REG - Rio Tinto - Final Results
21/02/2024 07:00
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RNS Number : 8383D Rio Tinto PLC 21 February 2024
21 February 2024
Production growth of 3% from focused investment in the health of our business;
underlying EBITDA of $23.9 billion and full year ordinary dividend of 435 US
cents per share
• Underlying EBITDA of $23.9 billion. Net cash generated from
operating activities of $15.2 billion.
• Profit after tax attributable to owners of Rio Tinto (referred to
as "net earnings" throughout this release) of $10.1 billion, after $0.7
billion of net impairment charges, mainly relating to our Australian alumina
refineries.
• Underlying earnings of $11.8 billion, leading to a full year
ordinary dividend of $7.1 billion, a 60% payout.
At year end 2023 2022 Change
Net cash generated from operating activities (US$ millions) 15,160 16,134 (6) %
Purchases of property, plant and equipment and intangible assets (US$ 7,086 6,750 5 %
millions)
Free cash flow¹ (US$ millions) 7,657 9,010 (15) %
Consolidated sales revenue (US$ millions) 54,041 55,554 (3) %
Underlying EBITDA¹ (US$ millions) 23,892 26,272 (9) %
Profit after tax attributable to owners of Rio Tinto (net earnings)² (US$ 10,058 12,392 (19) %
millions)
Underlying earnings per share (EPS)¹(,) ² (US cents) 725.0 824.7 (12) %
Ordinary dividend per share (US cents) 435.0 492.0 (12) %
Underlying return on capital employed (ROCE)¹(,) ² 20% 25%
Net debt¹ (US$ millions) 4,231 4,188 1 %
Rio Tinto Chief Executive Jakob Stausholm said: "The tragic loss of our four
Diavik colleagues and two airline crew members in a plane crash last month is
a devastating reminder of why safety is and must always be our top priority.
We continue to work closely with the authorities to support their efforts to
understand the full facts of what happened. This tragedy strengthens our
resolve to never be complacent about safety, so that we continue to learn and
improve.
"We are making clear progress as we shape Rio Tinto into a stronger and even
more reliable company. By focusing on our four objectives, we are building a
portfolio that is fit for the future - including our Oyu Tolgoi underground
copper mine in Mongolia and the Simandou iron ore project in Guinea. We have
taken significant steps over the past month towards our target to halve our
global Scope 1 & 2 carbon emissions this decade with agreements to
contract future renewable wind and solar power for our Gladstone operations.
"In 2023, we lifted our overall copper equivalent production by over 3% and
delivered resilient financial results, with underlying EBITDA of $23.9
billion, free cash flow of $7.7 billion and underlying earnings of
$11.8 billion, after taxes and government royalties of $8.8 billion. Our
balance sheet strength enables us to continue to invest with discipline while
also paying an ordinary dividend of $7.1 billion, a 60% payout.
"We will continue paying attractive dividends and investing in the long-term
strength of our business as we grow in the materials needed for a
decarbonising world."
(1) This financial performance indicator is a
non-IFRS (as defined below) measure which is reconciled to directly comparable
IFRS financial measures (non-IFRS measures). It is used internally by
management to assess the performance of the business and is therefore
considered relevant to readers of this document. It is presented here to give
more clarity around the underlying business performance of the Group's
operations. For more information on our use of non-IFRS financial measures in
this report, see the section entitled "Alternative performance measures"
(APMs) and the detailed reconciliations on pages 40 to 49. Our financial
results are prepared in accordance with IFRS - see page 35 for further
information. Other footnotes are set out in full on page 25.
(2) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
Resilient financial results, steady improvement in operational performance
Safety is our top priority. While we had zero fatalities at our managed
operations in 2023, tragically four colleagues and two airline crew members
died in a plane crash while travelling to our Diavik diamond mine in Canada in
January 2024.
Our team is committed to learning how we continuously improve safety. This
remains imperative throughout 2024.
By focusing on our four objectives, and prioritising the health of our assets,
our ore body knowledge and our people, we have improved our operational
performance and delivered resilient financial results. We have maintained a
strong financial position, which allows us to invest for the future to deliver
profitable growth, while also continuing to pay attractive returns.
As part of our focus on Best Operator, we continue to roll out the Safe
Production System across our business. This is a multi-year process, which is
already delivering real improvements in our Pilbara iron ore operations,
realising a 5 million tonne production uplift in 2023. We expect to deliver
another 5 million tonne uplift in 2024.
In line with our Excel in Development objective, we advanced a number of
projects, including making significant progress at the Simandou iron ore
project in Guinea, in collaboration with our joint venture partners. We
achieved first sustainable production at the Oyu Tolgoi copper-gold mine in
Mongolia, which remains on track to ramp up to 500 thousand tonnes(3) of
copper per year from 2028 to 2036. In our aluminium business, we are investing
in a significant AP60 expansion and gradually closing our Arvida smelter, in
operation since 1926. We also acquired a 50% equity stake in Matalco from
Giampaolo Group for $738 million to become a leader in recycled aluminium
supply in North America. We are making real progress in shaping our portfolio
for the future, with new technology developments and one of the most exciting
exploration pipelines for many years.
The low-carbon transition continues to be at the heart of our strategy,
aligned with our objective of achieving impeccable ESG credentials. In 2023,
our Scope 1 and 2 emissions were 32.6Mt CO(2)e (32.7Mt(4) in 2022), 6% below
our (restated and adjusted) 2018 baseline of 34.5Mt CO(2)e(4).
We continue to progress our six large carbon abatement programs, focusing on
repowering our Pacific Aluminium operations, renewable energy, aluminium
anodes, alumina process heat, minerals processing and diesel transition. In
2023, we made significant progress with our decarbonisation commitments, with
two sites fully transitioning to renewable diesel (Boron is complete and we
have announced that Kennecott will transition in 2024). We also focused on
progressing our other promising new technologies including BlueSmelting(TM),
Elysis(TM) and Nuton(TM). Key to achieving our 2030 Scope 1 and 2
decarbonisation target is the repowering of our Gladstone operations in
Queensland: our substantial efforts in 2023 have resulted in us signing two
major renewable Power Purchase Agreements in early 2024, one for solar and one
for wind.
A significant development with respect to potentially reducing Scope 3
emissions, was the announcement
(https://www.riotinto.com/en/news/releases/2024/australias-leading-iron-ore-producers-partner-with-bluescope-on-steel-decarbonisation)
in February 2024 of a new partnership with BHP and BlueScope to jointly
investigate the development of Australia's first ironmaking Electric Smelting
Furnace (ESF, also known as Electric Melter) pilot plant. This will
consolidate the work each party has completed to date, leveraging both BHP's
and Rio Tinto's deep knowledge of Pilbara iron ores with BlueScope's unique
operating experience in ESF technology. We also continued to advance our
pioneering BioIron(TM) technology, which has the potential to support low
CO(2) steelmaking and significantly reduce our Scope 3 emissions. For further
detail, please refer to our 2023 Climate Change
(file:///C%3A/Users/rubycampbell/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/WX62CAEX/www.riotinto.com/climatereport)
Report
(file:///C%3A/Users/rubycampbell/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/WX62CAEX/www.riotinto.com/climatereport)
released today.
Inclusion and diversity are imperative for the sustainable success of the
business. We increased our gender diversity to 24.3% (from 22.9% in 2022). The
increases were distributed across all levels of the organisation with female
senior leaders increasing to 30.1% (from 28.3% in 2022).
Other footnotes are set out in full on page 25.
Guidance
• Our share of capital investment (non-IFRS measure, refer to APMs on page
46) is unchanged from the 2023 Investor Seminar. In 2024, 2025 and 2026 it is
expected to be up to $10.0 billion per year, including up to $3.0 billion in
growth per year, depending on opportunities. Each year also includes
sustaining capital of around $4.0 billion and $2.0 to $3.0 billion of
replacement capital. Sustaining capital includes around $1.5 billion over the
next three years on decarbonisation projects ($5 to $6 billion in total up to
2030). This remains subject to Traditional Owner and other stakeholder
engagement, regulatory approvals and technology developments. All capital
guidance is subject to ongoing inflationary pressures and exchange rates.
• In 2024, we expect our ongoing exploration and evaluation expense
(excluding Simandou) to be around $1.0 billion. We have been capitalising all
qualifying Simandou costs from the fourth quarter of 2023: our guidance
assumes this continues.
• In the coming years, we expect to spend (on a cash basis) around $1
billion per year on closure activities ($0.8 billion in 2023) as we advance
our closure activities at Argyle, Energy Resources of Australia (ERA), the
Gove alumina refinery and legacy sites. Spend will vary from year to year as
we execute individual programs of work and optimise investment across the
portfolio. In 2024, spending may be somewhat above this level as we consider
one-off investment options to reduce our exposure over the longer term.
• Effective tax rate on underlying earnings is expected to be around 30%
in 2024.
Unit costs 2023 Actuals 2024 Guidance
Pilbara iron ore unit cash costs, free on board (FOB) basis - US$ per wet 21.5 21.75-23.50
metric tonne
Australian dollar exchange rate 0.66 0.66
Copper C1 unit costs (includes Kennecott, Oyu Tolgoi and Escondida) - US cents 195 140-160
per lb
• 2024 guidance for Pilbara unit cash costs reflects the increased work
effort in the mines and persistent labour and parts inflation in Western
Australia.
• Our Copper C1 unit costs are expected to decrease in 2024, primarily
driven by higher volumes at Oyu Tolgoi as the underground continues to ramp up
and at Kennecott, where refined copper volumes are expected to increase
following the planned smelter rebuild in 2023.
Production (Rio Tinto share, unless otherwise stated) 2023 Actuals 2024 Guidance
Pilbara iron ore (shipments, 100% basis) (Mt) 331.8 323 to 338
Bauxite (Mt) 54.6 53 to 56
Alumina (Mt) 7.5 7.6 to 7.9
Aluminium (Mt) 3.3 3.2 to 3.4
Mined copper (consolidated basis) (kt)(5) 620 660 to 720
Refined copper (kt) 175 230 to 260
Titanium dioxide slag (Mt) 1.1 0.9 to 1.1
Iron Ore Company of Canada iron ore pellets and concentrate (Mt) 9.7 9.8 to 11.5
Boric oxide equivalent (Mt) 0.5 ~0.5
Production guidance is consistent with our Fourth Quarter Operations Review,
released on 16 January 2024.
• Iron ore shipments and bauxite production guidance remain subject to
weather impacts. Pilbara shipments include SP10 products, which are expected
to remain elevated until replacement projects are delivered. Levels are
dependent on the timing of approvals for planned mining areas, including
heritage clearances.
Footnotes set out in full on page 25.
Financial performance
Income Statement
Underlying EBITDA
To provide additional insight into the performance of our business, we report
underlying EBITDA and underlying earnings. Underlying EBITDA and underlying
earnings are non-IFRS measures. For definitions and a detailed reconciliation
of underlying EBITDA and underlying earnings to the nearest IFRS measures, see
pages 40 to 44, respectively.
The principal factors explaining the movements in underlying EBITDA are set
out in this table.
US$bn
2022 underlying EBITDA 26.3
Prices (1.5)
Exchange rates 0.6
Volumes and mix 0.4
General inflation (0.4)
Energy 0.4
Operating cash unit costs (1.4)
Higher exploration and evaluation expenditure (net of profit from disposal of (0.3)
interests in undeveloped projects)
Non-cash costs/other (0.2)
Change in underlying EBITDA (2.4)
2023 underlying EBITDA 23.9
Resilient financial results, primarily impacted by commodity price movements
In general, we saw lower prices for our commodities, as supply improved,
outpacing modest demand growth.
Movements in commodity prices resulted in a $1.5 billion decline in underlying
EBITDA overall compared with 2022. This was primarily from lower pricing for
our Aluminium business, driven by London Metal Exchange (LME) prices, lower
premiums and lower alumina pricing. Higher realised pricing in our Iron Ore
business was offset by lower pricing for copper, diamonds and industrial
minerals. We have included a table of prices and exchange rates on page 50.
The monthly average Platts index for 62% iron fines converted to a Free on
Board (FOB) basis was 0.5% higher, on average, compared with 2022.
The average LME price for copper was 3% lower, the average LME aluminium price
was 17% lower while the gold price was 8% higher compared with 2022.
The Midwest premium duty paid for aluminium in the US averaged $512 per tonne,
22% lower than in 2022.
Benefit from weaker local currencies in 2023
Compared with 2022, on average, the US dollar strengthened by 4% against the
Australian dollar and by 4% against the Canadian dollar. Currency movements
increased underlying EBITDA by $0.6 billion relative to 2022.
Improvement in sales volumes but weaker mix
Higher sales volumes across the portfolio increased underlying EBITDA by $0.7
billion compared to 2022. This was mostly attributable to a 3% increase in
Pilbara iron ore shipments, with the Gudai-Darri mine reaching full capacity,
partly offset by lower portside sales volumes (down 4%). Higher copper sales
were driven by the ramp-up of the Oyu Tolgoi underground mine. This was partly
offset by lower margins achieved due to our product mix (-$0.3 billion) mainly
associated with a reduced proportion of Aluminium VAP sales and following high
quality diamond sales in 2022.
Impact of inflation offset by lower energy prices
We saw a $0.4 billion benefit to underlying EBITDA on the easing of energy
prices compared to 2022, mainly related to lower diesel prices at our Pilbara
iron ore operations, lower energy prices at our alumina refineries and
aluminium smelters, along with lower fuel prices in our Marine business.
General price inflation across our global operations resulted in a net $0.4
billion reduction in underlying EBITDA, which includes a $0.2 billion
year-on-year benefit from the impact of inflation on closure provisions.
Unit cost pressures persist due to temporary operational factors and weaker
markets: some easing of market-linked raw material prices in second half
We remain focused on cost control, in particular maintaining discipline on
fixed costs, which are expected to be broadly flat in 2024. While inflation
has eased, we continued to see lag effects in its impact on our third party
costs, such as contractor rates, consumables and some raw materials; we expect
this to stabilise in 2024.
In the second half of 2023, we started to see some easing of market-linked
prices for key raw materials such as caustic, coke and pitch: these benefited
underlying EBITDA by $0.2 billion.
