REG - Rio Tinto - Rio Tinto 2017 half year results <Origin Href="QuoteRef">RIO.L</Origin> - Part 4
02/08/2017 07:30
- Part 4: For the preceding part double click ID:nRSB8514Mc
investigation led by external counsel, it had notified or was in
the course of notifying the relevant authorities in the United States, United Kingdom and Australia of information
concerning contractual payments totalling US$10.5 million made to a consultant who had provided advisory services on the
Simandou project in Guinea. The Australian Federal Police, and most recently the UK Serious Fraud office, have announced
formal investigations in relation to this matter. Rio Tinto is cooperating fully with each of the relevant authorities in
their respective investigations. On 12 December 2016, a class action was also filed in the United States District Court for
the Southern District of New York against Rio Tinto plc and certain of its current and former directors in connection with
the Simandou payments.
On 1 December 2016, Rio Tinto confirmed that it was cooperating with relevant authorities (including the U.S. Securities
and Exchange Commission) in connection with an investigation into the impairment included in the Company's 2012 accounts in
respect of Rio Tinto Coal Mozambique.
The likely outcome on the Group of these regulatory investigations, and any associated litigation, is subject to a number
of significant uncertainties at the present time. They could ultimately expose the Group to material financial cost.
Contingent assets
The Group has, from time to time, various insurance claims outstanding with reinsurers. At 30 June 2016 this included a
claim relating to the Manefay slide at Rio Tinto Kennecott in April 2013. Interim progress payments were received on this
claim in 2013 and 2015; the final payment was received in January 2017.
Update on Grasberg
In January and February 2017, the Government of Indonesia issued new mining regulations to address exports of unrefined
metals, including copper concentrates, and requiring that PT Freeport Indonesia ('PT-FI') convert its contract of work
('CoW') to a special licence. These regulations impact PT-FI's operating rights and in February PT-FI provided formal
notice of an impending dispute to the Government of Indonesia listing multiple breaches by the Government of the CoW. These
circumstances have been identified as an impairment trigger and the recoverable amount of the Grasberg cash-generating unit
has been assessed in accordance with our accounting policies by reference to a fair value less cost of disposal ('FVLCD')
model.
No impairment charge has been recorded as the FVLCD model, which has been determined on the basis of estimates of forecast
post-tax cash flows under the Participation Agreement until the end of the life-of-mine plan, discounted at a post-tax rate
of 8.8 per cent, shows headroom under the central case valuation and also for reasonably possible changes in price and
discount rate assumptions.
Whilst agreement has been reached between PT-FI and the Government of Indonesia to resume copper concentrate exports for
six months, negotiations are on-going between PT-FI and the Indonesian government in relation to its operating licenses and
investment stability. The outcome of those discussions could result in a further impairment trigger.
Other disclosures (continued)
Related party matters
Purchases and sales relate largely to amounts charged by equity accounted units for toll processing of alumina and
purchases of bauxite and aluminium. Details of the Group's principal equity accounted units are given in the 2016 Annual
report.
Income statement items Six monthsto 30 June2017US$m Six monthsto 30 June2016US$m
Purchases from equity accounted units (569) (601)
Sales to equity accounted units 134 117
Cash flow statement items
Dividends from equity accounted units 169 22
Net funding of equity accounted units (2) (5)
Balance sheet items 30 June2017US$m 31 December2016US$m
Investments in equity accounted units 4,714 5,019
Loans to equity accounted units 39 39
Loans from equity accounted units (31) (49)
Trade and other receivables: amounts due from equity accounted units 378 298
Trade and other payables: amounts due to equity accounted units (246) (243)
Rio Tinto plc guarantees to pay the Rio Tinto Pension Fund (UK) any contributions due from Group companies participating in
that fund, pro rata to its ownership of those companies and subject to certain conditions, in the event that the companies
fail to meet their contribution requirements. Furthermore, Rio Tinto plc has in place a guarantee for the Rio Tinto Pension
Fund, in the standard form required by the Pension Protection Fund ('PPF'), to cover 105 per cent of the Fund's liabilities
measured on the PPF's prescribed assumptions. Other similar guarantees in place include a Rio Tinto plc guarantee to the
Rio Tinto 2009 pension fund, with no limit on liabilities.
