REG - Rio Tinto - Rio Tinto 2022 half year results
27/07/2022 07:15
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RNS Number : 8373T Rio Tinto PLC 27 July 2022
Rio Tinto delivers underlying EBITDA of $15.6 billion and an interim dividend
of 267 US cents per share
27 July 2022
Rio Tinto Chief Executive Jakob Stausholm said: "We remain focused on
delivering on our long-term strategy, with a steady improvement in operating
performance and some notable advances in our growth agenda. We continue to
strengthen our partnership with the Mongolian government following
commencement of underground mining at Oyu Tolgoi, delivered first iron ore
from the Gudai-Darri mine and approved early works funding at the Rincon
lithium project.
"Market conditions were good, albeit below last year's record levels. We
delivered largely flat production and solid financial results, with underlying
EBITDA of $15.6 billion, free cash flow of $7.1 billion and underlying
earnings of $8.6 billion, after taxes and government royalties of
$4.8 billion. As a result, we are paying our second highest ever interim
dividend of $4.3 billion, a 50% payout, in line with our policy. The market
environment has become more challenging at the end of the period.
"We are committed to making lasting, long-term change to our culture,
including to our workplace culture, and to building better relationships with
Indigenous peoples, communities and partners. The progress we are making will
ensure we continue to deliver attractive returns to shareholders, invest in
sustaining and growing our portfolio, and make a broader contribution to
society in the drive to net-zero carbon emissions."
Six months ended 30 June 2022 2021 2020 Change Change
vs 2021 vs 2020
Net cash generated from operating activities (US$ millions) 10,474 13,661 5,628 (23)% 86%
Purchases of property, plant and equipment and intangible assets (US$ 3,146 3,336 2,693 (6)% 17%
millions)
Free cash flow(1) (US$ millions) 7,146 10,181 2,809 (30)% 154%
Consolidated sales revenue (US$ millions) 29,775 33,083 19,362 (10)% 54%
Underlying EBITDA(1) (US$ millions) 15,597 21,037 9,640 (26)% 62%
Profit after tax attributable to owners of Rio Tinto (net earnings) (US$ 8,908 12,313 3,316 (28)% 169%
millions)
Underlying earnings per share(1) (EPS) (US cents) 532.7 751.9 293.7 (29)% 81%
Ordinary dividend per share (US cents) 267.0 376.0 155.0 (29)% 72%
Special dividend per share (US cents) - 185.0 - (100)% n/a
Total dividend per share (US cents) 267.0 561.0 155.0 (52)% 72%
Underlying return on capital employed (ROCE)(1) 34% 50% 21%
At 30 June 2022 At 31 December 2021
Net cash (1) (US$ millions) 291 1,576
(1) This financial performance indicator is a non-IFRS (as defined below)
alternative performance measure ("APM"). It is used internally by management
to assess the performance of the business and is therefore considered relevant
to readers of this document. It is presented here to give more clarity around
the underlying business performance of the Group's operations. First half 2022
and first half 2021 APMs are reconciled to directly comparable International
Financial Reporting Standards (IFRS) financial measures on pages 69 to 76.
First half 2020 APMs are reconciled within the 2020
(https://www.riotinto.com/-/media/Content/Documents/Invest/Financial-news-and-performance/Results/RT-Half-year-results-2020.pdf?rev=ea7d5e2bed5242d28d962754f3ca446e)
(https://www.riotinto.com/-/media/Content/Documents/Invest/Financial-news-and-performance/Results/RT-Half-year-results-2020.pdf?rev=ea7d5e2bed5242d28d962754f3ca446e)
Half
(https://www.riotinto.com/-/media/Content/Documents/Invest/Financial-news-and-performance/Results/RT-Half-year-results-2020.pdf?rev=ea7d5e2bed5242d28d962754f3ca446e)
Year
(https://www.riotinto.com/-/media/Content/Documents/Invest/Financial-news-and-performance/Results/RT-Half-year-results-2020.pdf?rev=ea7d5e2bed5242d28d962754f3ca446e)
Results
(https://www.riotinto.com/-/media/Content/Documents/Invest/Financial-news-and-performance/Results/RT-Half-year-results-2020.pdf?rev=ea7d5e2bed5242d28d962754f3ca446e)
release on our website. Our financial results are prepared in accordance with
IFRS - see page 42 for further information. Footnotes are set out in full on
page 7.
