REG - Rio Tinto - Rio Tinto announces first half underlying earnings <Origin Href="QuoteRef">RIO.L</Origin> - Part 3
29/10/2014 11:01
- Part 3: For the preceding part double click ID:nRSG5022Ob
Rachel StorrsT +61 3 9283 3628M +61 417 401 018 Galina RogovaT +852 2839 9208M +852 6978 3011
Rio Tinto plc2 Eastbourne TerraceLondon W2 6LGUnited 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
2 Eastbourne TerraceLondon W2 6LGUnited 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 June2014US$m Six monthsto 30 June2013US$m
Continuing operations
Consolidated sales revenue 24,337 24,511
Net operating costs (excluding items shown separately) (16,893) (18,092)
Impairment charges (a) (1,142) (242)
Net (losses)/gains on disposal of interests in businesses (b) (362) 113
Exploration and evaluation costs (340) (527)
Loss relating to interests in undeveloped projects (17) (6)
Operating profit 5,583 5,757
Share of profit after tax of equity accounted units 306 330
Profit before finance items and taxation 5,889 6,087
Finance items
Net exchange gains/(losses) on external debt and intragroup balances 707 (2,575)
Net gains on derivatives not qualifying for hedge accounting 19 43
Finance income 32 47
Finance costs (c) (367) (203)
Amortisation of discount (188) (188)
203 (2,876)
Profit before taxation 6,092 3,211
Taxation (1,807) (1,526)
Profit for the period 4,285 1,685
- attributable to owners of Rio Tinto (net earnings) 4,402 1,720
- attributable to non-controlling interests (117) (35)
Earnings per share (d)
- basic 238.2c 93.1c
- diluted 237.0c 92.6c
(a) The pre-tax impairment charge of US$1,142 million relates to the Group's aluminium business. As a result of further
revisions to future capital required to complete the modernisation project at Kitimat in British Columbia, and related
impacts on the project, the recoverable value of the Kitimat cash-generating unit diminished. The consequent fall in fair
value less costs of disposal ('FVLCD') below carrying value resulted in a pre-tax impairment charge to property, plant and
equipment of US$1,092 million.
The recoverable amount for the Kitimat cash-generating unit is US$2,184 million. This recoverable amount is classified as
level 3 under the fair value hierarchy. In arriving at FVLCD, post-tax cash flows expressed in real terms have been
estimated over the useful economic life of the modernised smelter, which is the principal asset of the cash-generating
unit, and discounted using a post-tax discount rate of 7.3 per cent (2013: 7.3 per cent).
Other impairment charges during 2014 relate to site closure and an anticipated disposal in the Aluminium portfolio.
In 2013, the pre-tax impairment charge of US$242 million represents adjustments to reduce the carrying value of the Eagle
nickel-copper project to FVLCD after the signing of a binding sales agreement on 12 June 2013, and the impact of commodity
prices on certain short-lived copper-gold assets.
(b) Pre-tax losses of US$362 million arise mainly from further adjustments in respect of contractual obligations for
product sales and delivery which remain with the Group following sale of the Group's interest in the Clermont mine on 29
May 2014, and indemnities provided in respect of prior disposals.
Net gains on disposal of interests in businesses in 2013 mainly related to the Group's disposal of part of its remaining
interest in Constellium (formerly Alcan Engineered Products).
(c) Finance costs in the income statement include hedging adjustments and are net of amounts capitalised of US$263 million
(30 June 2013: US$393 million).
(d) For the purposes of calculating basic earnings per share, the weighted average number of Rio Tinto plc and Rio Tinto
Limited shares outstanding during the period was 1,848.2 million (30 June 2013: 1,847.3 million), being the average number
of Rio Tinto plc shares outstanding of 1,412.9 million (30 June 2013: 1,411.5 million), plus the average number of Rio
Tinto Limited shares outstanding of 435.3 million (30 June 2013: 435.8 million). The profit figures used in the calculation
of basic and diluted earnings per share are based on profits attributable to owners of Rio Tinto.