Temporary operational issues reduced underlying EBITDA by $0.6 billion. We saw
a 20% rise in Copper C1 unit costs, primarily driven by lower refined volumes
at Kennecott following the planned rebuild of the smelter and refinery. In
Minerals, fixed unit cash costs increased at Iron Ore Company of Canada (IOC),
driven by lower production following the wildfires in Northern Quebec in June
as well as extended plant downtime and conveyor belt failures in the third
quarter.
Other cost pressures and weaker market demand lowered underlying EBITDA by
$1.0 billion. In Minerals, we experienced market weakness for many of our
products, in particular for TiO(2) feedstock, which gave rise to lower volumes
and resulting higher unit costs. In the Pilbara, a higher mine work index and
investment in mine maintenance and system health were in part offset by cost
efficiencies on delivering increased volumes. In Aluminium, we invested in
improving the integrity across our integrated operations.
Overall, we continue to experience tightness in our key labour markets, in
Western Australia, Quebec and Utah, which raised costs above general
inflation. We also entered into a new collective bargaining agreement at IOC
and applied the new labour law in Mongolia.
We have also increased our investment in decarbonisation, research &
development, technology, along with communities and social investment to
deliver on our four objectives.
Increasing our global exploration and evaluation activity
Our ongoing exploration and evaluation expenditure in 2023 was $0.9 billion,
compared with guidance of $1.0 billion and $0.7 billion in 2022. The increase
was mainly attributable to increased activity at the Rincon lithium project in
Argentina and across the other product group projects. We also expensed costs
associated with the Simandou iron ore project in Guinea (included in
underlying EBITDA on a 100% basis): these increased from $0.2 billion to $0.5
billion, with qualifying Simandou costs being capitalised from the fourth
quarter of 2023. These expenditures were partly offset by a $0.2 billion gain
on disposal of 55% of our interest in the La Granja copper project in Peru to
First Quantum Minerals in 2023, leading to a net charge to the Income
Statement of $1.2 billion (2022: $0.9 billion).
Net earnings
The principal factors explaining the movements in underlying earnings and net
earnings are set out below.
US$bn
2022 net earnings 12.4
Changes in underlying EBITDA (see above) (2.4)
Increase in depreciation and amortisation (pre-tax) in underlying earnings (0.1)
Decrease in interest and finance items (pre-tax) in underlying earnings 0.2
Increase in tax on underlying earnings (0.2)
Decrease in underlying earnings attributable to outside interests 0.8
Total changes in underlying earnings (1.6)
Changes in items excluded from underlying earnings (see below) (0.7)
2023 net earnings 10.1
Financial figures are rounded to the nearest million, hence small differences
may result in the totals. Comparative information has been restated to reflect
the adoption of narrow scope amendments to IAS12 'Income Taxes'.
Increase in tax on underlying earnings
The effective tax rate on underlying earnings in 2023 was 30% compared with
26% in 2022. Consequently the tax on underlying earnings increased by $0.2
billion despite a decrease in underlying EBITDA. The rate in 2023 was in line
with guidance, whereas the 2022 rate was lower due to the recognition of
additional deferred tax assets in respect of Oyu Tolgoi and adjustments in
respect of prior periods.
Decrease in underlying earnings attributable to outside interests
We completed the acquisition of Turquoise Hill Resources' non-controlling
interests in December 2022, which resulted in a reduction of Oyu Tolgoi's
earnings being attributable to outside interests and therefore a higher share
of income being attributable to Rio Tinto. The ramp-up of exploration and
evaluation spend at Simandou resulted in greater charges attributable to
outside interests given our 45.05% effective interest in the project.
Items excluded from underlying earnings
The differences between underlying earnings and net earnings are set out in
this table (all numbers are after tax and exclude amounts attributable to
non-controlling interests).
2023 2022
Year ended 31 December US$bn US$bn
Underlying earnings 11.8 13.4
Items excluded from underlying earnings
Net impairment charges (0.7) (0.1)
Change in closure estimates (non-operating and fully impaired sites) (1.1) (0.2)
Foreign exchange and derivative gains on net debt and intragroup balances and (0.3) (0.1)
derivatives not qualifying for hedge accounting
Deferred tax arising on internal sale of assets in Canadian operations 0.4 -
Gains recognised by Kitimat relating to LNG Canada's project - 0.1
Loss on disposal of interest in subsidiary - (0.1)
Gain on sale of Cortez royalty - 0.3
Write-off of Federal deferred tax assets in the United States - (0.9)
Total items excluded from underlying earnings (1.7) (1.0)
Net earnings 10.1 12.4
Financial figures are rounded to the nearest million, hence small differences
may result in the totals. Comparative information has been restated to reflect
the adoption of narrow scope amendments to IAS12 'Income Taxes'.
On pages 43 to 44 there is a detailed reconciliation from net earnings to
underlying earnings, including pre-tax amounts and additional explanatory
notes. The differences between profit after tax and underlying EBITDA are set
out in the table on page 40.
We recognised net impairment charges of $0.7 billion (after tax), mainly
related to our alumina refineries in Queensland, taken in the first half of
2023. This was triggered by the challenging market conditions facing these
assets, together with our improved understanding of the capital requirements
for decarbonisation and the recently legislated cost escalation for carbon
emissions. For a detailed explanation of the impairment process, refer to note
4 to the Financial Statements in the 2023 Annual Report. The signing of key
agreements with the Government of Guinea and other joint venture partners for
co-development of the infrastructure for the Simandou iron ore project gave
rise to an impairment reversal trigger, for amounts which had been fully
impaired in 2015. Previously capitalised exploration and evaluation costs
associated with the mine and retained items of property, plant and equipment
totalling $0.2 billion (after tax and outside interests) have therefore been
reversed.
We excluded $1.1 billion of closure cost charges from underlying earnings, of
which $850 million related to the closure update announced by Energy
Resources of Australia (ERA) on 12 December 2023. This was considered material
and was therefore aggregated with other closure study updates in the second
half of 2023 which were similar in nature. These other updates were at legacy
sites and at the Yarwun alumina refinery, which was expensed due to the
impairment earlier in the year.
We recognised an exchange and derivative loss of $0.3 billion (2022: loss of
$0.1 billion). The exchange losses are largely offset by currency translation
gains recognised in equity. The quantum of US dollar debt is largely
unaffected and we will repay it from US dollar sales receipts.
Our Canadian aluminium business completed an internal sale of assets. This
resulted in the utilisation of previously unrecognised capital losses and an
uplift in the tax depreciable value of assets on which a deferred tax asset of
$0.4 billion has been recognised.
Net earnings and underlying earnings refer to amounts attributable to the
owners of Rio Tinto. The net profit attributable to the owners of Rio Tinto in
2023 was $10.1 billion (2022: $12.4 billion). We recorded a profit after tax
in 2023 of $10.0 billion (2022: $13.0 billion) of which a loss of $0.1 billion
was attributable to non-controlling interests (2022 profit: $0.7 billion).
Underlying EBITDA and underlying earnings by product group
Underlying EBITDA Underlying earnings
2023 2022 Change 2023 2022 Change
Year ended 31 December US$bn US$bn % US$bn US$bn %
Iron Ore 20.0 18.6 7 % 11.9 11.2 6 %
Aluminium 2.3 3.7 (38) % 0.5 1.5 (64) %
Copper 1.9 2.6 (26) % 0.1 0.7 (81) %
Minerals 1.4 2.4 (42) % 0.3 0.9 (63) %
Reportable segment total 25.6 27.3 (6) % 12.9 14.3 (10) %
Simandou iron ore project (0.5) (0.2) 185 % (0.2) (0.1) 10 %
Other operations - - - % (0.3) (0.3) (28) %
Central pension costs, share-based payments, insurance and derivatives 0.2 0.4 (55) % - 0.4 (87) %
Restructuring, project and one-off costs (0.2) (0.2) 10 % (0.1) (0.1) 32 %
Other central costs (1.0) (0.8) 29 % (0.9) (0.7) 29 %
Central exploration and evaluation (0.1) (0.3) (60) % (0.1) (0.2) (71) %
Net interest 0.3 0.1 130 %
Total 23.9 26.3 (9) % 11.8 13.4 (12) %
Financial figures are rounded to the nearest million, hence small differences
may result in the totals and period-on-period change. Underlying EBITDA and
underlying earnings are non-IFRS measures used by management to assess the
performance of the business and provide additional information which investors
may find useful. For more information on our use of non-IFRS financial
measures in this report, see the section entitled "Alternative performance
measures" (APMs) and the detailed reconciliations on pages 40 to 49.
Simandou iron ore project
Costs attributable to the Simandou project in Guinea increased from
$0.2 billion to $0.5 billion (100% basis at underlying EBITDA level) on
ramp-up of project activity in 2023. We commenced capitalising qualifying
spend on Simandou from the fourth quarter of 2023, with $0.3 billion included
in capital expenditure (100% basis).
Central and other costs
Pre-tax central pension costs, share-based payments, insurance and derivatives
were a $0.2 billion credit compared with a $0.4 billion credit in 2022,
reflecting movement on derivatives in the two years.
On a pre-tax basis, restructuring, project and one-off central costs were
mainly associated with corporate projects and were comparable to 2022.
Other central costs of $1.0 billion were 29% higher than 2022, reflecting
increased investment in decarbonisation, research & development and
technology. Our core central costs increased in line with inflation.
On an underlying earnings basis, net interest was a credit of $0.3 billion
(2022: credit of $0.1 billion),
reflecting Rio Tinto's increased interest in Oyu Tolgoi and the related
financing items following the acquisition of Turquoise Hill minorities in
2022.
Continuing to invest in greenfield exploration
We have a strong portfolio of greenfield exploration projects in early
exploration and studies stages, with activity in 18 countries across eight
commodities. This is reflected in our pre-tax central spend of $0.3 billion.
The bulk of this expenditure in 2023 focused on copper in Australia, Chile,
Colombia, Namibia, the United States and Zambia; diamonds in Canada; nickel in
Brazil, Canada and Peru; heavy mineral sands in South Africa; and potash in
Canada. We recently partnered with Codelco on the Nuevo Cobre copper project
in the prospective Atacama region in Chile and with Charger Metals on the Lake
Johnston lithium project in the Yilgarn, Western Australia. This spend is
offset by the gain recognised on disposal of 55% of our interest in the La
Granja copper project ($0.2 billion, pre-tax).
Cash flow
2023 2022
Year ended 31 December US$bn US$bn
Net cash generated from operating activities 15.2 16.1
Purchases of property, plant and equipment and intangible assets (7.1) (6.8)
Lease principal payments (0.4) (0.4)
Free cash flow¹ 7.7 9.0
Dividends paid to equity shareholders (6.5) (11.7)
Acquisitions (0.8) (0.9)
Purchase of the minority interest in Turquoise Hill Resources Ltd - (3.0)
Disposals - 0.1
Cash receipt from sale of Cortez royalty - 0.5
Other (0.4) 0.2
Movement in net debt/cash¹ - (5.8)
Financial figures are rounded to the nearest million, hence small differences
may result in the totals.
Footnotes are set out in full on page 25.
• $15.2 billion in net cash generated from operating activities, 6% lower
than 2022, primarily driven by price movements for our major commodities and a
$0.9 billion rise in working capital, partly offset by lower taxes paid. The
cash outflow from the working capital increase was driven by healthy stocks in
the Pilbara, still elevated in-process inventory at Kennecott following the
extended smelter rebuild and higher working capital at Iron & Titanium,
reflective of weaker market conditions. Receivables also reflected a 20%
higher iron ore price at 2023 year end (vs 2022) that will be monetised in
2024. Operating cash flow was also impacted by lower dividends, primarily from
Escondida ($0.6 billion in 2023; $0.9 billion in 2022).
• Taking into account the timing of payments in Australia, taxes paid of
$4.6 billion in 2023 were at a similar level to 2022, which included around
$1.5 billion of payments related to prior years.
• Our capital expenditure of $7.1 billion was comprised of $1.0 billion of
growth ($0.9 billion on a Rio Tinto share basis), $1.6 billion of replacement,
$4.3 billion of sustaining and $0.2 billion of decarbonisation capital (in
addition to $0.2 billion of decarbonisation spend in operating costs). We
expect to spend around $4.0 billion each year on sustaining capital; spend in
2023 included the smelter and refinery rebuild at Kennecott ($0.3 billion) and
targeted investment in asset health in Iron Ore and Aluminium. We funded our
capital expenditure from operating activities and generally expect to continue
funding our capital program from internal sources.
• $6.5 billion of dividends paid in 2023, being the 2022 final ordinary
and the 2023 interim ordinary dividends.
• $0.8 billion of acquisitions related to the Matalco recycling joint
venture and the Nuevo Cobre exploration joint venture with Codelco.
• The above movements, together with $0.4 billion of other movements,
resulted in net debt(1) remaining stable year-on-year at $4.2 billion at 31
December 2023.
Balance sheet
Net debt(1) of $4.2 billion was unchanged at 31 December 2023 compared to the
prior year end.
Our net gearing ratio(1) (net debt/(cash) to total capital) was 7% at
31 December 2023 (31 December 2022: 7%). See page 49.
Our total financing liabilities excluding net debt derivatives at 31 December
2023 (see page 48) were $14.4 billion (31 December 2022: $12.3 billion) and
the weighted average maturity was around 12 years. At 31 December 2023,
approximately 68% of these liabilities were at floating interest rates (75%
excluding leases). The maximum amount within non-current borrowings maturing
in any one calendar year is $1.65 billion, which matures in 2033.
On 7 March 2023, we priced
(https://www.riotinto.com/en/news/releases/2023/rio-tinto-finance-usa-plc-prices-us1_75-billion-of-fixed-rate-notes)
$650 million of 10-year fixed rate SEC-registered debt securities and $1.1
billion of 30-year fixed rate SEC-registered debt securities. The 10-year
notes will pay a coupon of 5.000 per cent and will mature 9 March 2033 and the
30-year notes will pay a coupon of 5.125 per cent and will mature 9 March
2053.
We had $10.5 billion in cash and cash equivalents plus other short-term cash
investments at 31 December 2023 (31 December 2022: $8.8 billion).
Provision for closure costs
At 31 December 2023, provisions for close-down and restoration costs and
environmental clean-up obligations were $17.2 billion (31 December 2022:
$15.8 billion). The increase was largely due to revised closure estimates
following new studies at certain operations and legacy sites, including ERA,
together with the amortisation of discount ($1.0 billion), which includes the
effect of elevated inflation for the year. This was partly offset by a
revision of the closure discount rate to 2.0% (from 1.5%), reflecting
expectations of higher yields from long-dated bonds, which resulted in a
$1.1 billion decrease in the provision. $0.8 billion of the provision was
also utilised through spend in 2023.