• Safety remains our top priority: we have now exceeded 3.5 years without a
fatality on a managed site but we recognise that safety requires operating
discipline every day. Our all-injury frequency rate of 0.35 improved from
2021: fatigue, labour shortages and other pressures from COVID-19 have
heightened safety risks in day-to-day operations. We are advancing our
enhanced Safety Maturity Model to address these risks.
• $10.5 billion net cash generated from operating activities, which was
23% lower than 2021 first half, flowed through to 30% lower free cash
flow(1) of $7.1 billion, which included a 6% decrease in capital expenditure
to $3.1 billion, as our current programme of Pilbara replacement projects near
completion.
• $8.9 billion of net earnings, 28% lower than 2021 first half, reflected
the movement in commodity prices, the impact of higher energy prices on our
operations and higher rates of inflation on our operating costs and closure
liabilities. Effective tax rate on net earnings of 24.5% compared with 28.5%
in 2021 first half.
• $15.6 billion underlying EBITDA(1) was 26% below 2021 first half, with
an underlying EBITDA margin(1) of 50%.
• $8.6 billion underlying earnings(1) (underlying EPS(1) of 532.7 US
cents) were 29% below 2021 first half with a 25.2% effective tax rate on
underlying earnings(1), compared with 28.8% in 2021 first half.
• $0.3 billion of net cash(1) at 30 June 2022, which compared with net
cash(1) of $1.6 billion at the start of the year, reflected the free cash
flow(1) of $7.1 billion, offset by $7.6 billion of cash returns to
shareholders and the $0.8 billion Rincon acquisition.
• Interim ordinary dividend of $4.3 billion, our second highest ever
interim, equivalent to 267 US cents per share. This represents 50% of
underlying earnings, in line with our shareholder returns policy, and
consistent with our practice of paying out 50% on the ordinary interim
dividend.
• Following publi
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-releases-external-review-of-workplace-culture)
cation
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-releases-external-review-of-workplace-culture)
of a comprehensive external review of our workplace culture on 1 February, we
are now implementing all recommendations from the report to ensure that
everyone at Rio Tinto has a safe, respectful and inclusive workplace.
• We are on track to achieve our gender diversity target to increase
female representation (including in senior leadership) by two percentage
points this year: this increased by one percentage point in the half to 22.6%.
• We continue to focus on rebuilding our relationships with Indigenous
Peoples across our global operations. On 14 February, we announced
(https://www.riotinto.com/news/releases/2022/Yinhawangka-people-and-Rio-Tinto-agree-new-social-cultural-heritage-plan)
an agreement with the Yinhawangka Aboriginal Corporation on a new co-designed
management plan to ensure the protection of significant social and cultural
heritage values. This is part of our proposed development of the Western Range
iron ore project in the Pilbara region of Western Australia. In May, we signed
a Heads of Agreement with the Puutu Kunti Kurrama and Pinikura (PKKP) people
which will guide the co-management of PKKP country where mining takes place.
• We made significant progress with our objective to excel in development
with the following key milestones in the first half:
◦ we delivered
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-First-ore-delivered-at-Gudai-Darri-iron-ore-mine-in-the-Pilbara)
first ore from Gudai-Darri, our first greenfield iron ore mine in the Pilbara
in more than a decade. We expect it to reach its 43 million tonne per year
capacity in 2023.
◦ we fired the first and second drawbells from the Hugo North copper-gold
underground mine at Oyu Tolgoi in Mongolia. This followed the comprehensive
agreement announced
(https://www.riotinto.com/news/releases/2022/Oyu-Tolgoi-partners-reach-comprehensive-agreement-and-approve-commencement-of-underground-mining-operations)
on 25 January 2022, which resets the relationship between partners, and
resulted in the start of underground operations. The undercut progression
remains on track to achieve sustainable production in the first half of 2023.