For the purposes of calculating diluted earnings per share, the effect of dilutive securities is added to the weighted
average number of shares. This effect is calculated under the treasury stock method.
Group statement of comprehensive income
Six monthsto 30 June2014US$m Six monthsto 30 June2013US$m
Profit after tax for the period 4,285 1,685
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss:
Actuarial (losses)/gains on post retirement benefit plans (609) 1,635
Share of other comprehensive income of equity accounted units net of tax 1 4
Tax relating to components of other comprehensive income 170 (480)
(438) 1,159
Items that have been/may be reclassified subsequently to profit or loss:
Currency translation adjustment (a) 833 (2,285)
Fair value movements:
- Cash flow hedge losses (38) (2)
- Cash flow hedge losses transferred to the income statement 12 91
- Losses on revaluation of available for sale securities (19) (110)
- Losses on revaluation of available for sale securities transferred to the income statement 6 -
Share of other comprehensive income of equity accounted units net of tax 16 31
Tax relating to components of other comprehensive income (9) (39)
801 (2,314)
Other comprehensive income/(loss) for the period, net of tax 363 (1,155)
Total comprehensive income for the period 4,648 530
- attributable to owners of Rio Tinto 4,654 980
- attributable to non-controlling interests (6) (450)
(a) Excludes a currency translation credit of US$278 million (30 June 2013: charge of US$608 million) arising on Rio Tinto
Limited's share capital for the period ended 30 June 2014, which is recognised in the Group statement of changes in equity
as set out on page 34.
Group statement of cash flows
Six monthsto 30 June2014US$m Six monthsto 30 June2013US$m
Cash flows from consolidated operations(a) 8,618 7,474
Dividends from equity accounted units 42 531
Cash flows from operations 8,660 8,005
Net interest paid (538) (579)
Dividends paid to holders of non-controlling interests in subsidiaries (161) (3)
Tax paid (2,505) (1,906)
Net cash generated from operating activities 5,456 5,517
Cash flows from investing activities
Purchase of property, plant & equipment and intangible assets (b) (3,845) (6,960)
Disposals of subsidiaries, joint arrangements & associates (c) 999 130
Purchases of financial assets (51) (85)
Other funding of equity accounted units (84) (93)
Other investing cash flows 265 65
Cash used in investing activities (2,716) (6,943)
Cash flows before financing activities 2,740 (1,426)
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (2,006) (1,717)
Repayment of borrowings (3,061) (635)
Proceeds from additional borrowings 401 4,040
Proceeds from issue of equity to non-controlling interests 1,229 70
Other financing cash flows 70 37
Net cash flow from financing activities (3,367) 1,795
Effects of exchange rates on cash and cash equivalents (6) (23)
Net (decrease)/increase in cash and cash equivalents (633) 346
Opening cash and cash equivalents less overdrafts 10,209 7,272
Closing cash and cash equivalents less overdrafts (d) 9,576 7,618
(a) Cash flows from consolidated operations
Profit from continuing operations 4,285 1,685
Adjustments for:
Taxation 1,807 1,526
Finance items (203) 2,876
Share of profit after tax of equity accounted units (306) (330)
Loss/(gain) on disposal of interests in businesses 362 (113)
Impairment charges net of reversals 1,142 242
Depreciation and amortisation 2,258 2,281
Provisions (including exchange differences on provisions) 557 622
Utilisation of provisions (528) (481)
Utilisation of provision for post retirement benefits (159) (377)
Change in inventories 111 (352)
Change in trade and other receivables 484 250
Change in trade and other payables (1,390) (576)
Other items 198 221
8,618 7,474
(b) Capital expenditure includes US$272 million (30 June 2013: US$201 million) capitalised in accordance with IFRIC 20
'Stripping costs in the production phase of a surface mine'; a significant proportion of amounts capitalised relate to the
Group's Copper operations.
(c) Disposal proceeds mainly comprise amounts received following completion of the sale of the Group's interest in the
Clermont mine on 29 May 2014.