( )
Our shareholder returns policy
The Board is committed to maintaining an appropriate balance between cash
returns to shareholders and investment in the business, with the intention of
maximising long-term shareholder value.
At the end of each financial period, the Board determines an appropriate total
level of ordinary dividend per share. This takes into account the results for
the financial year, the outlook for our major commodities, the Board's view of
the long-term growth prospects of the business and the company's objective of
maintaining a strong balance sheet. The intention is that the balance between
the interim and final dividend be weighted to the final dividend.
The Board expects total cash returns to shareholders over the longer term to
be in a range of 40% to 60% of underlying earnings in aggregate through the
cycle. Acknowledging the cyclical nature of the industry, it is the Board's
intention to supplement the ordinary dividend with additional returns to
shareholders in periods of strong earnings and cash generation.
60% payout ratio on the ordinary dividend delivers an eight-year track record
2023 2022
US$bn US$bn
Ordinary dividend
Interim¹ 2.9 4.3
Final¹ 4.2 3.7
Full-year ordinary dividend 7.1 8.0
Payout ratio on ordinary dividend 60% 60%
(1) Based on weighted average number of shares and declared dividends per
share for the respective periods and excluding foreign exchange impacts on
payment.
We determine dividends in US dollars. We declare and pay Rio Tinto plc
dividends in pounds sterling and Rio Tinto Limited dividends in Australian
dollars. The 2023 final dividend has been converted at exchange rates
applicable on 20 February 2024 (the latest practicable date before the
dividend was declared). American Depositary Receipt (ADR) holders
receive dividends at the declared rate in US dollars.
Ordinary dividend per share declared 2023 2022
Rio Tinto Group
Interim (US cents) 177.00 267.00
Final (US cents) 258.00 225.00
Full-year (US cents) 435.00 492.00
Rio Tinto plc
Interim (UK pence) 137.67 221.63
Final (UK pence) 203.77 185.35
Full-year (UK pence) 341.44 406.98
Rio Tinto Limited
Interim (Australian cents) 260.89 383.70
Final (Australian cents) 392.78 326.49
Full-year (Australian cents) 653.67 710.19
The 2023 final ordinary dividend to be paid to our Rio Tinto Limited
shareholders will be fully franked. The Board expects Rio Tinto Limited to be
in a position to pay fully franked dividends for the foreseeable future.
On 18 April 2024, we will pay the 2023 final ordinary dividend to holders of
ordinary shares and holders of ADRs on the register at the close of business
on 8 March 2024 (record date). The ex-dividend date is 7 March 2024.
Rio Tinto plc shareholders may choose to receive their dividend in Australian
dollars or New Zealand dollars, and Rio Tinto Limited shareholders may choose
to receive theirs in pounds sterling or New Zealand dollars. Currency
conversions will be based on the pound sterling, Australian dollar and New
Zealand dollar exchange rates five business days before the dividend payment
date. Rio Tinto plc and Rio Tinto Limited shareholders must register their
currency elections by 26 March 2024.
We will operate our Dividend Reinvestment Plans for the 2023 final dividend
(visit riotinto.com for details). Rio Tinto plc and Rio Tinto Limited
shareholders' election notice for the Dividend Reinvestment Plans must be
received by 26 March 2024. Purchases under the Dividend Reinvestment Plan are
made on or as soon as practicable after the dividend payment date and at
prevailing market prices. There is no discount available.
Capital projects
Project Total Capital remaining to be spent from Status/Milestones
(Rio Tinto 100% capital cost 1 Jan 2024
owned unless (100% unless
otherwise stated) otherwise stated)
Ongoing
Iron ore
Investment in the Western Range iron ore project, a joint venture between Rio $1.3bn $0.8bn Approved in September 2022, the mine will have a capacity of 25 million tonnes
Tinto (54%) and China Baowu Steel Group Co. Ltd (46%) in the Pilbara to
per year. The project includes construction of a primary crusher and an 18
sustain production of the Pilbara Blend(TM) from Rio Tinto's existing (Rio Tinto share)(6) (Rio Tinto kilometre conveyor connection to the Paraburdoo processing plant. Construction
Paraburdoo hub. First production is anticipated in 2025.
is currently on schedule with civil work well advanced, while we continue to
share) progress primary crusher works, bulk earthworks and mine pre-strip.
Investment in the Simandou iron ore project in Guinea in partnership with $6.2bn⁹ $5.7bn Announced in December 2023, the Simfer joint venture(10) will develop, own and
CIOH, a Chinalco-led consortium (the Simfer joint venture) and co-development
operate a 60 million tonne per year¹¹ mine in blocks 3 & 4. First
of the rail and port infrastructure with Winning Consortium Simandou⁷ (WCS), (estimated Rio Tinto share) (estimated Rio Tinto share) production at the mine is expected in 2025, ramping up over 30 months to an
Baowu and the Republic of Guinea (the partners). Overall, the co-developed annualised capacity of 60 million tonnes per year (27 million tonnes Rio Tinto
infrastructure represents more than 600 kilometres of new multi-user share). WCS will construct the project's ~536 kilometre dual track main line
(including passenger and general freight services) rail together with port as well as the WCS barge port, while Simfer will construct the ~70 kilometre
facilities to be co-developed by the partners to allow the export of up to 120 spur line, connecting its mining concession to the main rail line. Pending
million tonnes per year of iron ore mined by Simfer's and WCS's respective completion and commissioning of its 60 million tonne per year transhipment
mining concessions.⁸ vessel port, Simfer will be able to export its ore using WCS's barge port.
The Rio Tinto Board has approved the project, subject to the remaining
conditions being met, including joint venture partner approvals and regulatory
approvals¹² from China and Guinea.
Aluminium
Investment to expand the low-carbon AP60 aluminium smelter at the Complexe $1.1bn $1.0bn Approved in June 2023, the investment will add 96 AP60 pots, representing
Jonquière in Quebec. The investment includes up to $113 million of financial 160,000 tonnes of primary aluminium per year, replacing the Arvida smelter
support from the Quebec government. which is set to gradually close from 2024. We continued early works for the
expansion of the AP60 smelter. Commissioning is expected in the first half of
2026, with the smelter fully ramped up by the end of that year. Once
completed, it is expected to be in the first quartile of the industry
operating cost curve.
Copper
Phase two of the south wall pushback to extend mine life at Kennecott in Utah $1.8bn $1.2bn Approved in December 2019, the investment will further extend strip waste rock
by a further six years. mining and support additional infrastructure development. This will allow
mining to continue into a new area of the orebody between 2026 and 2032. In
March 2023, a further $0.3 billion was approved to primarily mitigate the risk
of failure in an area of geotechnical instability known as Revere, necessary
to both protect open pit value and enable underground development.
Investment in the Kennecott underground development of the North Rim Skarn $0.5bn $0.5bn Approved in June 2023, production from NRS(13) will commence in the first
(NRS) area. quarter of 2025 (previously 2024) and is expected to ramp up over two years,
to deliver around 250,000 tonnes of additional mined copper over the next 10
years(14) alongside open cut operations.
Development of the Oyu Tolgoi underground copper-gold mine in Mongolia (Rio $7.06bn $1.0bn We delivered first sustainable underground production from Panel 0 in March
Tinto 66%), which is expected to produce (from the open pit and underground) 2023.
an average of ~500,000 tonnes³ of copper per year from 2028 to 2036.
The commissioning of infrastructure for ramp-up to full capacity remains on
target: we expect shafts 3 and 4 and the conveyor to surface in the second
half of 2024, while the concentrator conversion is expected to be
progressively completed from the fourth quarter of 2024 through to the second
quarter of 2025. Construction of primary crusher 2 commenced in December 2023
and is due to be complete by the end of 2025.
Future options
Status
Iron Ore: Pilbara brownfields
Over the medium term, our Pilbara system capacity remains between 345 and 360 In addition to Western Range (Greater Paraburdoo), which is under
million tonnes per year. Meeting this range, and the planned product mix, will construction, we continue to progress studies for Hope Downs 1 (Hope Downs 2
require the approval and delivery of the next tranche of replacement mines and Bedded Hilltop), Brockman 4 (Brockman Syncline 1), Greater Nammuldi and
over the next five years. West Angelas. We continue to work closely with local communities, Traditional
Owners and governments to progress approvals for these new mining projects.
Iron Ore: Rhodes Ridge
In October 2022, Rio Tinto (50%) and Wright Prospecting Pty Ltd (50%) agreed A resource-drilling program is currently underway to support future project
to modernise the joint venture covering the Rhodes Ridge project in the studies. In December 2023, we announced approval of a $77 million
Eastern Pilbara, providing a pathway for development utilising Rio Tinto's pre-feasibility study (PFS). This follows completion of an Order of Magnitude
rail, port and power infrastructure. study that considered development of an operation with initial capacity of up
to 40 million tonnes per year, subject to relevant approvals. Completion of
the PFS is expected by the end of 2025 and will be followed by a feasibility
study, with first ore expected by the end of the decade. Longer term, the
resource could support a world-class mining hub with a potential capacity of
more than 100 million tonnes of high-quality iron ore a year.
Lithium: Jadar
Development of the greenfield Jadar lithium-borates project in Serbia will The Board committed funding in July 2021, subject to receiving all relevant
include an underground mine with associated infrastructure and equipment, approvals, permits and licences. We are focused on consultation with all
including electric haul trucks, as well as a beneficiation chemical processing stakeholders to explore all options following the Government of Serbia's
plant. cancellation of the Spatial Plan in January 2022.
Lithium: Rincon
We completed the acquisition of the Rincon Lithium project in Salta province, In July 2022, we approved $140 million of investment and $54 million for early
Argentina in March 2022. Development of a 3,000 tonne per year battery-grade works to support a full-scale operation. To date, the majority of costs have
lithium carbonate starter plant is ongoing with first saleable production been expensed through exploration and evaluation expenditure. In July 2023, we
expected at the end of 2024. approved a further $195 million to complete the starter plant: the increase
was driven by the project now being fully defined (previously conceptual),
Studies are continuing on the full-scale plant, which will have benefits of scope adjustments to design (including column performance improvements and
economies of scale, with the capital intensity, based on current stage of changes to waste and spent brine disposal facilities), rising capital costs
studies, forecast to be in line with regional lithium industry benchmarks. across the lithium industry, particularly for processing equipment and from
broad cost escalation in Argentina.
Mineral Sands: Zulti South
Development of the Zulti South project at Richards Bay Minerals (RBM) in South Approved in April 2019 to underpin RBM's supply of zircon and ilmenite over
Africa (Rio Tinto 74%). the life of the mine. The project remains on full suspension.
Copper: Resolution
The Resolution Copper project is a proposed underground copper mine in the The United States Forest Service (USFS) continued work to progress the Final
Copper Triangle, in Arizona, US (Rio Tinto 55%). It has the potential to Environmental Impact Statement and complete actions necessary for the land
supply up to 25% of US copper demand. exchange. We continued to advance partnership discussions with several
federally-recognised Native American Tribes who are part of the formal
consultation process. We are also monitoring the Apache Stronghold versus USFS
case held in the US Ninth Circuit Court of Appeals. While there is significant
local support for the project, we respect the views of groups who oppose it
and will continue our efforts to address and mitigate these concerns.
Copper: Winu
In late 2017, we discovered copper-gold mineralisation at the Winu project in In 2023, Project Planning Agreements were executed with the Nyangumarta and
the Paterson Province in Western Australia. In 2021, we reported our first Martu groups, the Traditional Owners of the land on which the proposed Winu
Indicated Mineral Resource. The pathway remains subject to regulatory and mine and airstrip will be located. Study activities, drilling and fieldwork
other required approvals. progressed sufficiently to commence Winu's formal Western Australian
Environmental Protection Authority approval process. The environmental
In parallel, we continue to explore options aimed at enhancing project value, approval deliverables and Project Agreement negotiations with both Traditional
including further optimisation of the current pathway and alternative Owner groups remain the priority.
development models and partnerships.
Copper: La Granja
In August 2023, we completed a transaction to form a joint venture with First First Quantum Minerals acquired a 55% stake in the project for $105 million
Quantum Minerals that will work to unlock the development of the La Granja and will invest up to a further $546 million into the joint venture to sole
project in Peru, one of the largest undeveloped copper deposits in the world, fund capital and operational costs to take the project through a feasibility
with potential to be a large, long-life operation. study and toward development. All subsequent expenditures will be applied on a
pro-rata basis in line with shared ownership.
Aluminium: ELYSIS
ELYSIS, our joint venture with Alcoa, supported by Apple, the Government of ELYSIS has started commissioning activities following completion of the
Canada and the Government of Quebec, is developing a breakthrough inert anode construction of the first commercial-scale prototype cells. ELYSIS expects to
technology that eliminates all direct greenhouse gases from the aluminium start the first 450kA cell in 2024.
smelting process.
Review of operations
Iron Ore
Year ended 31 December 2023 2022 Change
Pilbara production (million tonnes - 100%) 331.5 324.1 2 %
Pilbara shipments (million tonnes - 100%) 331.8 321.6 3 %
Salt production (million tonnes - Rio Tinto share)¹ 6.0 5.8 4 %
Segmental revenue (US$ millions) 32,249 30,906 4 %
Average realised price (US$ per dry metric tonne, FOB basis) 108.4 106.1 2 %
Underlying EBITDA (US$ millions) 19,974 18,612 7 %
Pilbara underlying FOB EBITDA margin² 69% 68%
Underlying earnings (US$ millions)³ 11,882 11,213 6 %
Net cash generated from operating activities (US$ millions) 14,045 14,005 - %
Capital expenditure (US$ millions)⁴ (2,588) (2,940) (12) %
Free cash flow (US$ millions) 11,374 11,033 3 %
Underlying return on capital employed³, ⁵ 64% 61%
Production figures are sometimes more precise than the rounded numbers shown,
hence small differences may result in the year on year change.
1. Dampier Salt is reported within Iron Ore, reflecting management
responsibility. Iron Ore Company of Canada continues to be reported within
Minerals. The Simandou iron ore project in Guinea reports to the Chief
Technical Officer and is reported outside the Reportable segments.
