REG - Rio Tinto - Rio Tinto 2015 half year results <Origin Href="QuoteRef">RIO.L</Origin> - Part 2
06/08/2015 07:30
- Part 2: For the preceding part double click ID:nRSF2757Va
aluminium)
and Other product group items which relate to other commercial activities.
(f) Under the terms of a contractual agreement, Rio Tinto is entitled to 40 per cent of additional material mined as a
consequence of expansions and developments of the Grasberg facilities since 1998.
(g) Rio Tinto's interest in Oyu Tolgoi LLC is held indirectly through its 50.8 per cent investment in Turquoise Hill
Resources Ltd which in turn owns 66 per cent of Oyu Tolgoi.
(h) Includes Rio Tinto's 80 per cent interest in Coal & Allied, through which Rio Tinto holds its beneficial interests in
Bengalla, Mount Thorley and Warkworth of 32 per cent, 64 per cent and 44.5 per cent respectively.
(i) On 7 October 2014, Rio Tinto disposed of its interest in Rio Tinto Coal Mozambique (RTCM), including its interests
in the Benga project, a 65:35 joint venture with Tata Steel Limited. Zululand Anthracite Colliery (ZAC), which was
retained, is reported within Coal Evaluation projects/other.
(j) Includes Rio Tinto's interests in Argyle (100 per cent) and Diavik (60 per cent) and Murowa (77.8 per cent). On 26
June 2015, Rio Tinto announced the sale of its whole interest in Murowa Diamonds to RZ Murowa Holdings Limited.
(k) Includes Rio Tinto's interests in Rio Tinto Fer et Titane ('RTFT') (100 per cent), QIT Madagascar Minerals (80 per
cent) and Richards Bay Minerals ('RBM', attributable interest of 74 per cent).
(l) As a result of the ongoing Ebola epidemic in West Africa, Rio Tinto has given notice to the Government of Guinea of
a Force Majeure event which under the terms of the Investment Framework would automatically extend the target date for
completion of the bankable feasibility study and formation of a consortium of infrastructure investors. The Government of
Guinea has not yet recognised the Force Majeure and discussions are continuing.
(m) Other Operations include Rio Tinto's 100 per cent interest in the Gove alumina refinery and Rio Tinto Marine.
(n) Capital expenditure comprises the net cash outflow on purchases less disposals of property, plant and equipment,
capitalised evaluation costs and purchases less disposals of other intangible assets. The details provided include 100 per
cent of subsidiaries' capital expenditure and Rio Tinto's share of the capital expenditure of equity accounted units.
(o) Operating assets of subsidiaries comprise net assets excluding post retirement assets and liabilities, net of tax,
and are before deducting net debt. Operating assets are stated after deduction of non-controlling interests, which 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). In addition, Oyu Tolgoi's operating assets are shown net of Turquoise Hill Resources
Ltd's public shareholders' interest in intragroup receivables from Oyu Tolgoi.
(p) In 2015 the Energy group as presented in previous periods was split with the coal assets taken to the newly formed
Copper and Coal group and the uranium assets to the Diamonds and Minerals group.
(q) Comprising Rio Tinto's interests in the Blair Athol thermal coal mine and assets and liabilities relating to Rio
Tinto's interest in ECLTM following a binding sale agreement reached in May 2015 and Turquoise Hill Resources Ltd's
residual interest in SouthGobi Resources. The ECLTM sale closed on 9 July 2015.
Review of operations
Iron Ore
First half 2015 First half 2014 Change
Production (million tonnes - Rio Tinto share) 123.3 109.9 +12%
Production (million tonnes - 100%) 154.3 139.5 +11%
Shipments (million tonnes - Rio Tinto share) 122.7 112.2 +9%
Shipments (million tonnes - 100%) 153.9 142.4 +8%
Gross sales revenue (US$ millions) 7,573 12,596 -40%
Underlying EBITDA (US$ millions) 4,090 8,092 -49%
Underlying earnings (US$ millions) 2,099 4,683 -55%
Net cash generated from operating activities (US$ millions) 2,065 4,576 -55%
Capital expenditure (US$ millions) 879 2,069 -58%
The Simandou iron ore project is reported within Diamonds & Minerals, reflecting management responsibility.
Performance
The Iron Ore group's underlying earnings of $2,099 million in 2015 first half were 55 per cent or
$2,584 million down on 2014 first half. This was driven by the impact of lower prices, down 46 per cent, on average, half
on half, reducing earnings by $3.2 billion, which were partly offset by higher sales volumes together with a weaker
Australian dollar, lower energy costs and the realisation of significant cost savings initiatives.
Pre-tax cash cost improvements in the Iron Ore group were $244 million in 2015 first half and have now delivered $954
million of cumulative savings compared with the 2012 base. This is reflected in a reduction in Pilbara cash unit costs to
$16.20 per tonne in 2015 first half, compared with $20.40 per tonne in 2014 first half. Pilbara operations delivered a free
on board (FOB) EBITDA margin of 61 per cent in 2015 first half (2014 first half: 70 per cent).