(d) Closing cash and cash equivalents less overdrafts at 30 June 2014 differs from cash and cash equivalents on the Group
statement of financial position as it includes overdrafts of US$24 million (31 December 2013: US$7 million) reported within
'borrowings and other financial liabilities'.
Group statement of financial position
30 June2014US$m 31 December2013US$m
Non-current assets
Goodwill 1,370 1,349
Intangible assets 6,278 5,421
Property, plant and equipment 73,326 70,827
Investments in equity accounted units 4,412 3,957
Inventories 490 511
Deferred tax assets 3,987 3,555
Trade and other receivables 1,487 2,140
Other financial assets (including tax recoverable and loans to equity accounted units) 1,138 983
92,488 88,743
Current assets
Inventories 5,636 5,737
Trade and other receivables 4,303 4,667
Other financial assets (including tax recoverable and loans to equity accounted units) 500 710
Cash and cash equivalents 9,600 10,216
20,039 21,330
Assets of disposal groups held for sale 64 952
Total assets 112,591 111,025
Current liabilities
Borrowings and other financial liabilities (2,492) (3,926)
Trade and other payables (7,077) (8,400)
Tax payable (718) (1,126)
Provisions including post retirement benefits (1,869) (1,738)
(12,156) (15,190)
Non-current liabilities
Borrowings and other financial liabilities (23,612) (24,625)
Trade and other payables (949) (576)
Tax payable (457) (468)
Deferred tax liabilities (4,050) (4,140)
Provisions including post retirement benefits (13,483) (12,343)
(42,551) (42,152)
Liabilities of disposal groups held for sale (105) (181)
Total liabilities (54,812) (57,523)
Net assets 57,779 53,502
Capital and reserves
Share capital (a)
- Rio Tinto plc 230 230
- Rio Tinto Limited 5,189 4,911
Share premium account 4,282 4,269
Other reserves 13,550 12,871
Retained earnings 25,730 23,605
Equity attributable to owners of Rio Tinto 48,981 45,886
Attributable to non-controlling interests 8,798 7,616
Total equity 57,779 53,502
(a) At 30 June 2014, Rio Tinto plc had 1,413.8 million ordinary shares in issue and held by the public, and Rio Tinto
Limited had 435.8 million shares in issue and held by the public. As required to be disclosed under the ASX Listing Rules,
the net tangible assets per share amounted to US$22.35 (31 December 2013: US$21.16).
Group statement of changes in equity
Period ended
30 June 2014
Attributable to owners of Rio Tinto
Share capital Share Other Retained Total Non-controlling Total
US$m premium reserves earnings US$m interests equity
US$m US$m US$m US$m US$m
Opening balance 5,141 4,269 12,871 23,605 45,886 7,616 53,502
Total comprehensive income for
the period (a) - - 689 3,965 4,654 (6) 4,648
Currency translation arising on
Rio Tinto Limited's share capital 278 - - - 278 - 278
Dividends - - - (2,006) (2,006) (159) (2,165)
Own shares purchased from Rio
Tinto shareholders to satisfy
share options - - (42) - (42) - (42)
Treasury shares reissued - 13 - 2 15 - 15
Change in equity held by Rio Tinto - - - 10 10 (10) -
Equity issued to holders of non-controlling interests (b) - - - - - 1,240 1,240
Employee share options and other IFRS 2 charges taken to the income statement - - 32 154 186 117 303
Closing balance 5,419 4,282 13,550 25,730 48,981 8,798 57,779
Six monthsto 30 June2014US$m Six monthsto 30 June2013US$m
Dividends per share: paid during the period 108.5c 94.5c
Dividends per share: proposed in the announcement of the results for the period 96.0c 83.5c
Period ended
30 June 2013
Attributable to owners of Rio Tinto
Share capital Share Other Retained Total Non-controlling Total
US$m premium reserves earnings US$m interests equity
US$m US$m US$m US$m US$m
Opening balance 5,945 4,244 14,868 21,496 46,553 11,187 57,740
Total comprehensive income for the period (a) - - (1,865) 2,845 980 (450) 530
Currency translation arising on Rio Tinto Limited's share capital (608) - - - (608) - (608)
Dividends - - - (1,717) (1,717) (6) (1,723)
Own shares purchased from Rio Tinto shareholders to satisfy share options - - (65) - (65) - (65)
Treasury shares reissued - 40 - 4 44 - 44
Change in equity held by Rio Tinto - - - 71 71 (43) 28
Equity issued to holders of non-controlling interests - - - - - 70 70
Employee share options and other IFRS 2 charges taken to the income statement - - 32 31 63 - 63
Closing balance 5,337 4,284 12,970 22,730 45,321 10,758 56,079
(a) Refer to Group statement of comprehensive income for further details.