2. The Pilbara underlying free on board (FOB) EBITDA margin is defined as
Pilbara underlying EBITDA divided by Pilbara segmental revenue,
excluding freight revenue.
3. Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
4. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment; capitalised evaluation costs; and purchases
less sales of other intangible assets.
5. Underlying return on capital employed (ROCE) is defined as underlying
earnings excluding net interest divided by average capital employed.
Financial performance
Underlying EBITDA of $20.0 billion was 7% higher than 2022, with a 2%
improvement in realised prices ($0.8 billion) and higher volumes, following
the ramp-up of Gudai-Darri.
Unit costs of $21.5 per tonne were $0.2 per tonne lower than 2022. Cost
escalation from inflation was offset by a weaker Australian dollar and gains
on derivative contracts. Higher iron ore volumes offset a higher mine work
index and mine maintenance costs.
Our Pilbara operations delivered an underlying FOB EBITDA margin of 69%,
compared with 68% in 2022, largely due to the iron ore price.
We price the majority of our iron ore sales (79%) by reference to the average
index price for the month of shipment. In 2023, we priced approximately 10% of
sales with reference to the prior quarter's average index lagged by one month
with the remainder sold either on current quarter average, on the spot market
or other mechanisms. We made approximately 74% of sales including freight and
26% on an FOB basis.
We achieved an average iron ore price of $99.7 per wet metric tonne on an FOB
basis (2022: $97.6 per wet metric tonne) across our product suite. This
equates to $108.4 per dry metric tonne, assuming 8% moisture (2022: $106.1 per
dry metric tonne), which compares with the monthly average Platts index for
62% iron fines converted to an FOB basis of $110.3 per dry metric tonne (2022:
$109.8 per dry metric tonne). The 2% lower realised price compared to the
Platts index was mainly due to the lower average grades of our portfolio
compared to the 62% index.
Segmental revenue for our Pilbara operations included freight revenue of $2.1
billion (2022: $2.2 billion).
Net cash generated from operating activities of $14.0 billion was on a par
with 2022. Benefits from higher realised prices and higher volumes offset a
build in working capital to ensure healthy stocks across the system and an
increased receivables balance due to strong iron ore prices at year end. Free
cash flow of $11.4 billion was $0.3 billion higher than 2022, mostly driven by
a $0.4 billion reduction in capital expenditure to $2.6 billion due to lower
spend on replacement capital.
Review of operations
Pilbara operations produced 331.5 million tonnes (100% basis) of iron ore, 2%
higher than 2022. Shipments, on a 100% basis, were 3% higher (+10 million
tonnes) than in 2022, making 2023 the second highest shipment year on record.
Improved system performance supported by a 5 million tonne uplift from
implementation of the Safe Production System, and ramp-up of Gudai-Darri to
its 43 million tonne nameplate capacity, offset mine depletion. SP10 volumes
accounted for 47.5 million tonnes of 2023 shipments (or 14%).
We continue to see strong demand for our portside product in China, with sales
totalling 23.3 million tonnes in 2023 (2022: 24.3 million tonnes). At the end
of 2023, inventory levels were 6.4 million tonnes, including 3.9 million
tonnes of Pilbara product. In 2023, approximately 86% of our portside sales
were either screened or blended in Chinese ports.
In January 2024, Dampier Salt Limited entered into a sales agreement for the
Lake MacLeod salt and gypsum operation in Carnarvon, Western Australia with
privately-owned salt company Leichhardt Industrials Group for $251 million
(A$375 million). Completion of the sale is subject to certain commercial and
regulatory conditions being satisfied. The transaction is subject to capital
gains tax.
Aluminium
Year ended 31 December 2023 2022 Change
Bauxite production ('000 tonnes - Rio Tinto share) 54,619 54,618 0 %
Alumina production ('000 tonnes - Rio Tinto share) 7,537 7,544 0 %
Aluminium production ('000 tonnes - Rio Tinto share) 3,272 3,009 9 %
Segmental revenue (US$ millions) 12,285 14,109 (13) %
Average realised aluminium price (US$ per tonne) 2,738 3,330 (18) %
Underlying EBITDA (US$ millions) 2,282 3,672 (38) %
Underlying EBITDA margin (integrated operations) 21% 29%
Underlying earnings (US$ millions)¹ 538 1,504 (64) %
Net cash generated from operating activities (US$ millions) 1,980 3,055 (35) %
Capital expenditure - excluding EAUs (US$ millions)² (1,331) (1,377) (3) %
Free cash flow (US$ millions) 619 1,652 (63) %
Underlying return on capital employed¹, ³ 3% 10%
Footnotes are set out in full on page 25.
1. Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
2. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment; capitalised evaluation costs; and purchases
less sales of other intangible assets. It excludes equity accounted units
(EAUs).
3. Underlying return on capital employed (ROCE) is defined as underlying
earnings excluding net interest divided by average capital employed.
Financial performance
Although global primary aluminium demand rose by ~1% in 2023, falling costs
and an increase in global supply led to a 17% reduction in the LME price and
lower market and product premiums. Market-related costs for key materials such
as caustic, coke and pitch moderated with some of this benefitting underlying
EBITDA in the second half. Operating costs particularly in our mines and
refineries increased year on year with a focus on improved operational
stability and asset health. Overall there was significant margin compression
for our Aluminium business with a 38% decrease in underlying EBITDA to $2.3
billion. Underlying EBITDA margin fell eight percentage points to 21%.
We achieved an average realised aluminium price of $2,738 per tonne, 18% lower
than 2022.
Average realised aluminium prices comprise the LME price, a market premium and
a value-added product (VAP) premium. The cash LME price averaged $2,250 per
tonne, 17% lower than 2022, while in our key US market, the Midwest premium
duty paid, which is 57% of our total volumes (2022: 57%), decreased by 22% to
$512 per tonne (2022: $655 per tonne). Our VAP sales represented 46% of the
primary metal we sold (2022: 50%) and generated product premiums averaging
$354 per tonne of VAP sold (2022: $431 per tonne).
Our conversion of underlying EBITDA to cash remained relatively strong, with
net cash generated from operating activities of $2.0 billion. Free cash flow
of $0.6 billion reflected investment in the business of $1.3 billion.
Review of operations
Bauxite production of 54.6 million tonnes was unchanged from 2022. Operations
saw a continued improvement in the fourth quarter, following the challenges of
higher-than-average rainfall at Weipa in the first quarter and equipment
downtime at both Weipa and Gove in the first half.
We shipped 37.3 million tonnes of bauxite to third parties, 2% lower than
2022. Segmental revenue for bauxite was also unchanged at $2.4 billion. This
includes freight revenue of $0.5 billion (2022: $0.6 billion).
Alumina production of 7.5 million tonnes was unchanged from 2022, with the
Yarwun and Queensland Alumina Limited (QAL) refineries showing improved
operational stability.
For the 2023 calendar year, as the result of QAL's activation of a step-in
process following sanction measures enacted by the Australian Government in
2022, we continued to take on 100% of capacity for as long as the step-in
continues. We have used Rusal's 20% share of capacity under the tolling
arrangement with QAL. This additional output is excluded from our production
results as QAL remains 80% owned by Rio Tinto and 20% owned by Rusal. On 1
February 2024, the Federal Court of Australia rendered its decision in the
litigation initiated by Rusal against Rio Tinto and QAL, dismissing Rusal's
case. Rio Tinto and QAL are working to understand the impacts of the decision.
Aluminium production of 3.3 million tonnes was 9% higher than 2022, after we
returned to full capacity at the Kitimat smelter and completed cell recovery
efforts at Boyne during the third quarter. All other smelters continued to
demonstrate stable performance.
Copper
Year ended 31 December 2023 2022 Change
Mined copper production ('000 tonnes - consolidated basis) 620 607 2 %
Refined copper production ('000 tonnes - Rio Tinto share) 175 209 (16) %
Segmental revenue (US$ millions) 6,678 6,699 - %
Average realised copper price (US cents per pound)¹ 390 403 (3) %
Underlying EBITDA (US$ millions) 1,904 2,565 (26) %
Underlying EBITDA margin (product group operations) 42% 49%
Underlying earnings (US$ millions) 133 687 (81) %
Net cash generated from operating activities (US$ millions)² 545 1,523 (64) %
Capital expenditure - excluding EAUs³ (US$ millions) (1,976) (1,622) 22 %
Free cash flow (US$ millions) (1,438) (116)
Underlying return on capital employed (product group operations)⁴ 3% 6%
Footnotes are set out in full on page 25. 2022 has been restated following the
transfer of the Simandou iron ore project to outside the Reporting segments,
as it now reports to the Chief Technical Officer, and to reflect the adoption
of narrow scope amendments to IAS12 'Income Taxes'.
1. Average realised price for all units sold. Realised price does not
include the impact of the provisional pricing adjustments, which positively
impacted revenues by $2 million (2022: $175 million negative).
2. Net cash generated from operating activities excludes the operating
cash flows of equity accounted units (EAUs) but includes dividends from EAUs
(Escondida).
3. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets. It excludes EAUs.
4. Underlying return on capital employed (ROCE) is defined as underlying
earnings (product group operations) excluding net interest divided by average
capital employed.
Financial performance
We delivered first sustainable production from the underground mine at Oyu
Tolgoi, where we doubled our interest to 66% following the acquisition of
Turquoise Hill Resources at the end of 2022. However, lower refined copper
volumes and higher unit costs, primarily driven by the planned smelter and
refinery rebuild at Kennecott, in addition to higher energy prices and an
increase in exploration and evaluation expenditure, led to underlying EBITDA
being down 26% to $1.9 billion. Underlying EBITDA margin remained relatively
strong at 42%.
Our copper unit costs, at 195 cents per pound, increased by 32 cents, or 20%,
as a result of the lower shipment volumes of refined copper following the
planned rebuild at Kennecott and higher input costs.
We generated $0.5 billion in net cash from operating activities, a 64%
decrease on 2022, from the same drivers as underlying EBITDA, together with
$0.3 billion lower dividends from Escondida.
Negative free cash flow of $1.4 billion reflected the above movements and
significant investment of $2.0 billion in sustaining capital and our growth
projects. This mainly related to the ongoing development of the Oyu Tolgoi
underground, the projects at Kennecott and evaluation costs at Resolution and
Winu.
Review of operations
Mined copper production, at 620 thousand tonnes, was 2% higher than 2022,
reflecting first sustainable production from Oyu Tolgoi underground in the
first quarter. This offset challenges at Kennecott following a conveyor
failure in March, with the concentrator not returning to full capacity until
the third quarter. Our share of mined copper production from Escondida was
flat at 300 thousand tonnes.
Refined copper production decreased by 16% to 175 thousand tonnes as we
undertook the largest rebuild of the smelter and refinery in Kennecott's
history across the second and third quarters. The smelter rebuild was
successfully completed in the fourth quarter of 2023 and the ramp-up is
progressing.
Oyu Tolgoi underground project
During 2023, Rio Tinto, Oyu Tolgoi and the Government of Mongolia continued to
work together towards the implementation of Mongolian Parliamentary Resolution
103.
We continue to see strong performance from the underground mine, with a total
of 86 drawbells opened from Panel 0, including 67 drawbells in 2023.
By the end of 2023, shafts 3 and 4 sinking had reached 923 metres and 1,013
metres below ground level, respectively. Final depths required for shafts 3
and 4 are 1,130 and 1,176 metres, respectively. Both shafts are expected to be
commissioned in the second half of 2024.
Construction of the conveyor to surface works continued to plan and was 88%
complete at the end of 2023. Commissioning remains on track for the second
half of 2024.
Construction of primary crusher 2 commenced in December 2023 and is due to be
complete by the end of 2025.
Construction works for the concentrator conversion remains on schedule.
Commissioning is expected to be progressively completed from the fourth
quarter of 2024 through to the second quarter of 2025. Technical studies for
mine design and schedule optimisation for Panels 1 and 2 were completed during
the second quarter(15). The operation remains on track to ramp up to deliver
average mined copper production of ~500 thousand tonnes per year (100% basis)
between 2028 and 2036(3).
Minerals
Year ended 31 December 2023 2022 Change
Iron ore pellets and concentrates production¹ (million tonnes - Rio Tinto 9.7 10.3 (6) %
share)
Titanium dioxide slag production ('000 tonnes - Rio Tinto share) 1,111 1,200 (7) %
Borates production ('000 tonnes - Rio Tinto share) 495 532 (7) %
Diamonds production ('000 carats - Rio Tinto share) 3,340 4,651 (28) %
Segmental revenue (US$ millions) 5,934 6,754 (12) %
Underlying EBITDA (US$ millions) 1,414 2,419 (42) %
Underlying EBITDA margin (product group operations) 30% 40%
Underlying earnings (US$ millions)² 312 854 (63) %
Net cash generated from operating activities (US$ millions) 548 1,522 (64) %
Capital expenditure (US$ millions)³ (746) (679) 10 %
Free cash flow (US$ millions) (229) 814 (128) %
Underlying return on capital employed (product group operations)(2, 4) 13% 22%
Footnotes are set out in full on page 25.
1. Iron Ore Company of Canada (IOC) continues to be reported within
Minerals.
2. Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income
Taxes'.
3. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment; capitalised evaluation costs; and purchases
less sales of other intangible assets.
4. Underlying return on capital employed (ROCE) is defined as underlying
earnings (product group operations) excluding net interest divided by average
capital employed.
Financial performance
Underlying EBITDA of $1.4 billion was 42% lower than 2022, primarily due to
lower prices and higher costs. We experienced market weakness for many of our
products, in particular for TiO(2) feedstock, where underlying demand for
pigment was subdued on weak real estate activity in the Americas, Europe and
China. This gave rise to lower sales volumes and, in combination with the two
furnace failures at our RTIT Quebec operations, resulted in higher unit costs.
Net cash generated from operating activities of $0.5 billion was 64% lower
than 2022, while negative free cash flow of $0.2 billion reflected the lower
underlying EBITDA, higher working capital due to market conditions and a
modest rise in capital expenditure.
Review of operations
Production of iron ore pellets and concentrate at IOC of 9.7 million tonnes
was 6% lower than 2022 with challenges due to the wildfires in Northern Quebec
in the second quarter, as well as extended plant downtime and conveyor belt
failures in the third quarter.
