
us dollars per share is determined taking into account the results for the past
year and the outlook the interim dividend is set at one half of the total
dividend for the previous year
dividend determination
the majority of our sales are transacted in us dollars making this the most
appropriate measure for our global business performance it is our main
reporting currency and consequently the natural currency for dividend
determination dividends determined in us dollars are translated at exchange
rates prevailing two days prior to the declaration and payable in sterling by
rio tinto plc and in australian dollars by rio tinto limited
on request shareholders of rio tinto plc can elect to receive dividends in
australian dollars and rio tinto limited shareholders can elect to receive
dividends in sterling if such an election is made the dividend amounts
received will be calculated by converting the declared dividend using the
exchange rates applicable to sterling and australian dollars five days prior to
the dividend payment date
shareholders who wish to receive their dividends in any other currencies
should contact the companies’ share registrars who also offer payment
services in other currencies subject to a fee
2014 dividends
the 2014 interim and final dividends were determined at 96 us cents and
at 119 us cents per share respectively and the applicable conversion rates for
the interim and final dividend were us16871 and us152595 to the pound
sterling and us093125 and us077790 to the australian dollar respectively
for those rio tinto plc shareholders who elected to receive their interim
dividend in australian dollars the applicable conversion rate was a174955
and for rio tinto limited shareholders who elected to receive their dividend in
sterling the applicable conversion rate was £057158
final dividends of 7798 pence or 15298 australian cents per share will be
paid on 9 april 2015 for those rio tinto plc shareholders requesting the 2014
final dividend be paid in australian dollars those holders of rio tinto plc adrs
each representing one share and those rio tinto limited shareholders
requesting the 2014 final dividend be paid in pounds sterling the applicable
conversion rates will be announced on 31 march 2015
dividend reinvestment plan drp
rio tinto offers a drp to registered shareholders which provides the
opportunity to use cash dividends to purchase rio tinto shares in the market
due to local legislation the drp cannot be extended to shareholders in the us
canada and certain other countries
material contracts
articles of association and constitution and dlc merger
sharing agreement
as explained on pages 220 to 222 under the terms of the dlc structure the
shareholders of rio tinto plc and of rio tinto limited entered into certain
contractual arrangements which are designed to place the shareholders of
both companies in substantially the same position as if they held shares in a
single entity which owned all of the assets of both companies generally and
as far as is permitted by the uk companies act and the australian
corporations act and asx listing rules this principle is reflected in the
articles of association of rio tinto plc and in the constitution of rio tinto
limited the summaries below include descriptions of material rights of the
shareholders of both rio tinto plc and rio tinto limited
objects
at the 2009 annual general meetings shareholders of rio tinto plc and
rio tinto limited approved amendments to the constitutional documents
whereby the object clauses were removed to allow the companies to have the
widest possible scope of activities
directors
under rio tinto plc’s articles of association a director may not vote in respect
of any proposal in which he or any other person connected with him has any
material interest other than by virtue of his interests in shares or debentures
or other securities of or otherwise in or through the company except where
resolutions
– indemnify him or a third party in respect of obligations incurred by the
director on behalf of or for the benefit of the company or in respect of
obligations of the company for which the director has assumed
responsibility under an indemnity security or guarantee
– relate to an offer of securities in which he may be interested as a holder of
securities or as an underwriter
– concern another body corporate in which the director is beneficially
interested in less than one per cent of the issued shares of any class of
shares of such a body corporate
– relate to an employee benefit in which the director will share equally with
other employees and
– relate to liability insurance that the company is empowered to purchase
for the benefit of directors of the company in respect of actions
undertaken as directors or officers of the company
under rio tinto limited’s constitution except where a director is constrained
by australian law a director may be present at a meeting of the board while a
matter in which the director has a material personal interest is being
considered and may vote in respect of that matter
the directors are empowered to exercise all the powers of the companies to
borrow money to charge any property or business of the companies or all or
any of their uncalled capital and to issue debentures or give any other security
for a debt liability or obligation of the companies or of any other person the