Gross sales revenues for Pilbara operations in 2015 first half of $7,004 million included freight revenue of $372 million
(2014 first half: $635 million).
Net cash generated from operating activities of $2,065 million benefited from strong shipments from both the Pilbara and
the Iron Ore Company of Canada, combined with lower operating costs through realised cost savings initiatives and improved
productivity.
The 58 per cent decline in capital expenditure reflects the completion of the 290 Mt/a mine expansions in 2014 and the
recently completed Pilbara infrastructure expansion.
Markets
Approximately 25 per cent of sales in the first half of 2015 were priced with reference to the prior quarter's average
index lagged by one month. The remainder was sold either on current quarter average, current month average or on the spot
market. Around 55 per cent of 2015 first half Pilbara sales were made on a cost and freight (CFR) basis, with the remainder
sold FOB. Achieved average pricing in 2015 first half was $54.40 per wet metric tonne on an FOB basis. This equates to
$59.13 per dry metric tonne (assuming an average eight per cent moisture content), which compares with the average Platts
price of $56 per dry metric tonne for 62 per cent iron Pilbara fines during the half.
Operations
Global production of 154.3 million tonnes (Rio Tinto share 123.3 million tonnes) was 11 per cent higher than 2014 first
half following the successful ramp up to 290 Mt/a in May 2014, and was achieved despite unseasonal weather in the Pilbara
throughout the first half, including Tropical Cyclones Olwyn and Quang. Around seven million tonnes of shipping capacity
was lost directly at the ports due to the uncharacteristically severe weather.
Iron Ore Company of Canada delivered a very strong first half of production with 8.0 million tonnes of concentrate and
pellets (Rio Tinto share 4.7 million tonnes), a 14 per cent increase over 2014 first half. This significant improvement was
driven by increased asset reliability and performance and boosted sales by 16 per cent compared with 2014 first half, to
7.4 million tonnes (Rio Tinto share 4.3 million tonnes).
New projects and growth options
The key elements of the 360 Mt/a infrastructure expansion in the Pilbara are complete. The focus is now to ramp up the new
equipment to full capacity and generate maximum value from the integrated system. This includes improvements from
debottlenecking and productivity enhancements supported by a range of low cost brownfield developments. Around 40 Mt/a of
very low-cost brownfield expansions, principally at West Angelas, Nammuldi, Yandicoogina and Brockman mines, were completed
in the half, with an average mine production capital intensity of around $9 per tonne.
Steady progress is being made in the testing and verification of AutoHaul, with over 170 journeys covering 25,000
kilometres completed by the end of June 2015.
An investment decision on the development of the Silvergrass mine is expected in 2016.
2015 shipping and production guidance
Due to the weather disruption in the first half of 2015, anticipated shipments were reduced by around seven million tonnes.
Accordingly, Rio Tinto revised its expectations for 2015 global shipments to 340 million tonnes (100 per cent basis) from
its operations in Australia and Canada.
Aluminium
First half 2015 First half 2014 Change
Production (Rio Tinto share)
Bauxite (000 tonnes) 21,179 20,188 +5%
Alumina (000 tonnes) 3,821 3,650 +5%
Aluminium (000 tonnes) 1,627 1,627 -
Gross sales revenue (US$ millions) 5,455 5,752 -5%
Underlying EBITDA (US$ millions) 1,688 1,097 +54%
Underlying earnings (US$ millions) 793 373 +113%
Net cash generated from operating activities (US$ millions) 1,556 587 +165%
Capital expenditure (US$ millions) 952 752 +27%
The Gove alumina refinery is on care and maintenance and reported separately from Aluminium within Other Operations.
Performance
The Aluminium group's underlying earnings of $793 million increased 113 per cent compared with 2014 first half, with EBITDA
increasing to $1,688 million and integrated operations EBITDA margins improving to 35 per cent. The Aluminium group
benefited from continued portfolio optimisation, momentum from cost reduction and productivity improvement initiatives,
weaker Australian and Canadian currencies and higher prices, including regional market and product premiums, compared with
2014 first half.
Pre-tax cash cost improvements in the Aluminium group were $145 million in 2015 first half and the group has now delivered
$951 million of cumulative savings compared with the 2012 base. This strong performance, combined with reduced working
capital levels, helped the group to deliver close to
$1.6 billion of operating cash flow and around $650 million of free cash flow in 2015 first half. Capital expenditure
increased by 27 per cent as the expansion of the Kitimat smelter neared completion, with first production taking place in
June.
Markets
The 2015 first half cash LME aluminium price averaged $1,783 per tonne, an increase of two per cent on 2014 first half.
Market premiums in all regions reached record highs early in 2015 before falling back rapidly during the second quarter.
Specifically, in the US, the Mid-West market premium reached
$535 per tonne in the first quarter of 2015, ahead of a dramatic move downward during the second quarter, to complete the
first half at $187 per tonne.