TiO(2) slag production of 1,111 thousand tonnes was 7% lower than 2022. Two
furnaces at our RTIT Quebec Operations remain offline following process safety
incidents in June and July. In the fourth quarter, we decommissioned an
additional furnace, which is due for reconstruction in 2024. As a result, we
entered 2024 with six out of nine furnaces operating at our RTIT Quebec
Operations and three out of four online at Richards Bay Minerals (RBM).
Borates production was 7% lower than 2022, as we adjusted for decreased
customer demand, despite improved equipment reliability.
Our share of carats recovered was 28% lower than 2022, due to depleting one of
three underground pipes and reaching the end of life for open pit mining.
Price and exchange rate sensitivities
The following sensitivities give the estimated effect on underlying EBITDA,
assuming that each price or exchange rate moved in isolation. The relationship
between currencies and commodity prices is a complex one; movements in
exchange rates can affect movements in commodity prices and vice versa. The
exchange rate sensitivities quoted here include the effect on operating costs
of movements in exchange rates, but do not include the effect of the
revaluation of foreign currency working capital. They should be used with
care.
Average published US$ million impact on
price/exchange rate for 2023 full-year 2023
underlying EBITDA
of a 10% change
in prices/exchange rates
Aluminium (LME) - US$ per tonne 2,250 1,016
Copper (LME) - US cents per pound 386 507
Gold - US$ per troy ounce 1,941 62
Iron ore realised price (FOB basis) - US$ per dry metric tonne 108.4 2,695
Australian dollar against the US dollar 0.66 658
Canadian dollar against the US dollar 0.74 358
Oil (Brent) - US per barrel 84 185
Footnotes
1. This financial performance indicator is a non-IFRS (as defined below)
measure which is reconciled to directly comparable IFRS financial measures
(non-IFRS measures). It is used internally by management to assess the
performance of the business and is therefore considered relevant to readers of
this document. It is presented here to give more clarity around the underlying
business performance of the Group's operations. For more information on our
use of non-IFRS financial measures in this report, see the section entitled
"Alternative performance measures" (APM) and the detailed reconciliations on
pages 40 to 49. Our financial results are prepared in accordance with IFRS.
2. Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
3. The 500 thousand tonne per year copper production target (stated as
recoverable metal) for the Oyu Tolgoi underground and open pit mines for the
years 2028 to 2036 was previously reported in a release to the Australian
Securities Exchange (ASX) dated 11 July 2023 "Investor site visit to Oyu
Tolgoi copper mine, Mongolia". All material assumptions underpinning that
production target continue to apply and have not materially changed.
4. In 2023, we improved our carbon emissions reporting and now use the
market-based method as our primary measure. We also adjusted our 2018 baseline
and 2022 emissions to account for acquisitions and divestments. Further detail
on these changes in reporting is available in our Scope 1, 2 and 3 Emissions
Calculation Methodology Addendum.
5. Mined copper guidance: subsequent to Rio Tinto's acquisition of
Turquoise Hill Resources, which completed on 16 December 2022, mined copper
guidance includes Oyu Tolgoi on a 100% consolidated basis. It continues to
reflect our 30% share of Escondida.
6. Rio Tinto share of the Western Range capital cost includes 100% of
funding costs for Paraburdoo plant upgrades.
7. WCS is currently a consortium of Singaporean company, Winning
International Group (50%), Weiqiao Aluminium (part of the China Hongqiao
Group) (50%) and United Mining Supply Group (nominal shareholding). WCS is the
holder of Simandou North Blocks 1 & 2 (with the Government of Guinea
holding a 15% interest in the mining vehicle and WCS holding 85%) and
associated infrastructure. Baowu Resources has entered into an agreement to
acquire a 49% share of WCS mine and infrastructure projects through a
Baowu-led consortium, subject to conditions including regulatory approvals. In
the case of the mine, Baowu has an option to increase to 51% during
operations.
8. WCS holds the mining concession for Blocks 1 and 2, while Simfer SA
holds the mining concession for blocks 3 and 4. Simfer and WCS will
independently develop their mines.
9. Estimated numbers, subject to approval by the Simfer board and
government authorities. Spend incurred on the project in 2023 was $0.9 billion
of which $539 million was charged to the Income Statement and $330 million was
capitalised ($266 million on a cash basis). All qualifying costs are being
capitalised from the fourth quarter of 2023.
10. Simfer Jersey Limited is a joint venture between the Rio Tinto Group (53%)
and Chalco Iron Ore Holdings Ltd (CIOH) (47%),a Chinalco-led joint venture of
leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction
Corporation (2.5%) and China Harbour Engineering Company (2.5%)). Simfer S.A.
is the holder of the mining concession covering Simandou Blocks 3 & 4, and
is owned by the Guinean State (15%) and Simfer Jersey Limited (85%). Simfer
Infraco Guinée S.A.U. will deliver Simfer's scope of the co-developed rail
and port infrastructure, and is, on the date of this notice, a wholly-owned
subsidiary of Simfer Jersey Limited, but will be co-owned by the Guinean State
(15%) after closing of the co-development arrangements.
11. The estimated annualised capacity of approximately 60 million dry tonnes
per annum iron ore for the Simandou life of mine schedule was previously
reported in a release to the Australian Securities Exchange (ASX) dated 6
December 2023 titled "Investor Seminar 2023". Rio Tinto confirms that all
material assumptions underpinning that production target continue to apply and
have not materially changed.
12. Co-development of the rail and port infrastructure remains subject to a
number of conditions, including regulatory approvals in Guinea and China, the
entry into a number of legal agreements, ratification of the investment
framework for co-development by the Republic of Guinea, and agreement between
Simfer, WCS and the Republic of Guinea regarding the budget for the rail and
port infrastructure.
13. The NRS Mineral Resources and Ore Reserves, together with the Lower
Commercial Skarn (LCS) Mineral Resources and Ore Reserves, form the
Underground Skarns Mineral Resources and Ore Reserves.
14. The 250 thousand tonne copper production target for the Kennecott
underground mines over the years 2023 to 2033 was previously reported in a
release to the Australian Securities Exchange (ASX) dated 20 June 2023 "Rio
Tinto invests to strengthen copper supply in US". All material assumptions
underpinning that production target continue to apply and have not materially
changed.
15. Mine design and plans will be reviewed by regulatory bodies as part of the
OTFS23 process.
Selected financial information for the
year ended 31 December 2023
Contents:
Selected financial information Page number
Group income statement 27
Group statement of comprehensive income 28
Group cash flow statement 29
Group balance sheet 31
Group statement of changes in equity 33
Explanatory notes to the selected financial information
Status of financial information 35
Rio Tinto financial information by business unit 36
Alternative performance measures 40
Group income statement
Year ended 31 December 2022
2023 US$m
US$m restated((a))
Consolidated operations
Consolidated sales revenue 54,041 55,554
Net operating costs (excluding items disclosed separately) (37,052) (34,770)
Net impairment (charges)/reversals (936) 150
Loss on disposal of interest in subsidiary - (105)
Exploration and evaluation expenditure (net of profit from disposal of (1,230) (896)
interests in undeveloped projects)
Operating profit 14,823 19,933
Share of profit after tax of equity accounted units 675 777
Impairment of investments in equity accounted units - (202)
Profit before finance items and taxation 15,498 20,508
Finance items
Net exchange (losses)/gains on external net debt and intragroup balances (251) 253
Losses on derivatives not qualifying for hedge accounting (54) (424)
Finance income 536 179
Finance costs (967) (335)
Amortisation of discount on provisions (977) (1,519)
(1,713) (1,846)
Profit before taxation 13,785 18,662
Taxation (3,832) (5,614)
Profit after tax for the year 9,953 13,048
- attributable to owners of Rio Tinto (net earnings) 10,058 12,392
- attributable to non-controlling interests (105) 656
Basic earnings per share 620.3c 765.0c
Diluted earnings per share 616.5c 760.4c
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
Group statement of comprehensive income
2023 2022
US$m US$m
restated((a))
Profit after tax for the year 9,953 13,048
Other comprehensive income/(loss)
Items that will not be reclassified to the income statement:
Re-measurement (losses)/gains on pension and post-retirement healthcare plans (461) 578
Changes in the fair value of equity investments held at fair value through (24) -
other comprehensive income (FVOCI)
Tax relating to these components of other comprehensive income 152 (123)
Share of other comprehensive (losses)/income of equity accounted units, net of (3) 5
tax
(336) 460
Items that have been/may be subsequently reclassified to the income statement:
Currency translation adjustment((b)) 644 (2,399)
Currency translation on subsidiary disposed of, transferred to the income - 105
statement
Fair value movements:
- Cash flow hedge gains/(losses) 30 (167)
- Cash flow hedge (gains)/losses transferred to the income statement (39) 106
Net change in costs of hedging reserve 5 4
Tax relating to these components of other comprehensive loss 1 21
Share of other comprehensive income/(losses) of equity accounted units, net of 14 (27)
tax
655 (2,357)
Total other comprehensive income/(loss) for the year, net of tax 319 (1,897)
Total comprehensive income for the year 10,272 11,151
- attributable to owners of Rio Tinto 10,335 10,649
- attributable to non-controlling interests (63) 502
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(b) Excludes a currency translation gain of US$47 million (2022: charge of
US$240 million) arising on Rio Tinto Limited's share capital for the period
ended 31 December 2023, which is recognised in the Group statement of changes
in equity on page 33.
Group cash flow statement
2023 2022
US$m US$m
Cash flows from consolidated operations((a)) 20,251 23,158
Dividends from equity accounted units 610 879
Cash flows from operations 20,861 24,037
Net interest paid (612) (573)
Dividends paid to holders of non-controlling interests in subsidiaries (462) (421)
Tax paid (4,627) (6,909)
Net cash generated from operating activities 15,160 16,134
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets (7,086) (6,750)
Sales of property, plant and equipment and intangible assets 9 -
Acquisitions of subsidiaries, joint ventures and associates (834) (850)
Disposals of subsidiaries, joint ventures, joint operations and associates - 80
Purchases of financial assets (39) (55)
Sales of financial assets((b)(c)) 1,220 892
Net funding of equity accounted units (144) (75)
Other investing cash flows((d)) (88) 51
Net cash used in investing activities (6,962) (6,707)
Cash flows before financing activities 8,198 9,427
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (6,470) (11,727)
Proceeds from additional borrowings((e)) 1,833 321
Repayment of borrowings and associated derivatives((e)) (310) (790)
Lease principal payments (426) (374)
Proceeds from issue of equity to non-controlling interests 127 86
Purchase of non-controlling interest((f)) (33) (2,961)
Other financing cash flows 2 (28)
Net cash used in financing activities (5,277) (15,473)
Effects of exchange rates on cash and cash equivalents (23) 15
Net increase/(decrease) in cash and cash equivalents 2,898 (6,031)
Opening cash and cash equivalents less overdrafts 6,774 12,805
Closing cash and cash equivalents less overdrafts 9,672 6,774
(a) Cash flows from consolidated operations 2023 2022
US$m US$m
Profit after tax for the year (comparative restated)((g)) 9,953 13,048
Adjustments for:
- Taxation (comparative restated)((g)) 3,832 5,614
- Finance items 1,713 1,846
- Share of profit after tax of equity accounted units (675) (777)
- Loss on disposal of interest in subsidiary - 105
- Impairment charges of investments in equity accounted units after tax - 202
- Net impairment charges/(reversals) 936 (150)
- Depreciation and amortisation 5,334 5,010
- Provisions (including exchange differences on provisions) 1,470 1,006
Utilisation of other provisions (104) (176)
Utilisation of provisions for close-down and restoration (777) (609)
Utilisation of provisions for post-retirement benefits and other employment (277) (254)
costs
Change in inventories (422) (1,185)
Change in receivables and other assets (418) 20
Change in trade and other payables (86) 700
Other items((h)) (228) (1,242)
20,251 23,158
Group cash flow statement (continued)
(b) In 2023, we received net proceeds of US$1,157 million (2022: US$352
million) from our sales and purchases of investments within a separately
managed portfolio of fixed income instruments. Purchases and sales of these
securities are reported on a net cash flow basis within "Sales of financial
assets" or "Purchases of financial assets" depending on the overall net
position at each reporting date.
(c) In 2022, Sale of financial assets includes US$525 million of cash
received from the sale of the gross production royalty at the Cortez Complex
in Nevada, USA.
(d) In 2022, Other investing cash flows includes inflows relating to payments
from a trust fund controlled by the Government of Australia to Energy
Resources Australia (ERA) for closure activity that has been completed. At
31 December 2023 the total amount held in the trust fund was US$349 million
(31 December 2022: US$329 million).
(e) On 7 March 2023, we issued US$650 million 10-year fixed rate, and
US$1.1 billion of 30-year fixed rate, SEC-registered bonds. The 10-year
notes, which mature on 9 March 2033, have a coupon of 5% and the 30-year
notes, which mature on 9 March 2053 have a coupon of 5.125%. The funds were
received net of issuance fees and discount. There were no debt securities
issued during the year ended 31 December 2022.
(f) On 16 December 2022, we acquired the remaining 49% share of
Turquoise Hill Resources for expected consideration of US$3.2 billion
inclusive of transaction fees. At 31 December 2022, US$2,961 had been paid,
including US$33 million of transaction costs. In 2023, further transaction
costs of US$33 million were paid, the balance to dissenting shareholders
remains unpaid.
(g) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(h) Other items includes the recognition of realised losses of US$57 million
on currency forwards not designated as hedges (2022: realised losses US$459
million). In 2022, other items also included the deduction of the
US$432 million relating to the gain recognised on sale of the Cortez royalty
shown in "Sale of financial assets".