◦ we made
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-Makes-All-Cash-Proposal-to-Acquire-Full-Ownership-of-Turquoise-Hill)
a non-binding all-cash proposal to the Turquoise Hill (TRQ) Board to acquire
the ~49% of the issued and outstanding shares of TRQ that Rio Tinto does not
currently own. The proposed acquisition price of C$34 per share values the
minority shareholdings at US$2.7 billion. On 18 May, we agreed
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-agrees-revisions-to-funding-arrangements-with-Turquoise-Hill-Resources)
to amend the funding plan with TRQ in order to provide liquidity of up to $400
million in short-term early advances, while the Special Committee of TRQ
evaluates our proposal. The deadline in the funding plan for TRQ to conduct an
initial equity offering of at least $650 million has also been extended from
the end of August to the end of 2022.
◦ following completion of the acquisition of the Rincon lithium project in
Argentina, the Board has approved $190 million to develop a small starter
battery-grade lithium carbonate plant with a capacity of 3,000 tonnes per year
and first saleable production in 2024. The approval also includes early works
to support a full-scale operation, including power line and associated
substations, construction camp and airstrip.
• To achieve our ambition of becoming the best operator, we continue to
rollout the Rio Tinto Safe Production System (RTSPS). We now have 15 active
deployments across the business with 30 rapid improvement projects (Kaizens),
targeting bottlenecks, either completed or in progress.
• We set ambitious climate targets in 2021 to reduce our Scope 1 and 2
emissions by 50% by 2030. While, as expected, we are yet to achieve a
reduction in our emissions, we are putting the building blocks in place,
including a call
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-calls-for-proposals-for-large-scale-wind-and-solar-power-in-Queensland)
for proposals to develop large-scale wind and solar power in Central and
Southern Queensland to power our aluminium assets in the Gladstone region.
These assets require 1140MW of reliable power to operate, which equates to at
least 4GW of quality wind or solar power with firming.
• We reach
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-settles-all-tax-disputes-with-Australian-Tax-Office)
ed
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-settles-all-tax-disputes-with-Australian-Tax-Office)
agreement with the Australian Taxation Office (ATO) on all tax matters in
dispute. We also reached agreement with the Inland Revenue Authority of
Singapore in relation to transfer pricing for the same historical years (2010
to 2021). In the second half of 2022, we will pay additional tax of A$613
million to the ATO, relating to this agreement, which has been fully provided.
Energy Resources of Australia (ERA)
As the majority shareholder of ERA, we were disappointed to learn of the
material cost and schedule overruns on the Ranger rehabilitation project in
Australia's Northern Territory, announced earlier this year. We remain
committed to ensuring the rehabilitation project is completed to a standard
that will establish an environment similar to the adjacent Kakadu National
Park. We also acknowledge the Traditional Owners, the Mirarr People's
opposition to developing the Jabiluka uranium deposit
(https://nam12.safelinks.protection.outlook.com/?url=https%3A%2F%2Fgac-v3.katalyst.com.au%2Fmedia%2FW1siZiIsIjIwMjIvMDQvMTIvOHo3eDVkNjFuYV8yMDIyXzA0X0dBQ19SVF9Mb25kb25fQUdNX3JlaGFiX3JlbGVhc2VfcGx1c19ub3Rlc192NC5wZGYiXV0%2F2022-04%2520GAC%2520RT%2520London%2520AGM%2520rehab%2520release%2520plus%2520notes%2520v4.pdf%3Fsha%3D36b2fbbb7b51c5ca&data=05%7C01%7CDanielle.Smith%40riotinto.com%7C44e847b734d5451be01d08da6ecedf97%7C4341df80fbe641bf89b0e6e2379c9c23%7C0%7C0%7C637944132056063409%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=1uQCkSA2HvmsV2YdEMkkJCRuw9Hoij1xy%2BzzK8tmWyY%3D&reserved=0)
and restate our full support for ERA's commitment that the deposit would never
be developed without the Mirarr People's consent.