In December 2016 an agreement between Alcan Holdings Switzerland and the Alcan Schweiz pension fund was executed whereby
Alcan Holdings Switzerland will provide additional contributions in the event that the pension fund falls into a deficit
during the four year life of the agreement. This agreement replaces a previous agreement that was executed in February 2011
and expired at the end of 2016.
Events after the balance sheet date
No events were identified after the balance sheet date which could be expected to have a material impact on the
consolidated financial information included in this report.
Basis of preparation
The condensed consolidated interim financial statements included in this interim report have been prepared in accordance
with International Accounting Standard ('IAS') 34 'Interim financial reporting' as adopted by the European Union ('EU'),
the Disclosure Guidance and Transparency Rules ('DTR') of the Financial Conduct Authority ('FCA') applicable to interim
financial reporting and an Order under section 340 of the Australian Corporations Act 2001 issued by the Australian
Securities and Investments Commission on 14 December 2015.
These condensed consolidated interim financial statements represent a 'condensed set of financial statements' as referred
to in the DTR issued by the FCA. Accordingly, they do not include all of the information required for a full annual
financial report and are to be read in conjunction with the Group's annual financial statements for the year ended 31
December 2016 and any public announcements made by the Group during the interim reporting period. These annual financial
statements were prepared on a going concern basis in accordance with the Companies Act 2006 applicable to companies
reporting under International Financial Reporting Standards and in accordance with applicable UK law, applicable Australian
law as amended by the Australian Securities and Investments Commission Order dated 14 December 2015 and Article 4 of the
European Union IAS regulation and in accordance with:
- International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and
interpretations issued from time to time by the IFRS Interpretations Committee (IFRS IC) both as adopted by the European
Union and which were mandatory for EU reporting as at 31 December 2016; and
- International Financial Reporting Standards as issued by the IASB and interpretations issued from time to time by the
IFRS IC which were mandatory as at 31 December 2016.
The condensed consolidated financial statements are unaudited and do not constitute statutory accounts as defined in
Section 434 of the United Kingdom Companies Act 2006. The financial information for the year to 31 December 2016 included
in this report has been extracted from the full financial statements filed with the Registrar of Companies. The Auditors'
report on these full financial statements was unqualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis of matter and did not contain statements 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 Companies Act 2006.
Accounting policies
The condensed consolidated interim financial statements have been drawn up on the basis of accounting policies, methods of
computation and presentation consistent with those applied in the financial statements for the year ended 31 December 2016,
and in the corresponding interim period. This basis of accounting is referred to as 'IFRS' in this report.
The Group already complies with the amendment to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses which is mandatory for 2017. This amendment clarifies the accounting treatment for deferred tax assets
related to debt instruments measured at fair value.
In addition, there is an amendment to IAS 7 Statement of Cash Flows: Disclosure Initiative, which is mandatory for 2017,
which requires entities to provide disclosures about changes in their liabilities arising from financing activities,
including changes arising from financing cash flows and non-cash changes (such as foreign exchange gains or losses). The
Group is not required to provide additional disclosures in its condensed consolidated interim financial statements, but
will disclose additional information about movements in gross liabilities arising from financing activities in its annual
consolidated financial statements for the year ending 31 December 2017 in addition to the net debt reconciliation currently
provided.
Neither of the above amendments has been endorsed by the EU as yet.
The Group has not early adopted any amendments, standards or interpretations that have been issued but are not yet
effective.
The critical accounting judgements and key sources of estimation uncertainty for the half year are the same as those
disclosed in the Group's consolidated financial statements for the year ended 31 December 2016.
The financial information by business unit and the geographic analysis of sales by destination provided on pages 10 to 13
and 44 of this press release respectively, satisfy the disclosure requirements of IFRS 8 'Operating Segments' for interim
financial statements and also provide additional voluntary disclosure which the Group considers is useful to the users of
the financial statements.