Group balance sheet
2023 2022
US$m US$m
Restated((a))
Non-current assets
Goodwill 797 826
Intangible assets 4,389 3,645
Property, plant and equipment 66,468 64,734
Investments in equity accounted units 4,407 3,298
Inventories 214 203
Deferred tax assets 3,624 2,796
Receivables and other assets 1,659 1,893
Other financial assets 481 406
82,039 77,801
Current assets
Inventories 6,659 6,213
Receivables and other assets 3,945 3,478
Tax recoverable 115 347
Other financial assets 1,118 2,160
Cash and cash equivalents 9,673 6,775
21,510 18,973
Total assets 103,549 96,774
Current liabilities
Borrowings (824) (923)
Leases (345) (292)
Other financial liabilities (273) (69)
Trade and other payables (8,238) (8,047)
Tax payable (542) (223)
Close-down and restoration provisions (1,523) (1,142)
Provisions for post-retirement benefits and other employment costs (361) (353)
Other provisions (637) (554)
(12,743) (11,603)
Non-current liabilities
Borrowings (12,177) (10,148)
Leases (1,006) (908)
Other financial liabilities (513) (904)
Trade and other payables (596) (604)
Tax payable (31) (36)
Deferred tax liabilities (2,584) (3,164)
Close-down and restoration provisions (15,627) (14,617)
Provisions for post-retirement benefits and other employment costs (1,197) (1,305)
Other provisions (734) (744)
(34,465) (32,430)
Total liabilities (47,208) (44,033)
Net assets 56,341 52,741
Capital and reserves
Share capital((b))
- Rio Tinto plc 207 207
- Rio Tinto Limited 3,377 3,330
Share premium account 4,324 4,322
Other reserves 8,328 7,755
Retained earnings 38,350 35,020
Equity attributable to owners of Rio Tinto 54,586 50,634
Attributable to non-controlling interests 1,755 2,107
Total equity 56,341 52,741
Group balance sheet (continued)
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(b) At 31 December 2023, Rio Tinto plc had 1,251.3 million ordinary
shares in issue and held by the public, and Rio Tinto Limited had 371.2
million shares in issue and held by the public. There were no cross holdings
of shares between Rio Tinto Limited and Rio Tinto plc in either periods
presented. As required to be disclosed under the ASX Listing Rules, the net
tangible assets per share amounted to US$30.45 (31 December 2022: US$28.48).
Group statement of changes in equity
Year ended 31 December 2023 Attributable to owners of Rio Tinto
Share capital Share premium Other reserves Retained earnings Total Non-controlling Total
US$m account US$m US$m US$m interests equity
US$m US$m US$m
Opening balance as previously reported 3,537 4,322 7,805 34,511 50,175 2,099 52,274
Adjustment for transition to new accounting pronouncements((a)) - - (50) 509 459 8 467
Restated opening balance 3,537 4,322 7,755 35,020 50,634 2,107 52,741
Total comprehensive income for the year((b)) - - 585 9,750 10,335 (63) 10,272
Currency translation arising on Rio Tinto Limited's share capital 47 - - - 47 - 47
Dividends((e)) - - - (6,466) (6,466) (462) (6,928)
Newly consolidated operation - - - - - 33 33
Own shares purchased from Rio Tinto shareholders to satisfy share awards to - - (78) (17) (95) - (95)
employees((c))
Change in equity interest held by Rio Tinto - - - (13) (13) 13 -
Treasury shares reissued and other movements - 2 - - 2 - 2
Equity issued to holders of non-controlling interests - - - - - 127 127
Employee share awards charged to the income statement - - 66 76 142 - 142
Closing balance 3,584 4,324 8,328 38,350 54,586 1,755 56,341
Year ended 31 December 2022 Attributable to owners of Rio Tinto
Share capital Share premium Other reserves Retained earnings Total Non-controlling Total
US$m account US$m US$m US$m interests equity
US$m US$m US$m
Opening balance as previously reported((d)) 3,777 4,320 9,998 33,320 51,415 5,158 56,573
Adjustment for transition to new accounting pronouncements((a)) - - (22) 537 515 8 523
Restated opening balance 3,777 4,320 9,976 33,857 51,930 5,166 57,096
Total comprehensive income for the year((b)) - - (2,193) 12,842 10,649 502 11,151
Currency translation arising on Rio Tinto Limited's share capital (240) - - - (240) - (240)
Dividends((e)) - - - (11,716) (11,716) (421) (12,137)
Own shares purchased from Rio Tinto shareholders to satisfy share awards to - - (84) (16) (100) - (100)
employees((c))
Change in equity interest held by Rio Tinto - - - 701 701 (3,907) (3,206)
Treasury shares reissued and other movements - 2 - - 2 - 2
Equity issued to holders of non-controlling interests - - - (711) (711) 797 86
Employee share awards charged to the income statement - - 56 63 119 - 119
Transfers and other movements - - - - - (30) (30)
Closing balance (restated) 3,537 4,322 7,755 35,020 50,634 2,107 52,741
Group statement of changes in equity (continued)
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(b) Refer to the Group statement of comprehensive income for further
details. Adjustments to other reserves include currency translation
attributable to owners of Rio Tinto, other than that arising on Rio Tinto
Limited's share capital.
(c) Net of contributions received from employees for share awards.
(d) In 2022, the opening balance includes a US$17 million adjustment for
the prospective adoption of Amendments to IAS 37 "Provisions, Contingent
Liabilities and Contingent Assets", as reported in the prior year financial
statements.
(e) Dividends per share announced or paid during the period are summarised
below:
Year ended 31 December 2022
2023 US$
US$
Dividends per share: Ordinary - paid during the year 402.0c 684.0c
Dividends per share: Special - paid during the year - 62.0c
Ordinary dividends per share: announced with the results for the year 258.0c 225.0c
Status of financial information
The full year financial information contained in this announcement, which does
not constitute statutory accounts as defined in Section 434 of the Companies
Act 2006, has been derived from the statutory accounts for the year ended
31 December 2023. These statutory accounts have been audited, were approved
by the Board on 21 February 2024, and will be filed with the Registrar of
Companies in the United Kingdom and the Australian Securities and Investments
Commission in due course. Statutory accounts for the year ended 31 December
2022 have been filed with the Registrar of Companies.
Unless stated otherwise, financial information for the years ended
31 December 2023 and 31 December 2022 has been extracted from the full
financial statements for that year prepared under the historical cost
convention, as modified by the revaluation of certain derivative contracts,
the impact of fair value hedge accounting on the hedged items and the
accounting for post-retirement assets and obligations.
The Auditors' reports on the full financial statements for the years ended 31
December 2023 and 31 December 2022 were both unqualified and, in relation to
Rio Tinto plc, did not contain a statement under section 498 (2) (regarding
adequacy of accounting records and returns), or under section 498 (3)
(regarding provision of necessary information and explanations) of the United
Kingdom Companies Act 2006, and in relation to Rio Tinto Limited, contained a
statement that the financial report is in accordance with the Corporations Act
2001 as amended by the ASIC Order dated 16 July 2021.
Rio Tinto financial information by business unit
Segmental revenue((c)) for the year ended 31 December Underlying EBITDA((c)) for the year ended 31 December Depreciation and amortisation for the year ended 31 December Underlying earnings((c)) for the year ended 31 December
Rio Tinto
interest 2023 2022 2023 2022 2023 2022 2023 2022
% US$m US$m US$m US$m US$m US$m US$m US$m
Adjusted((a)) Adjusted((a)) Adjusted((a)) Restated((a)(b))
Iron Ore
Pilbara (d) 30,867 29,313 19,828 18,474 2,128 2,011 11,945 11,106
Dampier Salt 68.4 422 352 120 56 21 19 49 19
Evaluation projects/other (e) 2,701 2,711 57 33 - - (89) 53
Intra-segment (e) (1,741) (1,470) (31) 49 - - (23) 35
Total Iron Ore Segment 32,249 30,906 19,974 18,612 2,149 2,030 11,882 11,213
Aluminium
Bauxite 2,390 2,396 662 618 373 361 141 101
Alumina 2,882 3,215 136 289 170 200 (56) 18
North American Aluminium ((m)) 6,581 7,561 1,480 2,426 710 704 566 1,266
Pacific Aluminium 2,613 3,102 169 497 165 135 18 261
Intra-segment and other (2,953) (3,138) (11) 12 - - (15) (8)
Integrated operations 11,513 13,136 2,436 3,842 1,418 1,400 654 1,638
Other product group items 772 973 9 25 - - 5 15
Product group operations 12,285 14,109 2,445 3,867 1,418 1,400 659 1,653
Evaluation projects/other - - (163) (195) - - (121) (149)
Total Aluminium Segment 12,285 14,109 2,282 3,672 1,418 1,400 538 1,504
Copper
Kennecott 100.0 1,430 1,923 178 857 500 624 (328) 12
Escondida 30.0 2,756 2,628 1,619 1,641 355 330 684 798
Oyu Tolgoi (f) 1,625 1,424 639 449 476 194 161 130
Product group operations 5,811 5,975 2,436 2,947 1,331 1,148 517 940
Evaluation projects/other((a)) 867 724 (532) (382) 5 5 (384) (253)
Total Copper Segment 6,678 6,699 1,904 2,565 1,336 1,153 133 687
Minerals
Iron Ore Company of Canada 58.7 2,500 2,818 942 1,381 214 207 293 475
Rio Tinto Iron & Titanium (g) 2,172 2,366 582 799 222 224 221 374
Rio Tinto Borates 100.0 802 742 212 155 58 54 125 80
Diamonds (h) 444 816 44 330 35 45 26 151
Product group operations 5,918 6,742 1,780 2,665 529 530 665 1,080
Evaluation projects/other 16 12 (366) (246) 1 1 (353) (226)
Total Minerals Segment 5,934 6,754 1,414 2,419 530 531 312 854
Reportable segments total 57,146 58,468 25,574 27,268 5,433 5,114 12,865 14,258
Simandou iron ore project (i) - - (539) (189) - - (160) (145)
Other operations (j) 142 192 (39) (16) 290 272 (250) (347)
Inter-segment transactions (231) (256) 8 24 4 26
Central pension costs, share-based payments, insurance and derivatives 168 377 48 374
Restructuring, project and one-off costs (190) (173) (112) (85)
Central costs (990) (766) 95 94 (898) (651)
Central exploration and evaluation (100) (253) (60) (209)
Net interest 318 138
Underlying EBITDA/earnings 23,892 26,272 11,755 13,359
Items excluded from underlying EBITDA/earnings (1,257) 269 (1,697) (967)
Reconciliation to Group income statement
Share of equity accounted unit sales and intra-subsidiary/equity accounted (3,016) (2,850)
unit sales
Impairment charges (936) (52)
Depreciation and amortisation in subsidiaries excluding capitalised (4,976) (4,871)
depreciation
Depreciation and amortisation in equity accounted units (484) (470) (484) (470)
Taxation and finance items in equity accounted units (741) (640)
Finance items (1,713) (1,846)
Consolidated sales revenue/profit before taxation/depreciation and 54,041 55,554 13,785 18,662 5,334 5,010 10,058 12,392
amortisation/net earnings
Rio Tinto financial information by business unit (continued)
Capital expenditure((c)(k)) Operating assets((l))
for the year ended 31 December as at 31 December
Rio Tinto 2023 2022
interest 2023 2022 US$m US$m
% US$m US$m
Adjusted((a)) Restated((a)(b))
Iron Ore
Pilbara (d) 2,563 2,906 17,959 17,785
Dampier Salt 68.4 25 34 146 153
Evaluation projects/other (e) - - 780 835
Intra-segment (e) - - (243) (220)
Total Iron Ore Segment 2,588 2,940 18,642 18,553
Aluminium
Bauxite 159 161 2,649 2,458
Alumina 325 356 1,315 2,400
North American Aluminium ((m)) 748 752 10,582 9,343
Pacific Aluminium 99 108 340 159
Intra-segment and other - - 997 629
Total Aluminium Segment 1,331 1,377 15,883 14,989
Copper
Kennecott 100.0 735 563 2,606 2,027
Escondida 30.0 - - 2,844 2,792
Oyu Tolgoi (f) 1,230 1,056 15,334 13,479
Product group operations 1,965 1,619 20,784 18,298
Evaluation projects/other ((a)) 11 3 262 165
Total Copper Segment 1,976 1,622 21,046 18,463
Minerals
Iron Ore Company of Canada 58.7 364 366 1,347 1,147
Rio Tinto Iron & Titanium (g) 240 217 3,386 3,351
Rio Tinto Borates 100.0 49 34 502 496
Diamonds (h) 66 48 29 (84)
Product group operations 719 665 5,264 4,910
Evaluation projects/other 27 14 873 874
Total Minerals Segment 746 679 6,137 5,784
Reportable segments total 6,641 6,618 61,708 57,789
Simandou iron ore project (i) 266 - 738 (22)
Other operations (j) 57 53 (2,634) (1,850)
Inter-segment transactions 20 12
Other items 113 79 (1,015) (1,107)
Total 7,077 6,750 58,817 54,822
Add back: Proceeds from disposal of property, plant and equipment 9 -
Total purchases of property, plant & equipment and intangibles as per cash 7,086 6,750
flow statement
Add: Net (debt)/cash (4,231) (4,188)
Equity attributable to owners of Rio Tinto 54,586 50,634
Notes to financial information by business unit
Business units are classified according to the Group's management structure.
Our management structure is based on product groups together with global
support functions whose leaders make up the Executive Committee. The Executive
Committee members each report directly to our Chief Executive who is the chief
operating decision maker and is responsible for allocating resources and
assessing performance of the operating segments. Finance costs and net debt
are managed on a Group-wide basis and are therefore excluded from the
segmental results.
The disclosures in this note include certain non-IFRS financial measures
(non-IFRS measures). For more information on the non-IFRS measures used by the
Group, including definitions and calculations, refer to section entitled
alternative performance measures (pages 40 to 49).
(a) The financial information by business unit has been adjusted to reflect
a change in management responsibility for the Simandou iron ore project from
Copper to the Chief Technical Officer. As a result, we have moved Simandou
outside of reportable segments and accordingly adjusted prior period
comparatives.
(b) Underlying earnings for the year ended 31 December 2022 and 2021 and
operating assets as at 31 December 2022 and 2021 have been restated for the
impact of narrow-scope amendments to IAS 12. Details of these amendments are
disclosed in note 2 to the Financial Statements of our 2023 Annual Report.
(c) Segmental revenue and Capital expenditure are defined within Alternative
performance measures section on page 40 and page 46, respectively. Underlying
EBITDA is defined and calculated within the Alternative performance measures
section on pages 40 to 41. Underlying Earnings is defined and calculated
within the Alternative performance measures section on pages 43 and 44.
(d) Pilbara represents the Group's 100% holding in Hamersley, 50% holding in
Hope Downs Joint Venture, 54% holding in Western Range Joint Venture and 65%
holding in Robe River Iron Associates. The Group's net beneficial interest in
Robe River Iron Associates is 53%, as 30% is held through a 60% owned
subsidiary and 35% is held through a 100% owned subsidiary.