Since ERA announced the material cost and schedule overruns, we have sought to
work constructively with ERA's Independent Board Committee as they seek to
find a funding solution. Rio Tinto's position is that the terms should
reflect:
◦ the material cost overruns and interim funding requirements;
◦ the Mirarr People's publicly stated position on the future development
of Jabiluka; and
◦ Rio Tinto's expectation that its rehabilitation commitment will not
generate any financial return.
These talks are ongoing as we work to ensure ERA has the means to complete
this critical rehabilitation project.
Strong cash flow from operations
Six months ended 30 June 2022 Six months ended 30 June 2021
US$m US$m
Net cash generated from operating activities 10,474 13,661
Purchases of property, plant and equipment and intangible assets (3,146) (3,336)
Sales of property, plant and equipment 1 26
Lease principal payments (183) (170)
Free cash flow(1) 7,146 10,181
Disposals - 10
Dividends paid to equity shareholders (7,595) (6,435)
Acquisition of Rincon (825) -
Other (11) 48
(Decrease)/Increase in net cash / debt(1) (1,285) 3,804
Footnotes are set out on page 7.
• $10.5 billion in net cash generated from operating activities, 23% lower
than 2021 first half, was primarily driven by price movements for our major
commodities. In June 2022, we made a $1.1 billion (A$1.5 billion) final
payment to the Australian Taxation Office in respect of 2021 profits. We also
experienced a rise in working capital, primarily due to elevated prices for
raw materials in aluminium inventory, partly offset by a drawdown in iron ore
portside inventories.
• $3.1 billion capital expenditure was comprised of $0.3 billion of growth
capital, $1.2 billion of replacement capital and $1.6 billion of sustaining
capital.
• $7.6 billion of dividends paid in 2022 first half, being the 2021 final
ordinary and special dividends, including foreign exchange impacts.
• The above movements, together with completion of the $0.8 billion
acquisition of the Rincon lithium project, resulted in net cash(1) decreasing
by $1.3 billion in 2022 first half, with net cash(1) of $0.3 billion at 30
June 2022.
Guidance
• We expect our share of capital investment(1) (refer to Alternative
Performance Measures on page 73) of around $7.5 billion (previously $8.0
billion) in 2022. In each of 2023 and 2024, we expect our share of capital
investment of $9.0 to $10.0 billion, which includes the ambition to invest up
to $3.0 billion in growth per year, depending on opportunities. Each year also
includes sustaining capital of around $3.5 billion, of which around $1.5
billion a year is for Pilbara iron ore, subject to ongoing inflationary
pressure. Around half of our share of capital investment is denominated in
Australian dollars. In addition, our guidance includes around $1.5 billion
over the next three years on decarbonisation projects, mainly relating to
repowering the Pilbara: this will accelerate from 2025, bringing our best
estimate to around $7.5 billion, in aggregate from 2022 to 2030.
• Effective tax rate on underlying earnings is expected to be around 30%
in the second half of 2022. Following a settlement with the Australian Tax
Office, we expect to pay A$0.6 billion in the second half of 2022 in respect
of twelve historical years (2010 to 2021).
2022 unit cost guidance 2022 Guidance
Pilbara iron ore unit cash costs, free on board (FOB) basis - US$ per wet 19.5-21.0
metric tonne*
Australian dollar exchange rate 0.71
Copper C1 unit costs (average for Kennecott, Oyu Tolgoi and Escondida) - US 130-150
cents per lb
(*) Excludes COVID-19 costs.
• In 2022, we expect Pilbara iron ore unit cash costs to be $19.5-21.0 per
tonne, at an Australian dollar exchange rate of 0.71 (previously 0.75),
excluding any additional COVID-19 response costs.
• In 2022, we continue to expect copper C1 unit costs to be 130 to 150 US
cents per pound.