International financial reporting standards mandatory beyond 2017
IFRS 9 "Financial Instruments", IFRS 15 "Revenue from Contracts with Customers" and IFRIC 22 "Foreign Currency Transactions
and Advance Consideration" are mandatory in 2018. IFRS 16 "Leases" and IFRIC 23 "Uncertainty over Income Tax Treatments"
are mandatory in 2019 and IFRS 17 "Insurance Contracts" is mandatory in 2021.
The Group has commenced evaluation of IFRIC 23, which was issued in June 2017, and continues to evaluate the impact of the
other pronouncements which will be mandatory in 2018 and 2019. This work is ongoing and additional impacts may be
identified later in the implementation process. Information on the Group's implementation process was provided in the
Group's annual financial statements for the year ended 31 December 2016. A brief update on the implementation process is
provided below; further information will be provided in the Group's annual financial statements for the year ending 31
December 2017. The Group will commence evaluation of IFRS 17 at a later date.
International financial reporting standards mandatory beyond 2017 (continued)
IFRS 9 "Financial Instruments" - endorsed by the EU
Work in the first half of the year has focused on the classification and measurement of the Group's financial assets under
IFRS 9 and establishing the process for the calculation of impairment losses of financial assets under the new standard.
Certain changes in classification have been identified, in particular, the classification of provisionally priced
receivables as held at fair value as embedded derivatives are no longer separated from financial assets.
The Group continues to investigate the possibility of increased application of hedge accounting, primarily with respect to
the aluminium forward and option contracts embedded in certain aluminium smelter electricity purchase contracts.
The increased application of hedge accounting, if possible, would eliminate some of the income statement volatility arising
from the mark to market of embedded derivatives. The Group excludes this volatility from underlying earnings. The Group
does not currently expect the impact of the other changes noted above to be material.
IFRS 15 "Revenue from Contracts with Customers" - endorsed by the EU
The approach to IFRS 15 implementation includes review of sales contracts at all product groups. Contract review at the
Iron Ore and Aluminium product groups is complete, and work on contract reviews at the remainder of the Group's operations
is expected to be completed within the third quarter. To date, no material measurement differences have been identified
between IAS 18, the current revenue recognition standard, and IFRS 15.
IFRIC 22 "Foreign Currency Transactions and Advance Consideration" - not yet endorsed by the EU
Work continues on changes to systems and processes to comply with IFRIC 22.
IFRS 16 "Leases" - not yet endorsed by the EU
Work continues on the further understanding of the provisions of the standard which will most impact the group, adapting
the contract review process to identify items relevant to the measurement of new leases, performing financial reporting
impact analysis and determining system requirements.
IFRS 16 will impact the Group's primary statements at transition and in future years. It must be implemented
retrospectively, either with the restatement of comparatives or with the cumulative effect of initial application
recognised as at 1 January 2019. The Group expects to make a decision on the method of initial application in the second
half of the year.
International financial reporting standards mandatory beyond 2017 (continued)
IFRIC 23 "Uncertainty over Income Tax Treatments" - not yet endorsed by the EU
The method of calculating provisions for uncertain tax positions is subject to revision, as a result of this
interpretation. Rio Tinto currently recognises provisions based on the most likely amount of the liability, if any, for
each separate uncertain tax position.
The interpretation requires a probability weighted average approach to be taken for issues for which there are a wide range
of possible outcomes. For issues with a binary outcome, the most likely amount method should continue to be used.
The new interpretation is effective from 1 January 2019 and early adoption is permitted.
IFRS 17 "Insurance Contracts"
The standard was issued in June 2017 and provides consistent principles for all aspects of accounting for insurance
contracts.
Going concern
After making enquiries and having reassessed the principal risks, the directors considered it appropriate to adopt the
going concern basis of accounting in preparing the interim financial information.
Non-GAAP measures
The Group presents certain non-GAAP financial measures, including underlying earnings, which are reconciled to directly
comparable IFRS financial measures on page 62 of this report. These non-GAAP measures are used internally by management to
assess the performance of the business and may therefore be useful to investors. They are not a substitute for the IFRS
measures and should be considered alongside those measures.