Overall, the group achieved an average realised aluminium price of $2,292 per tonne in 2015 first half compared with $2,249
per tonne in 2014 first half. This includes premiums for value-added products (VAP), which represented 59 per cent of
primary metal produced in the first half of 2015 and generated attractive product premiums averaging $259 per tonne of VAP
sold in 2015 first half on top of physical market premiums.
Bauxite prices remain attractive, underpinned by growing import demand in China. Third party bauxite sales increased 29 per
cent in 2015 first half to 13.2 million tonnes (2014 first half: 10.2 million tonnes).
Operations
Bauxite underlying earnings increased by 40 per cent to $273 million in 2015 first half, with FOB EBITDA margins of 51 per
cent, driven by the sustained increase in third party sales and stronger pricing. Bauxite production was five per cent
higher than the first half of 2014 and set a new first half record, primarily driven by a strong performance at Weipa and
Gove's continued ramp up towards an eight million tonne annual run-rate by the fourth quarter of 2015.
Gross sales revenues for bauxite in 2015 first half of $1,013 million included freight revenues of
$93 million (2014 first half: $115 million).
The alumina division recorded a loss of $52 million, which represented a 69 per cent improvement on 2014 first half,
attributable to an improvement in volumes, productivity gains, higher pricing and favourable currency movements. Alumina
production was up by five per cent compared with the first half of 2014 (excluding production from the Gove refinery which
was curtailed in May 2014), reflecting improved productivity at Queensland Alumina and Yarwun.
Primary Metal increased earnings by 70 per cent to $305 million, while earnings from the Pacific Aluminium smelters rose by
61 per cent to $150 million. All operations continued to realise significant cost savings and benefited from favourable
prices and currency movements. First half aluminium production was in line with the same period of 2014, despite lower
production from Kitimat as it prepared for commissioning of the modernised and expanded low cost smelter.
New projects and growth options
The expanded Kitimat smelter commenced production in June 2015. Kitimat will ramp up towards nameplate capacity of 420
thousand tonnes (a 48 per cent increase over previous nameplate capacity), by early 2016. Once Kitimat is at full
production, 80 per cent of the Aluminium group's smelting capacity will be in the lowest cost quartile.
Feasibility studies are progressing as planned for the South of Embley bauxite project, a 22.8 Mt/a, tier one investment
opportunity in Cape York, Queensland, with mining costs expected to be in the first quartile. Required regulatory permits
are in place and the project is expected to be presented to the board for final approval by the end of 2015.
2015 production guidance
Rio Tinto's share of bauxite, alumina and aluminium production for 2015 is expected to be 43 million tonnes, 8.0 million
tonnes and 3.3 million tonnes, respectively.
Copper & Coal
First half 2015 First half 2014 Change
Production (Rio Tinto share)
Mined copper (000 tonnes) 278.4 323.0 -14%
Refined copper (000 tonnes) 128.0 170.4 -25%
Hard coking coal (000 tonnes) 4,103 3,642 +13%
Semi-soft coking coal (000 tonnes) 1,922 1,839 +5%
Thermal coal (000 tonnes) 8,837 8,967 -1%
Gross sales revenue (US$ millions) 4,407 4,980 -12%
Underlying EBITDA (US$ millions) 1,462 1,462 -
Underlying earnings (US$ millions) 393 658 -40%
Net cash generated from operating activities (US$ millions)1 1,177 817 +44%
Capital expenditure - excluding EAUs (US$ millions) 399 591 -32%
1 Net cash generated from operating activities excludes the operating cash flows from equity accounted units (Escondida)
but includes dividends from equity accounted units.
Performance
The Copper & Coal group's underlying earnings of $393 million were 40 per cent lower than 2014 first half, but 13 per cent
higher when adjusted for movements in prices, exchange rates, energy costs and inflation. This solid performance reflected
increased sales volumes from Oyu Tolgoi and the ramp-up of Kestrel, and the delivery of further cash cost savings at Oyu
Tolgoi, Escondida and Rio Tinto Coal Australia, partly offset by lower copper and gold volumes at Rio Tinto Kennecott (RTK)
where efforts were focused on de-weighting and de-watering the east wall of Bingham Canyon.
Pre-tax cash cost improvements in the Copper & Coal group were $150 million in 2015 first half and have now delivered
$1,870 million of cumulative savings compared with the 2012 base.
Despite the challenging market environment, all Copper & Coal operations were free cash flow positive during the period,
contributing close to $800 million to the Group. Net cash generated from operating activities of $1.2 billion was $360
million higher than 2014 first half as a result of the higher volumes from Oyu Tolgoi and Kestrel, lower operating costs,
higher dividends from Escondida, along with the release of working capital by drawing down inventories. This was partly
offset by the adverse impact of prices, along with lower volumes from RTK.
Markets
Average prices in 2015 first half were generally lower than 2014 first half. Copper declined 14 per cent to 268 cents per
pound and gold decreased seven per cent to $1,206 per ounce. Thermal and coking coal prices declined further, averaging $63
and $113 per tonne during 2015 first half, respectively.
The total impact of price changes on the Copper & Coal group, including the effects of provisional pricing movements,
resulted in a decrease in underlying earnings of $437 million compared with 2014 first half.