2022 production guidance (Rio Tinto share, unless otherwise stated) 2022 Guidance
Pilbara iron ore (shipments, 100% basis) (Mt) 320 to 335
Bauxite (Mt) 54 to 57
Alumina (Mt) 7.6 to 7.8
Aluminium (Mt) 3.0 to 3.1
Mined copper (kt) 500 to 575
Refined copper (kt) 230 to 290
Diamonds (M carats) 4.5 to 5.0
Titanium dioxide slag (Mt) 1.1 to 1.4
Iron Ore Company of Canada pellets and concentrate (Mt) 10.0 to 11.0
Boric oxide equivalent (Mt) ~0.5
• Production guidance is unchanged from our Second Quarter Operations
Review released on 15 July 2022.
• Iron ore shipments and bauxite production guidance remain subject to
weather and market conditions.
• Our guidance assumes development of the COVID-19 pandemic does not lead
to government-imposed restrictions and widespread protracted cases, which
could result in a significant number of our production and maintenance
critical workforce and contractor base being unable to work due to illness
and/or isolation requirements. This risk extends to prolonged interruption of
service from a key partner or supplier which could lead to severely
constrained operational activity of a key asset or project.
• Pilbara shipments guidance remains dependent on ramp-up of Gudai-Darri
and Robe Valley, availability of skilled operations and maintenance labour,
and management of cultural heritage, including any impacts from the Aboriginal
Cultural Heritage Act 2021.
Our projects and development options
• We increased our exploration and evaluation spend by 13% to $367 million
in 2022 first half, as we ramped up our activities in Guinea, Argentina and
Australia.
• We delivered first ore from the Gudai-Darri greenfield iron ore mine in
Western Australia. Production from the mine will continue to ramp up through
the remainder of this year and is expected to reach full capacity in 2023.
This first phase, with a 43 million tonne annual capacity, will replace
depleting orebodies and provide some incremental capacity. The commissioning
was achieved amidst ongoing COVID-19 restrictions, including labour access and
supply chain quality issues. This led to a rise in the approved capital cost
to $3.1 billion, in line with our disclosure in February that costs could rise
by 15%.
• The $1.0 billion (Rio Tinto share) investment in the Robe River Joint
Venture replacement iron ore mines is nearing completion. Mesa A wet plant
commissioning challenges impacted production ramp-up in the first quarter.
Plant performance stabilised in the second quarter and rectification works
remain on track for completion in the third quarter.
• The Kemano hydropower tunnel project in British Columbia is complete.
Water flow was achieved through the second tunnel powerhouse in June following
completion of tunnel construction works. This project will ensure the
long-term, sustainable operation of the Kitimat aluminium smelter.
• The first and second drawbells of the Hugo North underground mine at Oyu
Tolgoi in Mongolia were fired in June. This follows the comprehensive
agreement reached
(https://www.riotinto.com/news/releases/2022/Oyu-Tolgoi-partners-reach-comprehensive-agreement-and-approve-commencement-of-underground-mining-operations)
with our partners on 25 January 2022. Sustainable production is expected in
the first half of 2023, with the capital forecast at $7.06 billion, an
increase of $0.3 billion against the 2020 Definitive Estimate, largely related
to COVID-19 disruptions.
• Stripping for the $1.5 billion second phase of the south wall pushback
at Kennecott in the US, extending operations to 2032, remains on track. A $108
million investment in underground characterisation studies is ongoing:
potential underground mining would occur concurrently with open pit operations
and result in increased output.
• At the Jadar lithium-borate project in Serbia, we are continuing to
explore all options following the Government of Serbia's cancellation of the
Spatial Plan in January, requiring revocation of all related permits. We
acknowledge the concerns from communities and are engaging meaningfully to
explore ways to address them.