(e) Segmental revenue, Underlying EBITDA, Underlying earnings and Operating
assets within Evaluation projects/other include activities relating to the
shipment and blending of Pilbara and Iron Ore Company of Canada (IOC) iron ore
inventories held portside in China and sold to domestic customers.
Transactions between Pilbara and our portside trading business are eliminated
through the Iron Ore "intra-segment" line and transactions between IOC and the
portside trading business are eliminated through "inter-segment transactions".
(f) Until 16 December 2022, our interest in Oyu Tolgoi was held indirectly
through our 50.8% investment in Turquoise Hill Resources Ltd (TRQ), where
TRQ's principal asset was its 66% investment in Oyu Tolgoi LLC, which owned
the Oyu Tolgoi copper-gold mine. Following the purchase of TRQ we now directly
hold a 66% investment in Oyu Tolgoi LLC.
(g) Includes our interests in Rio Tinto Iron and Titanium Quebec Operations
(100%), QIT Madagascar Minerals (QMM, 80%) and Richards Bay Minerals
(attributable interest of 74%).
(h) Includes our interests in Argyle (100%) residual operations which relate
to the sale of remaining inventory and Diavik.
(i) Rio Tinto Simfer UK Limited (which is wholly owned by the Group) holds
a 53% interest in Simfer Jersey Limited (Simfer Jersey), a company
incorporated in Jersey. Simfer Jersey, in turn, has an 85% interest in Simfer
S.A., the company that operates the Simandou mining project in Guinea. As at
31 December 2023, Simfer Jersey also owns 100% of Simfer InfraCo Guinée S.A.,
a company incorporated in Guinea, which will deliver Simfer's scope of the
co-developed rail and port infrastructure. The Group therefore has a 45.05%
indirect interest in Simfer S.A. and a 53% indirect interest in Simfer InfraCo
Guinée S.A. These entities are consolidated as subsidiaries and together
referred to as the Simandou iron ore project.
(j) Other operations includes our 86% interest in Energy Resources of
Australia, sites being rehabilitated under the management of Rio Tinto
Closure, Rio Tinto Marine, and the remaining legacy liabilities of Rio Tinto
Coal Australia. These include provisions for onerous contracts, in relation to
rail infrastructure capacity, partly offset by financial assets and
receivables relating to contingent royalties and disposal proceeds. From 16
June 2022, Commercial Treasury and related central costs are reported as part
of 'Other operations' instead of 'Other items' in previous periods
(k) Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets as derived from the Group cash flow
statement. The details provided include 100% of subsidiaries' capital
expenditure and Rio Tinto's share of the capital expenditure of joint
operations but exclude equity accounted units.
(l) Operating assets of the Group represents equity attributable to Rio
Tinto adjusted for net (debt)/cash. Operating assets of subsidiaries, joint
operations and the Group's share relating to equity accounted units are made
up of net assets adjusted for net (debt)/cash and post-retirement assets and
liabilities, net of tax. Operating assets are stated after the deduction of
non-controlling interests; these are calculated by reference to the net assets
of the relevant companies (i.e. inclusive of such companies' debt and amounts
due to or from Rio Tinto Group companies).
(m) North American Aluminium comprises our reporting unit formerly
known as Primary Metal and from 1 December 2023 our 50% interest in Matalco
which focuses on recycling of aluminium. The operations are principally
located in Canada and USA, however this reporting unit also includes our
interests in ISAL (Iceland) and Sohar (Oman).
Alternative performance measures
The Group presents certain non-IFRS financial measures (non-IFRS measures)
which are reconciled to directly comparable IFRS financial measures below.
These non-IFRS measures hereinafter referred to as alternative performance
measures (APMs) are used by management to assess the performance of the
business and provide additional information, which investors may find useful.
APMs are presented in order to give further insight into the underlying
business performance of the Group's operations.
APMs are not consistently defined and calculated by all companies, including
those in the Group's industry. Accordingly, these measures used by the Group
may not be comparable with similarly titled measures and disclosures made by
other companies. Consequently, these APMs should not be regarded as a
substitute for the IFRS measures and should be considered supplementary to
those measures.
The following tables present the Group's key financial measures not defined
according to IFRS and a reconciliation between those APMs and their nearest
respective IFRS measures.
APMs derived from the income statement
The following income statement measures are used by the Group to provide
greater understanding of the underlying business performance of its operations
and to enhance comparability of reporting periods. They indicate the
underlying commercial and operating performance of our assets including
revenue generation, productivity and cost management.
Segmental revenue
Segmental revenue includes consolidated sales revenue plus the equivalent
sales revenue of equity accounted units in proportion to our equity interest
(after adjusting for sales to/from subsidiaries).
Underlying EBITDA
Underlying EBITDA represents profit before taxation, net finance items,
depreciation and amortisation adjusted to exclude the EBITDA impact of items
which do not reflect the underlying performance of our reportable segments.
Reconciliation of profit after tax to underlying EBITDA
Items excluded from profit after tax are those gains and losses that,
individually or in aggregate with similar items, are of a nature and size to
require exclusion in order to provide additional insight into the underlying
business performance. The following items are excluded from profit after tax
in arriving at underlying EBITDA in each year irrespective of materiality:
• Depreciation and amortisation in subsidiaries and equity accounted
units;
• Taxation and finance items in equity accounted units;
• Taxation and finance items relating to subsidiaries;
• Unrealised gains/(losses) on embedded derivatives not qualifying
for hedge accounting;
• Net gains/(losses) on disposal of interests in subsidiaries;
• Impairment charges net of reversals;
• The underlying EBITDA of discontinued operations;
• Adjustments to closure provisions where the adjustment is
associated with an impairment charge and for legacy sites where the
disturbance or environmental contamination relates to the pre-acquisition
period.
In addition, there is a final judgemental 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. In 2023, this
includes all re-estimates of the closure provisions for fully impaired sites
identified in the second-half of the year due to the materiality of the
adjustment in aggregate. In 2022 this category included the gain recognised by
Kitimat relating to LNG Canada's project and the gain recognised upon sale of
the Cortez royalty.
2023 2022
US$m US$m
Restated((a))
Profit after tax for the year 9,953 13,048
Taxation 3,832 5,614
Profit before taxation 13,785 18,662
Depreciation and amortisation in subsidiaries excluding capitalised 4,976 4,871
depreciation((b))
Depreciation and amortisation in equity accounted units 484 470
Finance items in subsidiaries 1,713 1,846
Taxation and finance items in equity accounted units 741 640
(Gains)/losses on embedded commodity derivatives not qualifying for hedge (15) (6)
accounting (including foreign exchange)
Impairment charges net of reversals((c)) 936 52
Gain recognised by Kitimat relating to LNG Canada's project((d)) - (116)
Change in closure estimates (non-operating and fully impaired sites)((e)) 1,272 180
Loss on disposal of interests in subsidiary((c)) - 105
Gain on sale of the Cortez royalty((f)) - (432)
Underlying EBITDA 23,892 26,272
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(b) Depreciation and amortisation in subsidiaries for the year ended
31 December 2023 is net of capitalised depreciation of US$358 million (2022:
US$139 million; 2021: US$172 million).
(c) Detailed information over impairment charges is disclosed in note 4 to
the Financial Statements of our 2023 Annual Report.
(d) During 2022, LNG Canada elected to terminate their option to purchase
additional land and facilities for expansion of their operations at Kitimat,
Canada. The resulting gain was excluded from underlying EBITDA consistent with
prior years as it was part of a series of transactions that together were
material.
(e) In 2023 the charge includes US$0.9 billion related to the closure
provision update announced by Energy Resources of Australia on 12 December
2023 together with the update included in their half year results for the
period ended 30 June 2023, published in August. This update was considered
material and therefore it was aggregated with other closure study updates
which were similar in nature and have been excluded from underlying EBITDA.
The other closure study updates were at legacy sites managed by our central
closure team as well as an update at Yarwun alumina refinery which was
expensed due to the impairment earlier in the year. In 2022, the charge
related to re-estimates of underlying closure cash flows for legacy sites
where the environmental damage preceded ownership by Rio Tinto.
(f) On 2 August 2022, we completed the sale of a gross production royalty
which was retained following the disposal of the Cortez Complex in 2008. The
gain recognised on sale of the royalty was excluded from underlying EBITDA on
the grounds of individual magnitude.
Underlying EBITDA margin
Underlying EBITDA margin is defined as Group underlying EBITDA divided by the
aggregate of consolidated sales revenue and our share of equity account unit
sales after eliminations.
2022
2023 US$m
US$m
Underlying EBITDA 23,892 26,272
Consolidated sales revenue 54,041 55,554
Share of equity accounted unit sales and inter-subsidiary/equity accounted 3,016 2,850
unit sales eliminations
57,057 58,404
Underlying EBITDA margin 42 % 45 %
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is defined as Pilbara
underlying EBITDA divided by Pilbara segmental revenue, excluding freight
revenue.
2022
2023 US$m
US$m
Pilbara
Underlying EBITDA 19,828 18,474
Pilbara segmental revenue 30,867 29,313
Less: Freight revenue (2,098) (2,206)
Pilbara segmental revenue, excluding freight revenue 28,769 27,107
Pilbara underlying FOB EBITDA margin 69 % 68 %
Underlying EBITDA margin from Aluminium integrated operations
Underlying EBITDA margin from integrated operations is defined as underlying
EBITDA divided by segmental revenue.
2022
2023 US$m
US$m
Aluminium
Underlying EBITDA - integrated operations 2,436 3,842
Segmental revenue - integrated operations 11,513 13,136
Underlying EBITDA margin from integrated operations 21 % 29 %
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined as underlying
EBITDA divided by segmental revenue.
2022
2023 US$m
US$m
Copper
Underlying EBITDA - product group operations 2,436 2,947
Segmental revenue - product group operations 5,811 5,975
Underlying EBITDA margin - product group operations 42 % 49 %
2022
2023 US$m
US$m
Minerals
Underlying EBITDA - product group operations 1,780 2,665
Segmental revenue - product group operations 5,918 6,742
Underlying EBITDA margin - product group operations 30 % 40 %
Underlying earnings
Underlying earnings represents net earnings attributable to the owners of Rio
Tinto, adjusted to exclude items that do not reflect the underlying
performance of the Group's operations.
Exclusions from underlying earnings are those gains and losses that,
individually or in aggregate with similar items, are of a nature and size to
require exclusion in order to provide additional insight into underlying
business performance.
The following items are excluded from net earnings in arriving at underlying
earnings in each year irrespective of materiality:
• net gains/(losses) on disposal of interests in subsidiaries;
• impairment charges and reversals;
• profit/(loss) after tax from discontinued operations;
• exchange and derivative gains and losses. This exclusion includes
exchange gains/(losses) on external net debt and intragroup balances,
unrealised gains/(losses) on currency and interest rate derivatives not
qualifying for hedge accounting, unrealised gains/(losses) on certain
commodity derivatives not qualifying for hedge accounting, and unrealised
gains/(losses) on embedded derivatives not qualifying for hedge accounting;
and
• adjustments to closure provisions where the adjustment is
associated with an impairment charge, or for legacy sites where the
disturbance or environmental contamination relates to the pre-acquisition
period.
In addition, there is a final judgemental 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.
Exclusions from underlying earnings relating to equity accounted units are
stated after tax and included in the column "Pre-tax".
Pre-tax Taxation Non-controlling Net amount Net amount
2023 2023 interests 2023 2022
US$m US$m 2023 US$m US$m
US$m Restated((a))
Net earnings 13,785 (3,832) 105 10,058 12,392
Items excluded from underlying earnings
Impairment charges net of reversals((j)) 936 (499) 215 652 52
Foreign exchange and derivative (losses)/gains:
- Exchange losses/(gains) on external net debt, intragroup balances and 253 (12) 2 243 (216)
derivatives((b))
- Losses on currency and interest rate derivatives not qualifying for hedge 58 30 (1) 87 373
accounting((c))
- (Gains)/losses on embedded commodity derivatives not qualifying for hedge (21) 6 (8) (23) (20)
accounting((d))
Change in closure estimates (non-operating and fully impaired sites)((e)) 1,272 (51) (119) 1,102 178
Deferred tax arising on internal sale of assets in Canadian operations((f)) - (364) - (364) -
Gains recognised by Kitimat relating to LNG Canada's project((g)) - - - - (106)
Loss on disposal of interest in subsidiary - - - - 105
Gain on sale of the Cortez royalty((h)) - - - - (331)
Write-off of Federal deferred tax assets in the United States((i)) - - - - 932
Total excluded from underlying earnings 2,498 (890) 89 1,697 967
Underlying earnings 16,283 (4,722) 194 11,755 13,359
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
(b) Exchange losses on external net debt and intragroup balances includes
post-tax foreign exchange losses on net debt of US$316 million offset by
post-tax gains of US$73 million on intragroup balances, primarily as a result
of the Australian dollar strengthening against the US dollar. In 2022,
exchange gains on external net debt and intragroup balances included post-tax
foreign exchange losses on net debt of US$262 million offset by post-tax gains
of US$478 million on intragroup balances, primarily as a result of the
Australian dollar weakening against the US dollar during the year.
(c) Valuation changes on currency and interest rate derivatives, which are
ineligible for hedge accounting, other than those embedded in commercial
contracts, and the currency revaluation of embedded US dollar derivatives
contained in contracts held by entities whose functional currency is not the
US dollar.
(d) Valuation changes on derivatives, embedded in commercial contracts
that are ineligible for hedge accounting but for which there will be an
offsetting change in future Group earnings. Mark-to-market movements on
commodity derivatives entered into with the commercial objective of achieving
spot pricing for the underlying transaction at the date of settlement are
included in underlying earnings.
(e) In 2023, the charge includes US$0.9 billion related to the closure
provision update announced by Energy Resources of Australia on 12 December
2023 together with the update included in their half year results for the
period ended 30 June 2023, published in August. This update was considered
material and therefore it was aggregated with other closure study updates
which were similar in nature and have been excluded from underlying earnings.
The other closure study updates were at legacy sites managed by our central
closure team as well as an update at Yarwun alumina refinery which was
expensed due to the impairment earlier in the year. In 2022, the charge
related to re-estimates of underlying closure cash flows for legacy sites
where the environmental damage preceded ownership by Rio Tinto.