At 30 June 2015, the Copper group had an estimated 333 million pounds of copper sales that were provisionally priced at 268
cents per pound. The final price of these sales will be determined during the second half of 2015. This compares with 331
million pounds of open shipments at 31 December 2014, provisionally priced at 288 cents per pound.
Operations - Copper
Mined copper production was 14 per cent lower than 2014 first half, driven by RTK, partly offset by higher production at
Escondida and Oyu Tolgoi.
RTK cash flows remain positive despite remediation activities continuing following the pit wall slide in April 2013. This
result is supported by the tolling of 166,000 tonnes of third party concentrate through the smelter in 2015 (excluded from
reported production figures) and the reduction of unit costs across the business. De-weighting and de-watering of the east
wall will continue in the second half of 2015.
Mined copper production at Escondida in the first half was 22 per cent higher than 2014 first half, primarily due to higher
grades and throughput. The second half is expected to be impacted by a decline in grades and water availability.
At Oyu Tolgoi, mined copper production was 44 per cent higher than 2014 first half, attributable to higher grades and
throughput. Mining has started moving to areas of higher grade ore in the open pit. Oyu Tolgoi's copper production in the
second half of 2015 is expected to be higher than the first half.
Operations - Coal
Hard coking coal production was 13 per cent higher than 2014 first half, as a result of improved production rates at
Kestrel which continues to ramp up towards nameplate long-wall capacity of around six million tonnes.
Semi-soft coking coal production was five per cent higher than 2014 first half, reflecting mine production sequencing at
the Hunter Valley Operations. Thermal coal production was in line with 2014 first half, with increased tonnage at Hail
Creek, through a processing plant by-product stream and a strong operational performance, offset by the impact of wet
weather in the Hunter Valley. A long-wall changeover at Kestrel is planned for the second half of 2015.
New projects and growth options
On 18 May 2015, the Government of Mongolia, Turquoise Hill Resources and Rio Tinto signed the Underground Mine Development
and Financing Plan (UDP) which provides a pathway forward in addressing shareholder matters to restart underground
development. Next steps include approval of the underground feasibility study and project financing, as well as securing
all necessary permits for operating the underground mine.
At Escondida, the new 152ktpd Organic Growth Project 1 (OGP1) concentrator achieved mechanical completion in the June 2015
quarter and is now in the commissioning phase. The project remains on schedule and within revised budget and approvals.
2015 production guidance
Rio Tinto expects its share of mined copper production to be between 500,000 and 535,000 tonnes and refined copper
production to be between 190,000 and 220,000 tonnes.
For coal, Rio Tinto's share of production is expected to be 18 to 19 million tonnes of thermal coal, 3.0 to 3.4 million
tonnes of semi-soft coking coal and 7.1 to 8.1 million tonnes of hard coking coal.
Diamonds & Minerals
First half 2015 First half 2014 Change
Production (Rio Tinto share)
Titanium dioxide (000 tonnes) 624 762 -18%
Borates (000 tonnes) 253 259 -2%
Diamonds (000 carats) 8,851 7,482 +18%
Salt (000 tonnes) 2,611 3,374 -23%
Uranium (000 lbs) 2,141 1,099 +95%
Gross sales revenue (US$ millions) 1,811 2,315 -22%
Underlying EBITDA (US$ millions) 413 492 -16%
Underlying earnings (US$ millions) 75 76 -1%
Underlying earnings pre-Simandou (US$ millions) 93 100 -7%
Net cash generated from operating activities (US$ millions) 306 433 -29%
Capital expenditure (US$ millions) 245 271 -10%
The Simandou iron ore project is reported within Diamonds & Minerals, reflecting management responsibility.
Performance
The Diamonds & Minerals group's underlying earnings of $75 million were one per cent lower than 2014 first half, or seven
per cent lower excluding the Simandou exploration and evaluation expenditure. Weaker exchange rates boosted earnings by
$104 million, which compensated for lower pricing across most products. Softer markets drove down volumes, most notably in
titanium dioxide feedstocks following the decision to optimise production to align with market demand. This in turn
impacted cash costs, calculated on a unit cash cost of production, despite the fact that in absolute terms, 2015 first half
cash operating costs were $228 million lower than 2014 first half, including a $136 million benefit from exchange rate
movements.
Net cash generated from operating activities of $306 million was 29 per cent lower than 2014 first half due to lower prices
and sales volumes and higher net tax payments.
Capital expenditure declined by $26 million, or ten per cent, to $245 million, following the completion of the modified
direct dissolving of kernite (MDDK) process plant at Boron in 2014 and lower spend on the Argyle underground project.
Markets
Titanium dioxide feedstock demand remained weak in the first half of 2015 and prices continue to be under pressure with the
industry continuing to absorb feedstock inventories that were incentivised during the previous periods of high prices. The
market for zircon continues to stabilise.
Demand for borates has been stable, globally, with increased demand in Asia offset by reduced demand in Europe.
Industry rough diamond prices are also going through a period of market weakness driven by lower demand from India and
China, high rough and polished diamond pipeline inventory, and very low trade manufacturing margins.