• Following completion of the acquisition of the Rincon lithium project in
Argentina, the Board has approved $190 million to develop a small starter
battery-grade lithium carbonate plant with a capacity of 3,000 tonnes per year
and first saleable production in 2024. The approval also includes early works
to support a full-scale operation, including power line and associated
substations, construction camp and airstrip. We have undertaken considerable
reviews and baseline studies in the last quarter, including safety and
environmental, working closely with the Government of Salta on permitting
requirements. In early July, we were granted a permit by the provincial
regulators and have commenced an exploration campaign to further understand
Rincon's basin and brine reservoir. We will continue to engage with local
communities, the Province of Salta and the Government of Argentina to ensure
open and transparent dialogue on the work plans. We recently signed
(https://www.riotinto.com/news/releases/2022/Ford-Rio-Tinto-sign-MOU-for-battery-and-low-carbon-materials-supply-to-support-net-zero-future)
a non-binding Memorandum of Understanding (MoU) with the Ford Motor Company
for a significant off-take agreement of Rincon lithium, to support Ford's
production of electric vehicles.
• The Zulti South project at Richards Bay Minerals (RBM) in South Africa
remains on full suspension.
• At the Winu copper-gold project in Western Australia, a programme of
work is ongoing to supplement our understanding of the deposit and the
environmental and cultural heritage impacts in advance of submitting the
regulatory approval requests. We also continue to strengthen our partnerships
with Traditional Owners and advance agreement making.
• At the Resolution Copper project in Arizona, we are working with the US
Forest Service to progress the Final Environmental Impact Statement (FEIS) and
complete actions necessary for the land exchange. We continue to advance
partnership discussions with 11 federally-recognised Tribes that are
participating in the formal consultation process on the FEIS and land
exchange. We note the Ninth Circuit's decision to uphold the lower court
ruling denying Apache Stronghold's request for injunctive relief. We are
encouraged by the significant local support for the project but respect the
views of certain groups who oppose it, and will continue our efforts to
address and mitigate these concerns.
• At the Simandou iron ore project in Guinea(2), project activities have
stopped following an order from the Government of Guinea to all parties to
stop work in country. We are actively engaging with the Government and the
Winning Consortium Simandou (WCS) towards the resumption of formal
negotiations. We remain committed to delivering Simandou in accordance with
international ESG standards, ensuring that the project results in sustainable
benefits to Guinea and its people, along with our shareholders and customers.
1. This financial performance indicator is an APM. It is used internally
by management to assess the performance of the business and is therefore
considered relevant to readers of this document. It is presented here to give
more clarity around the underlying business performance of the Group's
operations. APMs are reconciled to directly comparable IFRS financial measures
on pages 69 to 76.
2. Operating under the Simfer joint venture where the government of Guinea
holds 15% and Simfer Jersey holds 85%. Simfer Jersey is owned by Chalco Iron
Ore Holdings (CIOH) (47%) and Rio Tinto (53%). CIOH is owned by Chinalco
(75%), Baosteel Resources (20%), China Civil Engineering Construction
Corporation (CCECC) (2.5%) and China Harbour Engineering Company (CHEC)
(2.5%). This structure has been in place since 2017.
( )
Update on our Sustainability targets
Our strategy, objectives and values guide our approach to sustainability -
being a trusted steward of resources and being a socially responsible business
partner.
Progress against our Safety targets
Nothing is more important than the safety and wellbeing of our employees,
contractors and communities. Our first priority is to operate with zero
fatalities, reduce workplace injuries and prevent catastrophic events. We have
exceeded 3.5 years without a fatality on a managed site. The first half of
2022 has been stable, with our all-injury frequency rate (AIFR) of 0.35
representing an improvement on the 2022 target of 0.38 and 2021 actual of
0.40.
The primary causes of Potentially Fatal Incidents (PFIs) remain falling
objects, vehicles and driving. As a result of focused work by our sites, there
has been a 33% reduction in PFIs relating to falling objects compared to the
same period in 2021.
We believe our Safety Maturity Model - which brings together the key elements
of building a strong safety culture and leadership maturity - is the route to
achieve a safe and productive workplace. Successfully introduced in 2019, we
have enhanced the model this year to extend our leadership maturity approach
to contractors, as well as health and environment management. It will also
include a focus on mindsets and behaviours to strengthen our culture of safety
for everyone.