directors shall restrict the borrowings of rio tinto plc to the limitation that the
aggregate amount of all moneys borrowed by the company and its
subsidiaries shall not exceed an amount equal to one and one half times the
companies’ share capital plus aggregate reserves unless sanctioned by an
ordinary resolution of the company
directors are not required to hold any shares of either company by way of
qualification the remuneration report on pages 64 and 100 provides
information on shareholding policies relating to executive and nonexecutive
directors please refer to the corporate governance section on pages 53 to 63
for information on the appointment of directors
rights attaching to shares
under english law dividends on shares may only be paid out of profits
available for distribution as determined in accordance with generally accepted
accounting principles and by the relevant law shareholders are entitled to
receive such dividends as may be declared by the directors the directors may
also pay shareholders such interim dividends as appear to them to be justified
by the financial position of the group
any rio tinto plc dividend unclaimed after 12 years from the date the dividend
was declared or became due for payment will be forfeited and returned to the
company any rio tinto limited dividend unclaimed may be invested or
otherwise used by the board for the benefit of the company until claimed or
otherwise disposed of according to australian law
voting
voting at any general meeting of shareholders on a resolution on which the
holder of the special voting share is entitled to vote shall be decided by a poll
and any other resolution shall be decided by a show of hands unless a poll has
been duly demanded on a show of hands every shareholder who is present in
person or by proxy or other duly authorised representative and is entitled to
vote has one vote regardless of the number of shares held the holder of the
special voting share is not entitled to vote on a show of hands on a poll every
224 riotintocom shareholder who is present in person or by proxy or other duly authorised
representative and is entitled to vote has one vote for every ordinary share for
which he or she is the holder and in the case of joint decisions the holder of
the special voting share has one vote for each vote cast by the shareholders
at the parallel meeting of the other company’s shareholders
a poll may be demanded by any of the following
– the chairman of the meeting
– at least five shareholders entitled to vote on the resolution
– any shareholder or shareholders representing in the aggregate not less
than one tenth rio tinto plc or one 20th rio tinto limited of the total
voting rights of all shareholders entitled to vote on the resolution
– any shareholder or shareholders holding shares conferring a right to vote
at the meeting on which there have been paidup sums in the aggregate
equal to not less than one tenth of the total sum paid up on all the shares
conferring that right rio tinto plc or
– the holder of the special voting share
a proxy form will be treated as giving the proxy the authority to demand a poll
or to join others in demanding one
the necessary quorum for a rio tinto plc general meeting is three members
present in person or by proxy or other duly authorised representative and
entitled to vote and for a rio tinto limited general meeting is two members
present in person or by proxy or other duly authorised representative
matters are transacted at general meetings by the proposing and passing
of resolutions as
– ordinary resolutions which require the affirmative vote of a majority of the
votes of those persons voting at a meeting at which there is a quorum for
example the election of directors and
– special resolutions which require the affirmative vote of not less than
threefourths of the persons voting at a meeting at which there is a
quorum for example amending the articles of association of rio tinto plc
or the constitution of rio tinto limited
the sharing agreement further classifies resolutions as “joint decisions” and
“class rights actions” as explained under voting rights on pages 220 and 221
annual general meetings must be convened with 21 days’ written notice for
rio tinto plc and with 28 days’ notice for rio tinto limited other meetings of
rio tinto plc must be convened with 21 days’ written notice for the passing of
a special resolution and with 14 days’ notice for any other resolution
depending on the nature of the business to be transacted all meetings of
rio tinto limited require 28 days’ notice in calculating the period of notice the
days of delivery or receipt of the notice and the date of the meeting are not
included among other things the notice must specify the nature of the
business to be transacted
variation of rights
ifatanytimethesharecapitalisdivided into different classes of shares the
rights attached to any class may be varied subject to the provisions of the
relevant legislation with the consent in writing of holders of threefourths in
value of the shares of that class or upon the adoption of an extraordinary
resolution passed at a separate meeting of the holders of the shares of that
class at every such separate meeting all of the provisions of the articles of
association and constitution relating to proceedings at a general meeting