Directors' statement of responsibility
In the directors' opinion:
The condensed consolidated interim financial statements on pages 32 to 55 including the notes have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union, the Disclosure and Transparency
Rules ('DTR') of the Financial Conduct Authority in the United Kingdom, applicable accounting standards and the Australian
Corporations Act 2001 as modified by an order of the Australian Securities and Investments Commission issued on 14 December
2015, using the most appropriate accounting policies for Rio Tinto's business and supported by reasonable and prudent
judgements.
The condensed consolidated interim financial statements give a true and fair view of the Rio Tinto Group's financial
position as at 30 June 2017 and of its performance, as represented by the results of its operations, comprehensive income
and expense and its cash flows for the six months then ended.
There are reasonable grounds to believe that each of the Rio Tinto Group, Rio Tinto Limited and Rio Tinto plc will be able
to pay its debts as and when they become due and payable.
The interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first six months and their impact on the condensed
set of consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
- material related-party transactions in the first six months and any material changes in the related-party
transactions described in the last annual report.
Signed in accordance with a resolution of the Board of Directors.
Jean-Sébastien Jacques
Chief executive
2 August 2017
Jan du Plessis
Chairman
2 August 2017
Auditor's Independence Declaration
As lead auditor for the review of Rio Tinto Limited for the half-year ended 30 June 2017, I declare that to the best of my
knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Rio Tinto Limited and the entities it controlled during the period.
Debbie Smith
Partner
PricewaterhouseCoopers
Brisbane
2 August 2017
Liability limited by a scheme approved under Professional Standards Legislation
Independent auditors' review report of PricewaterhouseCoopers LLP to Rio Tinto plc and PricewaterhouseCoopers to the
members of Rio Tinto Limited
Introduction
For the purpose of this report, the terms 'we' and 'our' denote PricewaterhouseCoopers LLP in relation to UK legal,
professional and regulatory responsibilities and reporting obligations to Rio Tinto plc and PricewaterhouseCoopers in
relation to Australian legal, professional and regulatory responsibilities and reporting obligations to Rio Tinto Limited.
We have been engaged by Rio Tinto plc and Rio Tinto Limited (the 'Companies') to review the interim financial information
in the interim report of the Rio Tinto Group comprising the Companies and their subsidiaries, associates and joint ventures
(the 'Group') for the six months ended 30 June 2017, which comprises the Group income statement, Group statement of
comprehensive income, Group cash flow statement, Group balance sheet, Group statement of changes in equity and related
notes (including the financial information by business unit). We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material inconsistencies with the information in
the interim financial information.
PricewaterhouseCoopers has also reviewed the directors' declaration set out on page 56 in relation to Australian regulatory
requirements.
Directors' responsibilities
The interim report is the responsibility of, and has been approved by, the directors of the Companies. The directors are
responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom's Financial Conduct Authority and the Corporations Act 2001 in Australia as amended by the Australian
Securities and Investments Commission Order dated 14 December 2015 (the 'ASIC Order' described in the Australian
Corporations Act - Summary of ASIC relief in the 2016 Annual Report) and for such internal control as the directors
determine necessary to enable the preparation of the interim report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
As disclosed in Note 1 Principal Accounting Policies of the 2016 Annual Report, the financial statements of the Group are
prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The
interim financial information included in this interim report has been prepared in accordance with International Accounting
Standard IAS 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility
Our responsibility is to express a conclusion on the interim financial information in the interim report based on our
review. PricewaterhouseCoopers LLP have prepared this review report, including the conclusion, for and only for Rio Tinto
plc for the purpose of the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and PricewaterhouseCoopers have prepared this review report, including the conclusion, for and only for Rio Tinto
Limited for the purpose of the Corporations Act 2001 in Australia as amended by the ASIC Order and for no other purpose. We
do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) ISRE 2410, Review
of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board
for use in the United Kingdom and the Australian Auditing Standard on Review Engagements ASRE 2410 Review of a Financial
Report Performed by the Independent Auditor of the Entity. As the auditor of the Group, ISRE 2410 and ASRE 2410 require
that we comply with the ethical requirements relevant to the audit of the annual financial statements and financial
report.
A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK) or Australian Auditing Standards and
consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 in Australia.