(b) Equity issued to holders of non-controlling interests during 2014 includes US$1.2 billion of proceeds from a rights
issue by Turquoise Hill in January 2014.
Reconciliation with Australian Accounting Standards
The Group's financial statements have been prepared in accordance with IFRS as adopted by the European Union ('EU IFRS'),
which differs in certain respects from the version of IFRS that is applicable in Australia, referred to as Australian
Accounting Standards ('AAS').
Prior to 1 January 2004, the Group's financial statements were prepared in accordance with UK GAAP. Under EU IFRS goodwill
on acquisitions prior to 1998, which was eliminated directly against equity in the Group's UK GAAP financial statements,
has not been reinstated. This was permitted under the rules governing the transition to EU IFRS set out in IFRS 1. The
equivalent Australian Standard, AASB 1, does not provide for the netting of goodwill against equity. As a consequence,
shareholders' funds under AAS include the residue of such goodwill, which amounted to US$546 million at 30 June 2014 (31
December 2013: US$550 million).
Save for the exception described above, the Group's financial statements drawn up in accordance with EU IFRS are consistent
with the requirements of AAS.
Consolidated net debt
30 June2014US$m 31 December2013US$m
Analysis of changes in consolidated net debt (a)
Opening balance (18,055) (19,192)
Adjustment on currency translation (679) 2,051
Exchange gains/(losses) charged to the income statement 634 (2,120)
Cash movements excluding exchange movements 2,009 1,076
Other movements (44) 130
Closing balance (16,135) (18,055)
Total borrowings in the statement of financial position (b) (26,025) (28,460)
Derivatives related to net debt (included in 'Other financial assets/liabilities') 276 173
EAU funded balances excluded from net debt 14 16
Adjusted total borrowings (25,735) (28,271)
Cash and cash equivalents 9,600 10,216
Consolidated net debt (16,135) (18,055)
(a) Consolidated net debt is stated net of the impact of certain funding arrangements between EAUs and partially owned
subsidiaries (EAU funded balances). This adjustment is required in order to avoid showing borrowings twice in the net debt
disclosure, where funding has been provided to an EAU by the Group and subsequently on lent by the EAU to a consolidated
Group subsidiary.
(b) Total borrowings are combined with other current financial liabilities of US$12 million (31 December 2013: US$10
million) and non-current financial liabilities of US$67 million (31 December 2013: US$81 million) in the statement of
financial position.
Geographical analysis (by destination)
Six monthsto 30 June2014 % Six monthsto 30 June2013% Six monthsto 30 June2014US$m Six monthsto 30 June2013US$m
Gross sales revenue by destination (a)
China 37.8 33.2 9,665 8,812
Japan 16.2 15.4 4,155 4,080
Other Asia 14.9 15.9 3,801 4,234
United States of America 12.6 13.6 3,226 3,620
Other Europe (excluding United Kingdom) 8.4 11.4 2,149 3,017
Canada 2.7 2.5 701 661
Australia 2.5 2.1 652 570
United Kingdom 0.9 0.8 233 202
Other 4.0 5.1 988 1,367
Gross sales revenue 100.0 100.0 25,570 26,563
Share of equity accounted units' sales (1,233) (2,052)
Consolidated sales revenue 24,337 24,511
The financial information by business unit and the geographic analysis of sales by destination satisfy the disclosure
requirements of IFRS 8 'Operating Segments' for interim financial statements and also provide additional voluntary
disclosure which the Group considers is useful to the users of the financial statements.