apply except that the quorum for rio tinto plc should be two or more persons
who hold or represent by proxy not less than onethird in nominal value of the
issued shares of the class
rights upon a windingup
except as the shareholders have agreed or may otherwise agree upon a
windingup the balance of assets available for distribution
– after the payment of all creditors including certain preferential creditors
whether statutorily preferred creditors or normal creditors and
– subject to any special rights attaching to any class of shares
is to be distributed among the holders of ordinary shares according to the
amounts paidup on the shares held by them this distribution is generally to
be made in cash a liquidator may however upon the adoption of a special
resolution of the shareholders divide among the shareholders the whole or
any part of the assets in kind
the dlc merger sharing agreement further sets out the rights of ordinary
shareholders in a liquidation as explained on page 221
facility agreement
details of the group’s us75 billion multicurrency committed revolving
credit facilities are set out in note 30 to the 2014 financial statements
exchange controls and foreign investment
rio tinto plc
there are no uk foreign exchange controls or other uk restrictions on the
import or export of capital or on the payment of dividends to nonresident
holders of rio tinto plc shares or that materially affect the conduct of
rio tinto plc’s operations it should be noted however that various sanctions
laws regulations or conventions may restrict the import or export of capital by
or the payment of dividends to nonresident holders of rio tinto plc shares
there are no restrictions under rio tinto plc’s articles of association or under
uk law that limit the right of nonresident owners to hold or vote
rio tinto plc shares
rio tinto limited
under current australian legislation permission is not required for the
movement of funds into or out of australia however there is a prohibition on
or in some cases the specific prior approval of the department of foreign
affairs and trade or minister for foreign affairs must be obtained for certain
payments or other dealings connected with countries or parties identified with
terrorism or to whom united nations or autonomous australian
sanctions apply
rio tinto limited may be required to deduct withholding tax from foreign
remittances of dividends to the extent that they are unfranked and from
payments of interest
acquisitions of interests in shares voting power or certain other equity
instruments in australian companies by foreign interests are subject to review
and approval by the treasurer of the commonwealth of australia under the
foreign acquisitions and takeovers act 1975 the takeovers act the
takeovers act applies to acquisitions by a single foreign person and any
associate of 15 per cent or more or by several foreign persons and any
associates of 40 per cent or more of the issued shares issued shares if all
rights were converted voting power or potential voting power in an australian
company and to other transactions that result in such persons controlling
such interests the takeovers act also applies to direct investments by foreign
government investors including acquisitions of interests of ten per cent or
more persons who are proposing such acquisitions or transactions are
required to notify the treasurer of their intention the treasurer has the power
to order divestment in cases where such acquisitions or transactions have
already occurred the takeovers act does not affect the rights of owners
whose interests are held in compliance with the legislation
limitations on voting and shareholding
except for the provisions of the takeovers act there are no limitations
imposed by law rio tinto plc’s articles of association or rio tinto limited’s
constitution on the rights of nonresidents or foreign persons to hold or vote
the group’s ordinary shares or adss that would not apply generally to all
shareholders
riotintocom 225
strategic report directors’ report financial statements production reserves
and operations
additional information shareholder information continued
uk listing rules cross reference table
the following table contains cross references identifying the location of information required to be disclosed in the annual report by the uk listing authority’s
listing rule 984 r
listing rule description of listing rule reference in report
984 1 a statement of any interest capitalised by the group during the year note 8 finance income and
finance costs and note 17
deferred taxation
984 2 any information required by listing rule 9218 r na
984 4 details of any longterm incentive scheme as described in lr 942r 2 na
984 5 details of any arrangement under which a director has waived any emoluments na
984 6 details of any arrangement under which a director has agreed to waive future emoluments na
984 7 details of any allotments of shares by the company for cash not previously authorised by shareholders na
984 8 details of any allotments of shares for cash by a major subsidiary of the company na
984 9 details of the participation by the company in any placing made by its parent company na
984 10 details of any contract of significance with the company in which a director has a material interest or a