The uranium market continues to suffer from high inventory levels throughout the supply chain, keeping uranium prices under
pressure during the first half of the year.
Operations
Titanium dioxide slag production was 18 per cent lower than in 2014 first half as production continued to be optimised to
align with market demand. Two out of nine furnaces are currently idled at Rio Tinto Fer et Titane (RTFT) in Quebec.
Borates production was slightly lower than in 2014 first half which included additional production to build inventory in
preparation for the commissioning of the MDDK plant.
Diamonds production increased 18 per cent half on half, with higher volumes at Argyle from the continued ramp up of
production from the underground mine offsetting lower carats recovered at Diavik, reflecting lower ore availability as
mining progressed through an area of higher dilution in the first quarter and the absence of stockpiled ore which was
processed in 2014 first half.
On 26 June 2015, Rio Tinto announced the sale of its interest in the Murowa diamond mine in Zimbabwe.
Salt production was lower than the comparative period in 2014 as a result of weaker demand and optimising production in
line with market demand.
Uranium production was 95 per cent higher than 2014 first half when Energy Resources of Australia (ERA) was not processing
ore following a leach tank failure in December 2013. On 11 June 2015, Rio Tinto announced that it did not support any
further study on the future development of Ranger 3 Deeps due to the project's economic challenges. Production at Rössing
was lower than 2014 first half, largely as a result of lower grades and recoveries, partially offset by higher throughput.
New projects and growth options
Work continues on the feasibility study for the Zulti South development at Richards Bay Minerals (RBM), which is expected
to maintain the low cost RBM smelter capacity once completed. Due to market conditions, an investment decision is now
expected in mid-2016.
The Argyle underground mine development was completed in June and the operation will continue to ramp up production through
2015.
The development of the A21 pipe at Diavik is advancing as planned, with first production still expected in 2018, as
crushing of material for dike construction, a critical path, is going very well. This development will provide an important
source of incremental supply to maintain existing production levels and leverage spare processing capacity. A21 is
estimated to cost $350 million (Rio Tinto share $210 million).
The Simandou project partners are continuing to work towards the completion of a bankable feasibility study, which has been
delayed due to the Ebola epidemic in West Africa. Rio Tinto has given notice to the Government of Guinea of a Force Majeure
event which under the terms of the Investment Framework would automatically extend the target date for completion of the
bankable feasibility study and formation of a consortium of infrastructure investors. The Government of Guinea has not yet
recognised the Force Majeure and discussions are continuing.
2015 production guidance
In 2015, Rio Tinto's share of production is expected to be 1.2 million tonnes of titanium dioxide slag, 0.5 million tonnes
of boric oxide equivalent and 20 million carats of diamonds.
Rio Tinto's share of uranium production is expected to be approximately five million pounds.
Other Operations
First half 2015 First half 2014
Production (Rio Tinto share)
Alumina (000 tonnes) - 676
Gross sales revenue (US$ millions) 10 195
Underlying EBITDA (US$ millions) (14) (232)
Underlying loss (US$ millions) (20) (181)
Capital expenditure (US$ millions) (15) (35)
The Gove alumina refinery is reported in Other Operations. The curtailment of production was completed on 28 May 2014 and
the refinery remains under care and maintenance.
Central exploration
First half 2015 First half 2014
US$ millions
Central exploration (post-tax) (61) (63)
Divestments gain/(loss) 5 (6)
Post-tax charge (56) (69)
Central exploration expenditure in 2015 first half (post divestments and tax) resulted in a charge to underlying earnings
of $56 million and was 19 per cent lower than in 2014, principally driven by divestment inflows.
Price & exchange rate sensitivities
The following sensitivities give the estimated effect on underlying earnings assuming that each individual price or
exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and movements
in exchange rates can affect movements in commodity prices and vice versa. The exchange rate sensitivities quoted below
include the effect on operating costs of movements in exchange rates but exclude the effect of the revaluation of foreign
currency working capital. They should therefore be used with care.
Average published price/exchange rate for 2015 first half $ million impact on full year 2015 underlying earningsof a 10% change in prices/exchange rates
Aluminium $1,783/t 441
Copper 268c/lb 183
Gold $1,206/oz 23
Iron ore (62% Fe FOB) $56/t 1,005
Coking coal (benchmark) $113/t 74
Thermal coal (average spot) $63/t 110
Australian dollar 0.78 710
Canadian dollar 0.81 224
Oil $58/bbl 87
DIRECTORS' REPORT
for the half year ended 30 June 2015
Review of operations and important events
A detailed review of the Group's operations, the results of those operations during the half year ended 30 June 2015 and
likely future developments are given on pages 1 to 21. Important events that have occurred during the period and up until
the date of this report are set out below.
On 12 February 2015, the Group announced a proposed US$2 billion capital return programme, comprising the repurchase of a
targeted A$500 million of Rio Tinto Limited shares by way of an off-market buy-back tender, and the balance of
approximately US$1.6 billion by way of an on-market buy-back of Rio Tinto plc shares.