(a) Gross sales revenue is used by the Group in monitoring business performance (refer to the financial information by
Business Unit on page 10). Gross sales revenue includes the sales revenue of equity accounted units (after adjusting for
sales to subsidiaries) in addition to consolidated sales. Consolidated sales revenue includes subsidiary sales to equity
accounted units which are not included in gross sales revenue.
Prima facie tax reconciliation
Six monthsto 30 June 2014US$m Six monthsto 30 June2013US$m
Profit before taxation 6,092 3,211
Deduct: share of profit after tax of equity accounted units (306) (330)
Parent companies' and subsidiaries' profit before tax 5,786 2,881
Prima facie tax payable at UK rate of 21 per cent (2013: 23 per cent) 1,215 663
Higher rate of tax on Australian earnings at 30 per cent 630 562
Impact of items excluded from underlying earnings
Impairment charges (59) -
Gains and losses on disposal of businesses (118) (28)
Foreign exchange on intra-group balances 27 120
Foreign exchange on excluded finance items 66 (74)
Other exclusions 69 (79)
Other tax rates applicable outside the UK and Australia 24 11
Resource depletion and other depreciation allowances (94) (10)
Research, development and other investment allowances (14) (25)
Recognition of previously unrecognised deferred tax assets (51) (4)
Unrecognised current year operating losses 44 151
Other items (a) 68 239
Total taxation charge (b) 1,807 1,526
(a) Other items include various adjustments to provisions for taxation of prior periods.
(b) This tax reconciliation relates to the Group's parent companies, subsidiaries, joint operations, and excludes
equity accounted units. The Group's share of profit of equity accounted units is net of tax charges of US$202 million (30
June 2013: US$221 million).
Fair value disclosure for financial instruments
Except where stated, the information given below relates to the financial instruments of the parent companies and their
subsidiaries and joint operations, and excludes those of equity accounted units.
Fair values of financial instruments
The carrying amounts and fair values of all of the Group's financial instruments which are not carried at an amount which
approximates their fair value at 30 June 2014 and 31 December 2013 are shown in the following table. The fair values of the
Group's cash and cash equivalents and loans to equity accounted units approximate their carrying values as a result of
their short maturity or because they carry floating rates of interest.
30 June 2014 31 December 2013
CarryingvalueUS$m FairvalueUS$m CarryingvalueUS$m FairvalueUS$m
Short term borrowings (2,480) (2,515) (3,916) (3,924)
Medium and long term borrowings (23,545) (24,557) (24,544) (25,746)
Valuation hierarchy of financial instruments carried at fair value on a recurring basis
The table below shows the financial instruments carried at fair value by valuation method at 30 June 2014:
Total (h) Level 1 (a) (h) Level 2 (b) (h) Level 3 (c) (h) Not held at fair value
Assets
Listed and unlisted equity shares and quoted funds 226 105 65 14 42
Other investments, including loans (d) 540 129 - 222 189
Trade receivables (e) 2,682 13 34 - 2,635
3,448 247 99 236 2,866
Derivatives
Forward contracts: designated as hedges (f) 17 - (2) 19 -
Forward contracts and option contracts: not designated as hedges (f) 299 - (11) 310 -
Derivatives related to net debt (g) 276 (2) 278 - -
4,040 245 364 565 2,866
The table below shows the financial instruments carried at fair value by valuation method at 31 December 2013:
Total (h) Level 1 (a) (h) Level 2 (b) (h) Level 3 (c) (h) Not held at fair value
Assets
Listed and unlisted equity shares and quoted funds 279 139 79 15 46
Other investments, including loans (d) 506 106 1 215 184
785 245 80 230 230
Derivatives
Forward contracts: designated as hedges (f) 21 - - 21 -
Forward contracts and option contracts: not designated as hedges (f) 231 2 19 210 -
Derivatives related to net debt (g) 173 - 173 - -
1,210 247 272 461 230
Fair value disclosure for financial instruments (continued)
(a) Valuation is based on unadjusted quoted prices in active markets for identical financial instruments. This
category includes listed equity shares and other quoted funds.