contract between the company and a controlling shareholder na
984 11 details of any contract for the provision of services to the company by a controlling shareholder na
984 12 details of any arrangement under which a shareholder has waived or agreed to waive any dividends note 11 dividends
984 13 details of where a shareholder has agreed to waive future dividends na
984 14 information required by lr 922ar 2a na
226 riotintocom financial calendar
2015
20 january fourth quarter 2014 operations review
12 february announcement of results for 2014
4 march rio tinto limited shares and rio tinto plc adrs quoted “exdividend” for 2014 final dividend
5 march rio tinto plc shares quoted “exdividend” for 2014 final dividend
6 march record date for 2014 final dividend for rio tinto plc and rio tinto limited shares and rio tinto plc adrs
6 march publication of 2014 annual report 20f and notices of annual general meetings
17 march plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2014
final dividend
31 march dividend currency conversion date rio tinto plc holders electing to receive australian dollars and rio tinto limited holders electing to
receive pounds sterling
9 april payment date for 2014 final dividend to holders of ordinary shares and adrs
16 april annual general meeting for rio tinto plc london
21 april first quarter 2015 operations review
7 may annual general meeting for rio tinto limited melbourne
16 july second quarter 2015 operations review
6 august announcement of half year results for 2015
12 august rio tinto limited shares and rio tinto plc adrs quoted “exdividend” for 2015 interim dividend
13 august rio tinto plc shares quoted “exdividend” for 2015 interim dividend
14 august record date for 2015 interim dividend for rio tinto plc and rio tinto limited shares and rio tinto plc adrs
19 august plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2015
interim dividend for rio tinto plc
20 august plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2015
interim dividend for rio tinto limited
3 september dividend currency conversion date rio tinto plc holders electing to receive australian dollars and rio tinto limited holders electing to
receive pounds sterling
10 september payment date for 2015 interim dividend to holders of ordinary shares and adrs
16 october third quarter 2015 operations review
2016
january fourth quarter 2015 operations review
february announcement of results for 2015
april annual general meeting for rio tinto plc london
april first quarter 2016 operations review
may annual general meeting for rio tinto limited brisbane
july second quarter 2016 operations review
august announcement of half year results for 2016
october third quarter 2016 operations review
riotintocom 227
strategic report directors’ report financial statements production reserves
and operations
additional information contact details
registered offices
rio tinto plc
2 eastbourne terrace
london
w2 6lg
registered in england no 719885
telephone 44 0 20 7781 2000
fax 44 0 20 7781 1800
riotintocom
rio tinto limited
level 33
120 collins street
melbourne
victoria 3000
abn 96 004 458 404
telephone 61 0 3 9283 3333
fax 61 0 3 9283 3707
riotintocom
rio tinto’s agent in the us is cheree finan
who may be contacted at
rio tinto services inc
80 state street
albany ny 122072543
shareholders
please refer to the investor centre of the
respective registrar if you have any queries about
your shareholding
rio tinto plc
computershare investor
services plc
the pavilions
bridgwater road
bristol
bs99 6zy
telephone 44 0 870 703 6364
fax 44 0 870 703 6119
uk residents only
freephone 0800 435021
computersharecom
holders of rio tinto american depositary
receipts adrs
please contact the adr administrator if you have
any queries about your adrs
adr administrator
jpmorgan chase  co
po box 64504
st paul mn 551640504
telephone 1 651 453 2128
us residents only toll free general
800 990 1135
us residents only toll free global invest direct
800 428 4237
adrcom
jpmorganadrwellsfargocom
rio tinto limited
computershare investor services
pty limited
gpo box 2975
melbourne
victoria 3001
telephone 61 0 3 9415 4030
fax 61 0 3 9473 2500
australian residents only toll free
1800 813 292
new zealand residents only toll free
0800 450 740
computersharecom
former alcan inc shareholders
computershare investor
services inc
9th floor
100 university avenue
toronto on m5j 2y1
ontario
telephone 1 416 263 9200
north american residents only
toll free 1 866 6241341
computersharecom
investor centre
investor centre is computershare’s free secure
self service website where shareholders can
manage their holdings online the website
enables shareholders to
– view share balances
– change address details
– view payment and tax information
– update payment instructions
in addition shareholders who register their email
address on investor centre can be notified
electronically of events such as annual general
meetings and can receive shareholder
communications such as the annual report or
notice of meeting electronically online
rio tinto plc shareholders
investorcentrecoukriotinto
rio tinto limited shareholders
investorcentrecomrio
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typeset by rr donnelley riotintocomar2014
get more information online
visit riotintocom
– find out more about our business and performance
– view our full 2014 annual report riotintocomar2014