On 27 February 2015, the Group announced that it would streamline its product groups and corporate functions as part of the
continued focus on efficiency and costs. Under the new arrangements, Rio Tinto's world-class portfolio of assets was
condensed into four product groups: Aluminium, Copper & Coal, Diamonds & Minerals, and Iron Ore. The new Copper & Coal
product group brings Rio Tinto's coal operations alongside the existing Copper portfolio. Copper chief executive
Jean-Sébastien Jacques leads the combined product group. Uranium has been added to the Diamonds & Minerals product group,
under the leadership of product group chief executive Alan Davies. As a consequence of the restructuring, Energy chief
executive Harry Kenyon-Slaney left the Group.
On 24 March 2015, Rio Tinto and joint venture partner Alcoa agreed to terminate a historic State Agreement Act intended to
facilitate the mining of bauxite and the development of an alumina refinery in the north Kimberley region, clearing the way
for the area to be included in the Kimberley National Park.
On 7 April 2015, Rio Tinto successfully completed its off-market buy-back tender of Rio Tinto Limited shares, which was
increased to A$560 million from the indicative A$500 million announced due to strong demand. The buy-back price was A$48.44
per share which represented a discount of 14 per cent to the market price for Rio Tinto Limited shares. Rio Tinto Limited
bought back around 11.6 million shares, at an aggregate cost of approximately A$0.6 billion (US$0.4 billion). This
represented 2.65 per cent of Rio Tinto Limited's issued capital (0.63 per cent of the Rio Tinto Group's issued capital) at
the time. The on-market buy-back of Rio Tinto plc shares, which will continue until the end of the year, will now total
approximately US$1.6 billion.
On 18 May 2015, the Government of Mongolia, Turquoise Hill Resources and Rio Tinto signed the Underground Mine Development
and Financing Plan (UDP) which provides a pathway forward in addressing shareholder matters to restart underground
development. Next steps include approval of the underground feasibility study and project financing, as well as securing
all necessary permits for operating the underground mine.
On 11 June 2015, Rio Tinto acknowledged Energy Resources of Australia Ltd's (ERA) release to the Australian Securities
Exchange on 11 June 2015, in which ERA announced it had decided it would not proceed with the Final Feasibility Study of
the Ranger 3 Deeps project in the current operating environment. Rio Tinto agrees with the decision not to progress the
study. After careful consideration, Rio Tinto has determined that it does not support any further study or the future
development of Ranger 3 Deeps due to the project's economic challenges. Rio Tinto recognises the importance of ongoing
rehabilitation work at the Ranger mine site, which is surrounded by the Kakadu National Park. Rio Tinto is engaged with
ERA on a conditional credit facility to assist ERA to fund its rehabilitation program, should additional funding be
required beyond ERA's existing cash reserves and the future earnings from processing ore stockpiles.
On 12 June 2015, Rio Tinto announced that it had priced US$1.2 billion of 10-year fixed rate SEC-registered debt
securities. The bonds were issued by Rio Tinto Finance (USA) Limited and are fully and unconditionally guaranteed by Rio
Tinto plc and Rio Tinto Limited. The notes will pay a coupon of 3.75 per cent and will mature on 15 June 2025.
On 26 June 2015, Rio Tinto announced that it had completed the sale of its 78 per cent interest in Murowa Diamonds and 50
per cent interest in Sengwa Colliery Ltd (Sengwa) to RZ Murowa Holdings Limited. RioZim Limited, an independent Zimbabwean
mining company listed on the Zimbabwean Stock Exchange, already holds a 22 per cent interest in Murowa Diamonds and a 50
per cent interest in Sengwa and will assume the overall management of both entities.
Directors
The directors serving on the boards of Rio Tinto plc and Rio Tinto Limited during and since the end of the half year are:
Notes Date of appointment
Chairman
Jan du Plessis (N and R) 1 September 2008
Executive directors
Sam Walsh, chief executive 5 June 2009
Chris Lynch, chief financial officer 1 September 2011
Non-executive directors
John Varley (senior independent director) (A, R and N) 1 September 2011
Robert Brown (A and N) 1 April 2010
Megan Clark (N and S) 20 November 2014
Ann Godbehere (A and N) 9 February 2010
Richard Goodmanson (N, R and S) 1 December 2004
Anne Lauvergeon (N and S) 15 March 2014
Michael L'Estrange (N and S) 01 September 2014
Paul Tellier (A, R and N) 25 October 2007
Simon Thompson (N and S) 1 April 2014
Michael Fitzpatrick and Lord Kerr stepped down from the board on 7 May 2015, having been directors since June 2006 and
October 2003 respectively.