(f) During the year the Canadian aluminium business completed an
internal sale of assets which resulted in the utilisation of previously
unrecognised capital losses and an uplift in the tax depreciable value of
assets on which a deferred tax asset of US$364 million is recognised.
(g) During 2022, LNG Canada elected to terminate their option to purchase
additional land and facilities for expansion of their operations at Kitimat,
Canada. The resulting gain was excluded from underlying earnings consistent
with prior years as it was part of a series of transactions that together were
material.
(h) On 2 August 2022, we completed the sale of a gross production royalty
which was retained following the disposal of the Cortez Complex in 2008. The
gain recognised on sale of the royalty was excluded from underlying earnings
on the grounds of individual magnitude.
(i) In 2022, we wrote down our deferred tax assets in the United States
following the introduction of the Corporate Alternative Minimum Tax regime.
The amount has been restated from US$820 million as previously reported to
US$932 million to reflect the adoption of narrow-scope amendments to IAS 12 as
referred to in footnote (a).
(j) Detailed information about impairment charges is disclosed in note 4
to the Financial Statements of our 2023 Annual Report.
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying earnings
divided by the weighted average number of shares outstanding during the year.
Year ended 31 December 2022
2023 Restated((a))
Net earnings (US$ million) 10,058 12,392
Weighted average number of shares (millions) 1,621.4 1,619.8
Basic earnings per ordinary share (cents) 620.3 765.0
Items excluded from underlying earnings per share (cents)((b)) 104.7 59.7
Basic underlying earnings per ordinary share (cents) 725.0 824.7
(a) Comparative information has been restated to reflect the adoption
of narrow scope amendments to IAS12 'Income Taxes'.
(b) Calculation of items excluded from underlying earnings per share:
2022
2023 Restated((a))
Income excluded from underlying earnings (US$m) (refer to page 44) 1,697.0 967.0
Weighted average number of shares (millions) 1,621.4 1,619.8
Items excluded from underlying earnings per share (cents) 104.7 59.7
(a) Comparative information has been restated to reflect the adoption
of narrow scope amendments to IAS12 'Income Taxes'.
We have provided basic underlying earnings per share as this allows the
comparability of financial performance adjusted to exclude items that do not
reflect the underlying performance of the Group's operations.
Interest cover
Interest cover is a financial metric used to monitor our ability to service
debt. It represents the number of times finance income and finance costs
(including amounts capitalised) are covered by profit before taxation, before
finance income, finance costs, share of profit after tax of equity accounted
units and items excluded from underlying earnings, plus dividends from equity
accounted units.
2023 2022
US$m US$m
Profit before taxation 13,785 18,662
Add back
Finance income (536) (179)
Finance costs 967 335
Share of profit after tax of equity accounted units (675) (777)
Items excluded from underlying earnings 2,498 (49)
Add: Dividends from equity accounted units 610 879
Calculated earnings 16,649 18,871
Finance income 536 179
Finance costs (967) (335)
Add: Amounts capitalised (279) (416)
Total net finance costs before capitalisation (710) (572)
Interest cover 23 33
Payout ratio
The payout ratio is used by us to guide the dividend policy we implemented in
2016, under which we have sought to return 40-60% of underlying earnings, on
average through the cycle, to shareholders as dividends. It is calculated as
total equity dividends per share to owners of Rio Tinto declared in respect of
the financial year divided by underlying earnings per share (as defined
above). Dividends declared usually include an interim dividend paid in the
year, and a final dividend paid after the end of the year. Any special
dividends declared in respect of the financial year are also included.
2023 2022
(cents) (cents)
Restated((a))
Interim dividend declared per share 177.0 267.0
Final dividend declared per share 258.0 225.0
Total dividend declared per share for the year 435.0 492.0
Underlying earnings per share 725.0 824.7
Payout ratio 60 % 60 %
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
APMs derived from cash flow statement
Capital expenditure
Capital expenditure includes the net sustaining and development expenditure on
property, plant and equipment, and on intangible assets. This is equivalent to
"Purchases of property, plant and equipment and intangible assets" in the cash
flow statement less "Sales of property, plant and equipment and intangible
assets".
This measure is used to support management's objective of effective and
efficient capital allocation as we need to invest in existing assets in order
to maintain and improve productive capacity, and in new assets to grow the
business.
Rio Tinto share of capital investment
Rio Tinto's share of capital investment represents our economic investment in
capital projects. This measure was introduced in 2022 to better represent the
Group's share of funding for capital projects which are jointly funded with
other shareholders and which may differ from the consolidated basis included
in the Capital expenditure APM. This better reflects our approach to capital
allocation.
The measure is based upon the Capital expenditure APM, adjusted to deduct
equity or shareholder loan financing provided to partially owned subsidiaries
by non-controlling interests in respect of major capital projects in the
period. In circumstances where the funding to be provided by non-controlling
interests is not received in the same period as the underlying capital
investment, this adjustment is applied in the period in which the underlying
capital investment is made, not when the funding is received. Where funding
which would otherwise be provided directly by shareholders is replaced with
project financing, an adjustment is also made to deduct the share of project
financing attributable to the non-controlling interest. This adjustment is not
made in cases where Rio Tinto has unilaterally guaranteed this project
financing. Lastly, funding contributed by the Group to Equity Accounted Units
for its share of investment in their major capital projects is added to the
measure. No adjustment is made to the Capital expenditure APM where capital
expenditure is funded from the operating cash flows of the subsidiary or
Equity Accounted Unit.
2023 2022 2021
US$m US$m US$m
Purchase of property, plant and equipment and intangible assets 7,086 6,750 7,384
Less: Equity or shareholder loan financing received/due from non-controlling (125) - -
interests
Rio Tinto share of capital investment 6,961 6,750 7,384
Free cash flow
Free cash flow is defined as net cash generated from operating activities
minus purchases of property, plant and equipment and intangibles and payments
of lease principal, plus proceeds from the sale of property, plant and
equipment and intangible assets.
This measures the net cash returned by the business after the expenditure of
sustaining and development capital. This cash can be used for shareholder
returns, reducing debt and other investing/financing activities.
2022
2023 US$m
US$m
Net cash generated from operating activities 15,160 16,134
Less: Purchase of property, plant and equipment and intangible assets (7,086) (6,750)
Less: Lease principal payments (426) (374)
Add: Sales of property, plant and equipment and intangible assets 9 -
Free cash flow 7,657 9,010
APMs derived from the balance sheet
Net debt
Net debt is total borrowings plus lease liabilities less cash and cash
equivalents and other liquid investments, adjusted for derivatives related to
net debt.
Net debt measures how we are managing our balance sheet and capital structure.
2023
Financial liabilities Other assets
Borrowings Lease liabilities((b)) Net debt related derivatives Cash and cash equivalents including overdrafts Other investments Net debt
US$m
excluding overdrafts US$m ((c)) ((a)) ((d))
((a)) US$m US$m US$m
US$m
At 1 January (11,070) (1,200) (690) 6,774 1,998 (4,188)
Foreign exchange adjustment (87) (21) 62 (23) - (69)
Cash movements excluding exchange movements (1,523) 426 (4) 2,921 (1,157) 663
Other non-cash movements (320) (556) 203 - 36 (637)
At 31 December (13,000) (1,351) (429) 9,672 877 (4,231)
(a) Borrowings excluding overdrafts of US$13,000 million (2022: US$11,070
million) differs from Borrowings on the balance sheet as it excludes bank
overdrafts of US$1 million (2022: US$1 million) which has been included in
cash and cash equivalents for the net debt reconciliation.
(b) Other non-cash movements in lease liabilities include the net impact
of additions, modifications and terminations during the year.
(c) Included within "Derivatives related to net debt" are interest rate
and cross currency interest rate swaps that are in hedge relationships with
the Group's debt.
(d) Other investments includes US$877 million (2022: US$1,998 million) of
highly liquid financial assets held in a separately managed portfolio of fixed
income instruments classified as held for trading.
Net gearing ratio
Net gearing ratio is defined as net debt divided by the sum of net debt and
total equity at the end of each year. It demonstrates the degree to which the
Group's operations are funded by debt versus equity.
2023 2022
US$m US$m
Restated((a))
Net debt (4,231) (4,188)
Net debt (4,231) (4,188)
Total equity (56,341) (52,741)
Net debt plus total equity (60,572) (56,929)
Net gearing ratio 7% 7%
(a) Comparative information has been restated to reflect the adoption of
narrow scope amendments to IAS12 'Income Taxes'.
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as underlying
earnings excluding net interest divided by average capital employed (operating
assets).
Underlying ROCE measures how efficiently we generate profits from investment
in our portfolio of assets.
2023 2022
US$m US$m
Restated((a))
Profit after tax attributable to owners of Rio Tinto (net earnings) 10,058 12,392
Items added back to derive underlying earnings 1,697 967
Underlying earnings 11,755 13,359
Add/(deduct):
Finance income per the income statement (536) (179)
Finance costs per the income statement 967 335
Tax on finance cost (373) (238)
Non-controlling interest share of net finance costs (429) (98)
Net interest cost in equity accounted units (Rio Tinto share) 53 42
Net interest (318) (138)
Adjusted underlying earnings 11,437 13,221
Equity attributable to owners of Rio Tinto - beginning of the year((a)) 50,634 51,930
Net debt/(cash) - beginning of the year 4,188 (1,576)
Operating assets - beginning of the year 54,822 50,354
Equity attributable to owners of Rio Tinto - end of the year((a)) 54,586 50,634
Net debt - end of the year 4,231 4,188
Operating assets - end of the year 58,817 54,822
Average operating assets 56,820 52,588
Underlying return on capital employed 20 % 25 %
(a) Comparative information has been restated to reflect the adoption
of narrow scope amendments to IAS12 'Income Taxes'.
Metal prices and exchange rates
12 month average to 31 December 2023 12 month average to 31 December 2022 Increase/ (Decrease)
Metal prices - average for the period
Copper - US cents/lb 386 398 (3) %
Aluminium - US$/tonne 2,250 2,703 (17) %
Gold - US$/troy oz 1,941 1,800 8 %
Twelve month average to 31 December At 31 December
Exchange rates against the US dollar 2023 2022 Increase/ (Decrease) 2023 2022 Increase/ (Decrease)
Pound sterling 1.24 1.24 - % 1.28 1.21 6 %
Australian dollar 0.66 0.69 (4) % 0.69 0.68 1 %
Canadian dollar 0.74 0.77 (4) % 0.76 0.74 3 %
Euro 1.08 1.05 3 % 1.11 1.07 4 %
South African rand 0.054 0.061 (11) % 0.054 0.059 (8) %
Forward-looking statements
This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts included in this report, including, without
limitation, those regarding Rio Tinto's financial position, business strategy,
plans and objectives of management for future operations (including
development plans and objectives relating to Rio Tinto's products, production
forecasts and reserve and resource positions), are forward-looking statements.
The words "intend", "aim", "project", "anticipate", "estimate", "plan",
"believes", "expects", "may", "should", "will", "target", "set to" or similar
expressions, commonly identify such forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Rio Tinto, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding Rio Tinto's present and future business
strategies and the environment in which Rio Tinto will operate in the future.
Among the important factors that could cause Rio Tinto's actual results,
performance or achievements to differ materially from those in the
forward-looking statements include, but are not limited to: an inability to
live up to Rio Tinto's values and any resultant damage to its reputation; the
impacts of geopolitics on trade and investment; the impacts of climate change
and the transition to a low-carbon future; an inability to successfully
execute and/or realise value from acquisitions and divestments; the level of
new ore resources, including the results of exploration programmes and/or
acquisitions; disruption to strategic partnerships that play a material role
in delivering growth, production, cash or market positioning; damage to Rio
Tinto's relationships with communities and governments; an inability to
attract and retain requisite skilled people; declines in commodity prices and
adverse exchange rate movements; an inability to raise sufficient funds for
capital investment; inadequate estimates of ore resources and reserves; delays
or overruns of large and complex projects; changes in tax regulation; safety
incidents or major hazard events; cyber breaches; physical impacts from
climate change; the impacts of water scarcity; natural disasters; an
inability to successfully manage the closure, reclamation and rehabilitation
of sites; the impacts of civil unrest; the impacts of the Covid-19 pandemic;
breaches of Rio Tinto's policies, standard and procedures, laws or
regulations; trade tensions between the world's major economies; increasing
societal and investor expectations, in particular with regard to
environmental, social and governance considerations; the impacts of
technological advancements; and such other risks identified in Rio Tinto's
most recent Annual Report and accounts in Australia and the United Kingdom and
the most recent Annual Report on Form 20-F filed with the United States
Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to, or
filed with, the SEC. Forward-looking statements should, therefore, be
construed in light of such risk factors and undue reliance should not be
placed on forward-looking statements. These forward-looking statements speak
only as of the date of this report. Rio Tinto expressly disclaims any
obligation or undertaking (except as required by applicable law, the UK
Listing Rules, the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority and the Listing Rules of the Australian Securities Exchange)
to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Rio Tinto's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
Nothing in this report should be interpreted to mean that future earnings per
share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed
its historical published earnings per share.
Contacts Please direct all enquiries to media.enquiries@riotinto.com
Media Relations, UK Media Relations, Australia
Matthew Klar Matt Chambers
M+ 44 7796 630 637 M +61 433 525 739
David Outhwaite Jesse Riseborough
M +44 7787 597 493 M +61 436 653 412
Alyesha Anderson
Media Relations, Americas M +61 434 868 118
Simon Letendre
M +1 514 796 4973
Malika Cherry
M +1 418 592 7293 Investor Relations, Australia
Investor Relations, UK Tom Gallop
M +61 439 353 948
Menno Sanderse
Amar Jambaa
M: +44 7825 195 178
M +61 472 865 948
David Ovington
M +44 7920 010 978
Laura Brooks
M +44 7826 942 797
Rio Tinto plc Rio Tinto Limited
6 St James's Square Level 43, 120 Collins Street
London SW1Y 4AD
United Kingdom Melbourne 3000
T +44 20 7781 2000 Australia
Registered in England
No. 719885
T +61 3 9283 3333
Registered in Australia
ABN 96 004 458 404
riotinto.com
This announcement is authorised for release to the market by Rio Tinto's Group
Company Secretary.
LEI: 213800YOEO5OQ72G2R82
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