Conclusion of PricewaterhouseCoopers LLP for Rio Tinto plc
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in
the interim report of the Group for the six months ended 30 June 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Conclusion of PricewaterhouseCoopers for Rio Tinto Limited
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim
report of Rio Tinto Limited is not in accordance with the Corporations Act 2001 in Australia as amended by the ASIC Order,
including:
a) giving a true and fair view of the Group's financial position as at 30 June 2017 and of its performance for the
half-year ended on that date; and
b) complying with International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the European Union
and the Corporations Regulations 2001 in Australia.
PricewaterhouseCoopers LLPChartered AccountantsLondon2 August 2017in respect of Rio Tinto plc Debbie Smith PartnerPricewaterhouseCoopersChartered AccountantsBrisbane2 August 2017in respect of Rio Tinto Limited Liability limited by a scheme approved under Professional Standards Legislation
(a) The maintenance and integrity of the Rio Tinto Group website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility
for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom and Australia governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Summary financial data in Australian dollars, Sterling and US dollars
30 June2017A$m 30 June 2016A$m 30 June2017£m 30 June 2016£m 30 June2017US$m 30 June 2016US$m
26,399 22,195 15,815 11,358 Gross sales revenue 19,906 16,293
25,621 21,115 15,349 10,805 Consolidated sales revenue 19,319 15,500
6,573 2,858 3,937 1,463 Profit before tax from continuing operations 4,956 2,098
4,359 2,372 2,611 1,214 Profit for the period from continuing operations 3,287 1,741
Net earnings attributable to
4,383 2,334 2,626 1,194 Rio Tinto shareholders 3,305 1,713
5,227 2,129 3,131 1,090 Underlying earnings(a) 3,941 1,563
244.0c 129.8c 146.2p 66.4p Basic earnings per ordinary share(b) 184.0c 95.3c
291.0c 118.5c 174.3p 60.6p Basic underlying earnings per ordinary share(a), (b) 219.4c 87.0c
Dividends per share to Rio Tinto shareholders(c)
163.62c 151.89c 100.56p 74.21p - paid 125.0c 107.5c
137.72p 59.13c 83.13p 33.80p - proposed 110.0c 45.0c
6,338 3,546 3,797 1,815 Cash flow before financing activities 4,779 2,603
30 June 31 December 30 June 31 December 30 June 31 December
2017 2016 2017 2016 2017 2016
A$m A$m £m £m US$m US$m
(9,875) (13,281) (5,829) (7,836) Net debt (7,571) (9,587)
55,160 54,428 32,560 32,116 Equity attributable to Rio Tinto shareholders 42,291 39,290
(a) Underlying earnings exclude impairment charges and other net losses totalling US$636 million (30 June 2016: charges
and other net gains totalling US$150 million).
(b) Basic earnings per ordinary share and basic underlying earnings per ordinary share do not recognise the dilution
resulting from share options on issue.
(c) The Australian dollar and Sterling amounts are based on the US dollar amounts, retranslated at average or closing
rates as appropriate, except for the dividends which are the actual amounts paid or payable.
Metal prices and exchange rates
Six months to 30 June2017 Six months to 30 June2016 Increase/(decrease)H1-17 Vs. H1-16 Year to 31December2016
Metal prices - average for the period
Copper - US cents/lb 262c 213c 23% 221c
Aluminium - US$/tonne US$1,880 US$1,544 22% US$1,605
Gold - US$/troy oz US$1,238 US$1,221 1% US$1,250
Average exchange rates in US$
Sterling 1.26 1.43 (12)% 1.36
Australian dollar 0.75 0.73 3% 0.74
Canadian dollar 0.75 0.75 0% 0.76
Euro 1.08 1.12 (3)% 1.11
South African rand 0.076 0.065 16% 0.068
Period end exchange rates in US$
Sterling 1.30 1.35 (4)% 1.22
Australian dollar 0.77 0.74 3% 0.72
Canadian dollar 0.77 0.77 0% 0.74
Euro 1.14 1.11 3% 1.05
South African rand 0.077 0.067 14% 0.073
Availability of this report
This report is available on the Rio Tinto website (www.riotinto.com).