Notes
(A) Audit committee
(R) Remuneration committee
(N) Nominations committee
(S) Sustainability committee
Dividend
A 2014 final dividend was paid on 9 April 2015 to holders of Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio
Tinto plc ADR holders. The 2014 final dividend, equivalent to 119 US cents per share, was determined by the board on 12
February 2015. Rio Tinto plc shareholders received 77.98 pence per share and Rio Tinto Limited shareholders received 152.98
Australian cents per share, based on the applicable exchange rates on 10 February 2015. Rio Tinto plc ADR holders received
115.76 US cents per ADR, based on the exchange rate on 31 March 2015 to convert from pounds sterling to US dollars
The 2015 interim dividend, equivalent to 107.5 US cents per share, will be paid on 10 September 2015 to holders of Ordinary
shares and ADRs. Rio Tinto plc shareholders will receive 68.92 pence per share and Rio Tinto Limited shareholders will
receive 144.91 Australian cents per share based on the applicable exchange rates on 4 August 2015. ADR holders receive
dividends in US dollars, which will be converted from pounds sterling by reference to the exchange rate applicable on 3
September 2015. The dividend will apply to Rio Tinto plc and ADR holders and to Rio Tinto Limited shareholders on the
register at the close of business on 14 August 2015.
Principal risks and uncertainties
The principal risks and uncertainties that could materially affect Rio Tinto's results and operations are set out on pages
14 to 17 of the 2014 Annual report and are listed under the risk factor headings below. The Group's view of its principal
risks and uncertainties for the remaining six months of the financial year remains substantially unchanged. There may be
additional risks unknown to Rio Tinto and other risks, currently believed to be immaterial, which could turn out to be
material. These risks, whether they materialise individually or simultaneously, could significantly affect the Group's
business and financial results.
(i) External risks
Commodity prices and global demand for the Group's products are expected to remain uncertain.
Past strong demand for the Group's products in China could be affected by future developments in that country.
Rio Tinto is exposed to fluctuations in exchange rates.
Political, legal and commercial changes in the places where the Group operates.
Community disputes in the countries and territories in which the Group operates.
Increased regulation of greenhouse gas emissions could adversely affect the Group's cost of operations.
Regulations, standards and stakeholder expectations regarding health, safety, environment and community evolve over time
and unforeseen changes could have an adverse effect on the Group's social licence to operate, business viability and
reputation.
(ii) Strategic risks
The Group's exploration and development of new projects might be unsuccessful.
Rio Tinto may fail to successfully execute divestments and acquisitions.
Large outsourcing programmes may result in exposure to third-party failure, or loss of intellectual property.
(iii) Financial risks
The Group's reported results could be adversely affected by the impairment of assets including goodwill.
Discount rates used in determining provisions and asset valuations may change, causing changes to provisions, asset
carrying values and capital allocation.
The Group's liquidity and cash flow expectations may not be realised, inhibiting planned expenditure.
Failure to reduce costs may result in reduced margins.
(iv) Operational risks
Estimates of ore reserves are based on uncertain assumptions that, if changed, could result in the need to restate ore
reserves.
Labour disputes could lead to lost production and/or increased costs.
Some of the Group's technologies are unproven and failures could adversely impact costs and/or productivity.
The Group may be exposed to major failures in the supply chain for specialist services, equipment and materials.
Joint ventures, strategic partnerships or non-managed operations may not be successful and may not comply with the Group's
standards.
The Group's operations are vulnerable to a range of interruptions, not all of which are covered fully by insurance. One
such risk is that of a sustained pandemic. We have experienced this in Guinea in 2014 and in 2015 with Ebola, which has
impacted our projects and operations in-country.
The Group depends on the continued services of key personnel.
The Group's costs of close-down, reclamation and rehabilitation could be higher than expected.
Corporate governance
The directors of Rio Tinto believe that highest standards of corporate governance are essential to its pursuit of greater
shareholder value and have continued to apply the standards discussed under 'Corporate governance' on pages 53 to 63 of the
2014 Annual report which is available on the Rio Tinto Group website www.riotinto.com.
Publication of half year results
In accordance with the UK Financial Conduct Authority's Disclosure & Transparency Rules and the Australian Securities
Exchange Listing Rules, the half year results will be made public and are available on the Rio Tinto Group website.
Auditor's independence declaration
PricewaterhouseCoopers, the auditors of Rio Tinto Limited, have provided the auditor's independence declaration as required
under section 307C of the Corporations Act 2001 in Australia. This has been reproduced on page 52 and forms part of this
report.
The Directors' report is made in accordance with a resolution of the board.
Jan du Plessis
Chairman
6 August 2015
Capital projects
Rio Tinto has a programme of high-quality projects delivering industry-leading returns across a broad range of
commodities.
In production
Iron ore - expansion of the Pilbara port, rail and power supply capacity to 360Mt/a. Rio Tinto's share of total approved capex is $3.5 bn. $5.9bn $0.7bn The phase two expansion to 360Mt/a includes investment in the port, rail and power supply and an investment in autonomous trains.
Iron ore - investment to extend the life of the Yandicoogina mine in the Pilbara to 2021 and expand its nameplate capacity from 52 Mt/a to 56 Mt/a. $1.7bn $0.1bn Approved in June 2012, first production from the wet plant took place in March 2015 and from the dry plant in April 2015. The project was completed in July 2015. The wet processing plant is expected to maintain product specification levels.