(b) Valuation is based on inputs that are observable for the financial instruments; these include quoted prices for
similar instruments or identical instruments in markets which are not considered to be active, or inputs, either directly
or indirectly based on observable market data.
(c) Valuation is based on inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
(d) Other Investments, including loans, comprise: Cash deposits in rehabilitation funds, government bonds,
contingent consideration receivable from divested businesses, and royalty amounts receivable. The royalty receivables are
valued based on an estimate of forward sales subject to the royalty agreement.
(e) Trade receivables includes provisionally priced receivables relating to sales contracts where selling price is
determined after delivery to the customer, based on the market price at the relevant quotation point stipulated in the
contract. Revenue is recognised on provisionally priced sales based on the forward selling price for the period stipulated
in the contract. Not included within the balance above are provisionally priced trade payables of US$11 million, wherein
the fair value of the expected final price has fallen below the initial consideration received.
(f) Level 3 derivatives consist of derivatives embedded in electricity purchase contracts linked to the LME with
terms expiring between 2014 and 2040. The embedded derivatives are measured using discounted cash flows and option model
valuation techniques. Long-term embedded derivatives with a fair value of US$299 million at 30 June 2014 are valued using
significant unobservable inputs as the term of the derivative extends beyond the forward curve for aluminium.
Aluminium prices are flatlined beyond the market forward curve and increased by projected inflation up to the date of
expiry of the contract.
The range of market prices is between US$2,356 per metric tonne in 2024 to US$3,156 in 2040.
The other contracts with a fair value of US$30 million at 30 June 2014 are categorised as level 3 as the market premium
assumptions used represent unobservable inputs.
(g) Interest rate and currency interest rate swaps are valued using applicable market quoted swap yield curves
adjusted for relevant basis and credit default spreads. Currency interest rate swap valuations also use market quoted
foreign exchange rates. A discounted cash flow approach is applied to the cash flows derived from the inputs to determine
fair value.
(h) There were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 during the six months to 30
June 2014 or the year ended 31 December 2013.
Fair value disclosure for financial instruments (continued)
Level 3 Financial instruments
The table below shows the summary of changes in the fair value of the Group's level 3 financial assets and financial
liabilities for the six months to 30 June 2014 (year ended 31 December 2013).
Level 3 Financial assets and liabilities 30 June 31 December
2014 2013
Opening balance 461 189
Currency translation adjustments 7 (8)
(Losses)/gains (realised) included in:
- Consolidated sales revenue - (20)
- Net operating costs (10) 150
Gains (unrealised) included in:
- Consolidated sales revenue - 2
- Net operating costs 106 127
(Losses)/gains transferred into other comprehensive income (3) 21
Additions 4 -
Closing balance 565 461
Total (losses)/gains included in the income statement for assets and liabilities (10) 130
Sensitivity analysis in respect of level 3 derivatives
Forward contracts and options whose carrying value are valued using unobservable inputs are calculated using appropriate
discounted cash flow and option model valuation techniques.
The most significant of these assumptions relates to long term pricing wherein internal pricing assumptions are used after
the ten year LME curve. A ten per cent increase in long term metal pricing assumptions would result in a US$124 million (31
December 2013: US$165 million) decrease in carrying value. A ten per cent decrease in long term metal pricing assumptions
would result in a US$69 million (31 December 2013: US$94 million) increase in carrying value.
Acquisitions and disposals
30 June 2014
Acquisitions
There were no material acquisitions during the six months ended 30 June 2014.
Disposals
On 29 May 2014, Rio Tinto completed the sale of its 50.1 per cent interest in the Clermont Joint Venture to GS Coal for
US$1,015 million subject to finalisation of net debt and working capital adjustments. The net assets and liabilities of
Clermont were included within assets and liabilities of disposal groups held for sale in the Group statement of financial
position at 31 December 2013.