Reconciliation of net earnings to underlying earnings
Pre-taxHY2017US$m TaxHY2017US$m Non-controllinginterestsHY2017US$m NetamountHY2017US$m Net amount HY2016US$m
Exclusions from underlying earnings
Impairment charges(a) (357) 100 91 (166) (7)
Net gains on disposal of interests in businesses(b) (13) 8 - (5) 193
Exchange and derivative gains/(losses):
- Exchange (losses)/gains on US dollar net debt and intragroup balances (462) 47 6 (409) 502
- (Losses)/gains on currency and interest rate derivatives not qualifying for hedge accounting(c) (7) 2 2 (3) 11
- (Losses)/gains on commodity derivatives not qualifying for hedge accounting(d) (130) 40 - (90) 45
Onerous port and rail contracts(e) - - - - (496)
Rio Tinto Kennecott(f) 73 (28) - 45 -
Restructuring costs and global headcount reductions - - - - (88)
Other exclusions(g) 11 (19) - (8) (10)
Total excluded from underlying earnings (885) 150 99 (636) 150
Net earnings 4,956 (1,669) 18 3,305 1,713
Underlying earnings 5,841 (1,819) (81) 3,941 1,563
Underlying earnings is reported by Rio Tinto to provide greater understanding of the underlying business performance of its
operations. Underlying earnings and net earnings both represent amounts attributable to owners of Rio Tinto.
The following items are excluded from net earnings in arriving at underlying earnings in each period irrespective of
materiality:
- Net gains on disposal and consolidation of interests in businesses.
- Impairment charges and reversals of cash generating units.
- Profit/(loss) after tax from discontinued operations.
- Certain exchange and derivative gains and losses (as defined in the table above).
Exclusions from underlying earnings relating to equity accounted units are stated after tax and included in the column
'Pre-tax'. Items (a) to (g) below are excluded from net earnings in arriving at underlying earnings.
(a) In light of the current market conditions for uranium, no substantive expenditure is now budgeted or planned to
evaluate the Roughrider deposit in Canada. These circumstances have been identified as an impairment trigger under IFRS 6.
The recoverable amount for the evaluation and exploration assets has been determined to be US$nil due to the significant
uncertainty over whether commercially viable quantities of mineral resources could be identified at a future date.
Accordingly an impairment charge of US$357 million has been recorded to fully write-off the mineral interests recognised on
acquisition.
Reconciliation of net earnings to underlying earnings (continued)
In 2015, the impairment charge for Simandou included an amount relating to the anticipated settlement of contractual
liabilities. These liabilities were settled during 2017 by the Group's subsidiary Simfer Jersey Ltd. from the proceeds of a
share issue. The non-controlling interest component of this transaction (US$91 million) has been accounted for as an
impairment reversal consistent with the original accounting treatment.
(b) For the period to 30 June 2017 there were no material disposals of interests in businesses.
For the period to 30 June 2016, a pre-tax gain of US$410 million (post-tax US$268 million) was recognised by Rio Tinto on
the sale of its 40 per cent interest in the Bengalla Joint Venture on 1 March 2016. This was partially offset by a loss on
disposal of the 100 per cent interest in Carbone Savoie on 31 March 2016.
(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 commodity derivatives, including those embedded in commercial contracts, that are ineligible for
hedge accounting, but for which there will be an offsetting change in future Group earnings.
(e) At 30 June 2016 an onerous contract was recognised in relation to the Abbott Point Coal Terminal and associated rail
infrastructure capacity. In October 2016, agreement was reached with Adani to relinquish the port capacity at Abbot Point
Coal Terminal and therefore the charge recorded in the first half of 2016 was reduced to US$329 million by year end.
(f) In the six months to 30 June 2017, Rio Tinto received the final settlement on the insurance claims related to the
2013 slide at Rio Tinto Kennecott's Bingham Canyon mine. The amounts excluded from underlying earnings are consistent with
the previously excluded losses to which they relate, in line with the treatment of the 2013 and 2015 settlement payments.
(g) 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 business performance.
This information is provided by RNS
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