Aluminium - expansion and modernisation of Kitimat smelter in British Columbia, Canada, to increase annual capacity from 280kt to 420kt. $4.8bn $0.4bn First production took place at the end of the first half of 2015 with full capacity expected to be reached in early 2016.
Copper - development of Organic Growth Project 1 (OGP1) a new 152kt per day capacity concentrator at Escondida (Rio Tinto 30%), Chile. $1.3bn(RT share) <$0.1bn(RT share) Approved in February 2012, OGP1 achieved mechanical completion in the June 2015 quarter and is now in commissioning. The project is on schedule and revised budget.
Ongoing and approved
Copper
Construction of a desalination facility to ensure continued water supply and sustain operations at Escondida (Rio Tinto 30%), Chile. $1.0bn(RT share) $0.5bn(RTshare) Approved in July 2013, the project is designed to provide a sustainable supply of water for the new OGP1 copper concentrator and is 52 per cent complete.Commissioning is scheduled in 2017.
Grasberg project funding for 2012 to 2016 $0.9bn(RT share) $0.3bn(RTshare) Investment to continue the pre-production construction of the Grasberg Block Cave, the Deep Mill Level Zone underground mines, and the associated common infrastructure. Rio Tinto's final share of capital expenditure will in part be influenced by its share of production over the 2012 to 2016 period.
Investment to extend mine life at Rio Tinto Kennecott, US from 2018 to 2030. $0.5bn $0.4bn Following the pit wall slide in 2013, activity on the Cornerstone project was redirected. Mine operations have focused on remediation from the slide and the east wall of Bingham Canyon, including de-weighting and de-watering activities that will continue into the second half of 2015. Initial funding for the south wall pushback has
been approved for 2015.
Diamonds & Minerals
Development of A21 pipe at the Diavik Diamond Mine in Canada (Rio Tinto 60%). Rio Tinto's share of capex is $210m. $0.35bn $0.32bn Approved in November 2014, the development of the A21 pipe is expected to ensure the continuation of existing production levels. First carats are planned for late 2018.
Diamonds & Minerals
Development of A21 pipe at the Diavik Diamond Mine in Canada (Rio Tinto 60%). Rio Tinto's share of capex is $210m.
$0.35bn
$0.32bn
Approved in November 2014, the development of the A21 pipe is expected to ensure the continuation of existing production
levels. First carats are planned for late 2018.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York
Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto's business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds,
gold, industrial minerals (borates, titanium dioxide and salt), iron ore, thermal and metallurgical coal and uranium.
Activities span the world and are strongly represented in Australia and North America, with significant businesses in Asia,
Europe, Africa and South America.
Forward-looking statements
This announcement 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 announcement, 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 are levels of actual production during any
period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign
currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic
conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as
changes in taxation or regulation and such other risk factors 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 announcement. Rio Tinto
expressly disclaims any obligation or undertaking (except as required by applicable law, the UK Listing Rules, the
Disclosure 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 announcement 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
media.enquiries@riotinto.com
www.riotinto.com
Follow @riotinto on Twitter
Media Relations, EMEA/AmericasIlltud HarriT +44 20 7781 1152M +44 7920 503 600 David OuthwaiteT +44 20 7781 1623M +44 7787 597 493 David Luff Media Relations, Australia/AsiaBen MitchellT +61 3 9283 3620M +61 419 850 212 Bruce TobinT +61 3 9283 3612M +61 419 103 454 Matt KlarT + 61 7 3625 4244
T + 44 20 7781 1177 M + 61 457 525 578 Investor Relations, Australia/AsiaNatalie WorleyT +61 3 9283 3063M +61 409 210 462 Rachel StorrsT +61 3 9283 3628M +61 417 401 018
M + 44 7780 226 422 Investor Relations, EMEA/AmericasJohn SmeltT +44 20 7781 1654M +44 7879 642 675 David OvingtonT +44 20 7781 2051M +44 7920 010 978 Grant DonaldT +44 20 7781 1262M +44 7920 587 805
Rio Tinto plc6 St James's SquareLondon SW1Y 4ADUnited Kingdom T +44 20 7781 2000 Rio Tinto Limited120 Collins StreetMelbourne 3000Australia T +61 3 9283 3333Registered in AustraliaABN 96 004 458 404
Registered in England No. 719885
Rio Tinto plc
6 St James's SquareLondon SW1Y 4ADUnited Kingdom T +44 20 7781 2000
Registered in England No. 719885
Rio Tinto Limited
120 Collins StreetMelbourne 3000Australia T +61 3 9283 3333Registered in AustraliaABN 96 004 458 404
Group income statement
Six monthsto 30 June2015US$m Six monthsto 30 June2014US$m
Continuing operations
Consolidated sales revenue 17,980 24,337
Net operating costs (excluding items shown separately) (14,007) (16,893)
Impairment charges (a) (439) (1,142)
Net gains/(losses) on disposal of interests in businesses (b) 23 (362)
Exploration and evaluation costs (243) (340)
Gain/(loss) relating to interests in undeveloped projects 4
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