30 June 2013
There were no material acquisitions or disposals during the six months ended 30 June 2013.
Other disclosures
Simandou Investment Framework
On 26 May 2014, Rio Tinto and its Simandou project partners signed an Investment Framework with the Government of Guinea
and agreed to transfer an equity interest in Simfer S.A., to the state. The arrangement allows the Government of Guinea to
acquire equity interests of up to 25 per cent of Simfer S.A. at a discount to fair value and a further ten per cent at full
fair value. Arrangements to transfer an interest in a subsidiary undertaking at a discount to fair value are considered to
be a share-based payment. The discount provided or value given on the 25 per cent interest in Simfer S.A. has been
calculated in accordance with IFRS 2 'Share-based payment' as a charge of US$230 million.
The first tranche of shares comprising 7.5 per cent Non-Contributory Shares was transferred free of charge to the
Government of Guinea on 26 May 2014. A second tranche comprising ten per cent Ordinary Contributory Shares may be acquired
at any time for a pro rata share of historical mining cost. The third tranche of shares comprising 7.5 per cent
Non-Contributory Shares may be transferred at any time after 22 April 2016 free of charge. The remaining two tranches of
five per cent Ordinary Contributing Shares may be acquired by the Government of Guinea at market value at any time after 22
April 2026 and 22 April 2031 respectively.
Oyu Tolgoi cash generating unit
An impairment review of the Oyu Tolgoi cash-generating unit at 31 December 2013 resulted in a pre-tax impairment of
US$1,149 million to goodwill and US$3,567 million to property, plant and equipment, primarily as a result of the delay in
developing the underground mine. No goodwill remains in the Group's statement of financial position following the 2013
impairment, however in accordance with IAS 36 'Impairment of Assets', the Group is required at each reporting date to
assess whether there are any indicators that an asset may be impaired.
A consideration of external and internal sources of information impacting the valuation of the Oyu Tolgoi cash-generating
unit at 30 June 2014 did not indicate that Oyu Tolgoi was impaired.
The restart of the underground development is dependent upon approval by the shareholders of Oyu Tolgoi LLC of the
feasibility study. Rio Tinto continues to engage with the Government of Mongolia with the aim of resolving a number of
outstanding shareholder issues which have delayed the distribution of the feasibility study. Lender commitments for project
financing are currently scheduled to expire on 30 September 2014. Delays to the relative timing of cash flows for restart
of the development of the underground could have an adverse impact on the recoverable amount of the Oyu Tolgoi
cash-generating unit and result in impairment.
Capital commitments
Capital commitments, excluding the Group's share of joint venture capital commitments, were US$4,411 million (31 December
2013: US$5,499 million).
The Group's share of joint venture capital commitments contracted for at 30 June 2014 but not yet incurred were US$1,302
million (31 December 2013: US$1,747 million).
Contingent liabilities (subsidiaries and joint operations)
Contingent liabilities, indemnities and other performance guarantees were US$354 million at 30 June 2014 (31 December 2013:
US$489 million).
Indemnities and other performance guarantees represent the potential outflow of funds from the Group for the satisfaction
of obligations including those under contractual arrangements (for example undertakings related to rehabilitation
activities and supplier agreements) not provided for in the statement of financial position, where the likelihood of the
guarantees or indemnities being called is assessed as possible rather than probable or remote. There were no contingent
liabilities arising in relation to the Group's joint ventures and associates.
There are a number of legal claims currently outstanding against the Group. No material loss to the Group is expected to
result from these claims.
- More to follow, for following part double click ID:nRSG5022OdRecent news on Rio Tinto
See all newsREG - Rio Tinto - Director/PDMR Shareholding
AnnouncementREG - Rio Tinto - Director/PDMR Shareholding
AnnouncementREG - Rio Tinto - Total Voting Rights
AnnouncementREG - Rio Tinto - Notice of dividend currency exchange rates
AnnouncementREG - Rio Tinto - Director/PDMR Shareholding
Announcement