– view our full 2014 sustainable development report


Summary:
 performance highlights
2014 results demonstrate clear delivery against our commitments
in 2014 rio tinto made a commitment to materially increase cash returns to shareholders the group delivered this through a 12 per cent increase in the full year
dividend and announced a us20 billion share buyback these represent a total cash return to shareholders in respect of 2014 of almost us60 billion
during 2014 rio tinto’s continued financial and operating discipline enabled the group to offset much of the impact of lower commodity prices by increasing
volumes and reducing costs rio tinto achieved underlying earnings
a
of us93 billion and maintained the ebitda margin
b
at 39 per cent free cash flow was
assisted by a further reduction in capital expenditure
c
and a successful programme to release working capital as a consequence net debt
d
reduced by
us56 billion to us125 billion
decisive early action taken throughout the group delivered the strong balance sheet enabling the additional material cash return to shareholders
with lower commodity prices and uncertain global economic trends the operating environment remains tough however in these conditions rio tinto’s qualities and
competitive advantages deliver superior value the group’s combination of worldclass assets disciplined capital allocation balance sheet strength operating and
commercial excellence and a culture of safety and integrity gives rio tinto confidence in its ability to continue generating sustainable returns for shareholders
year to 31 december 2014 2013 change
pg 12
underlying earnings us millions
a
9305 10217 9
net earnings us millions
a
6527 3665 78
pg 12
net cash generated from operating activities us millions 14286 15078 5
pg 13
capital expenditure us millions
c
8162 13001 37
underlying earnings per share us cents 5034 5531 9
basic earnings per share us cents 3531 1984 78
ordinary dividends per share us cents 2150 1920 12
at 31 december 2014 2013 change
pg 13
net debt us millions
d
12495 18055 31
gearing ratio
e
19 25 6
the financial results are prepared in accordance with ifrs and are audited
a 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 net and underlying earnings relate to profit attributable to the owners of rio tinto underlying earnings is defined
and reconciled to net earnings on pages 124 and 125
b ebitda margin is defined as group underlying ebitda divided by product group total revenues as per the financial information by business unit on pages 178 and 179 where it is
reconciled to profit on ordinary activities before finance items and taxation
c capital expenditure is presented gross before taking into account any disposals of property plant and equipment
d net debt is defined and reconciled to the balance sheet on page 41
e gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end
revenues and earnings
– achieved consolidated sales revenues of us477 billion as a
us54 billion pretax decline in pricing was partially offset by
us30 billion from higher volumes
– sustained the ebitda margin at 39 per cent unchanged from 2013
with volume gains and cost improvements offsetting the impact of
lower prices
– achieved underlying earnings of us93 billion nine per cent lower than
2013 despite the us41 billion posttax impact of lower prices
– delivered underlying earnings per share of 5034 us cents
– generated net earnings of us65 billion reflecting noncash exchange
rate losses of us19 billion a us04 billion charge following the repeal
of the minerals resource rent tax and other charges of us05 billion an
impairment charge of us12 billion mainly related to the kitimat project
as reported at the half year was mostly offset by an impairment reversal of
us10 billion in the second half of 2014 related to an uplift in carrying
value for the pacific aluminium business
production
– set production records for iron ore and hunter valley thermal coal
and delivered a strong operational performance in bauxite copper
and aluminium
cash flow and balance sheet
– achieved us48 billion of sustainable operating cash cost
improvements and exploration and evaluation savings since 2012 of
which us15 billion were in 2014
– generated net cash from operating activities of us143 billion
including working capital improvements of us15 billion principally
from lower inventories and lower receivables
– reduced capital expenditure by us48 billion to us82 billion in
2014 reflecting completion of existing major projects and continued
capital discipline
– decreased net debt by us56 billion in 2014 to us125 billion at
31 december 2014 with gearing of 186 per cent this compares with
us181 billion and 252 per cent gearing at 31 december 2013
capital returns
– increased full year dividend by 12 per cent to 215 us cents per share
– announced an additional capital return of us20 billion
which comprises a a500 million c us04 billion offmarket share
buyback tender of rio tinto limited shares and the balance of
approximately us16 billion for an onmarket buyback of rio tinto
plc shares
– these represent a total cash return to shareholders in respect of 2014
of almost us60 billion an increase of approximately 64 per cent
on 2013
riotintocom 1
strategic report directors’ report financial statements production reserves
and operations
additional information