Progress against our Water targets
By 2023, for all our managed operations, we will disclose their permitted
surface water allocation, how much of their allocation they have used, and the
average rainfall volume that the catchment receives.
We have been focused on the collection and analysis of data for all our
product groups and are now finalising the dataset verification ahead of
external disclosure. We have developed standardised controls for our assets to
prevent or mitigate water security risks and those associated with discharge
quality and quantity, long-term dewatering and geochemical impacts.
Integrating these controls completes the realignment of our water risk
management approach and further enables our assets to improve water
stewardship.
Progress against our Climate targets
We are targeting a reduction in our absolute Scope 1 and 2 emissions of 15% by
2025 and a reduction of 50% by 2030 relative to our 2018 equity baseline.
In the first half of 2022, we continued to progress our climate strategy by
initiating a number of partnerships to address our operational and value chain
emissions. In the lead up to COP27, we are working to identify and develop
options to raise our climate ambition in line with the goals of the Paris
Agreement.
Reducing the carbon footprint of our operations
Mt CO(2)e H1 2022* H1 2021 2021 2020 2019 2018**
Scope 1 emissions 11.2 11.3 22.7 22.8 23.1 23.7
Scope 2 emissions 4.3 4.3 8.4 8.7 8.3 8.9
Total 15.5 15.6 31.1 31.5 31.5 32.6
*Emissions from non-managed operations and emissions for June 2022 are
estimated based on production and emission intensity
**Adjusted baseline target due to divestments and acquisitions. Refer to our
Scope 1, 2 and 3 Emissions
(https://www.riotinto.com/-/media/Content/Documents/Invest/Reports/Climate-Change-reports/RT-Climate-scope-123-report-2021.pdf?rev=02ff321e0574403a91912babcbb341cd)
(https://www.riotinto.com/-/media/Content/Documents/Invest/Reports/Climate-Change-reports/RT-Climate-scope-123-report-2021.pdf?rev=02ff321e0574403a91912babcbb341cd)
Calculation Methodology 2021
(https://www.riotinto.com/-/media/Content/Documents/Invest/Reports/Climate-Change-reports/RT-Climate-scope-123-report-2021.pdf?rev=02ff321e0574403a91912babcbb341cd)
report for more information.
Our emissions in the first half of 2022 remain at approximately the same level
as 2021. The abatement projects identified in the short-term incentive plan
targets have continued to progress through feasibility, design and approvals
stages. However, as indicated in the 2021 Climate Change Report, these
projects are expected to deliver more significant reductions later this
decade. Current emissions levels are mostly influenced by changes in
operational factors.
We continued to identify preferred locations in the Pilbara for wind and solar
energy developments. We have a particular focus on our proposed 100MW solar
farm near Karratha, one of the first projects identified as part of our
programme to generate 1GW of renewable energy to replace gas power to meet
demand from our fixed plants and infrastructure, as well as support early
electrification and decarbonisation of our mobile fleet. Planning for
additional engineering, environmental and heritage studies on these preferred
locations is ongoing and we continue to engage with the Western Australian
Government, Traditional Owners and other stakeholders.
In the first half of 2022, we established new partnership initiatives to
reduce our future emissions, such as a one-year biofuel trial
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-and-bp-sign-one-year-trial-of-marine-biofuels)
with bp to help reduce carbon emissions from our marine fleet, a letter of
intent
(https://www.riotinto.com/news/releases/2022/Maritime-industry-joins-forces)
with BHP, Oldendorff Carriers and Star Bulk Carriers Corp to assess the
development of an iron ore Green Corridor between Australia and East Asia and
select
(https://www.riotinto.com/news/releases/2022/Mining-giants-back-eight-winning-ideas-in-global-challenge)
ed
(https://www.riotinto.com/news/releases/2022/Mining-giants-back-eight-winning-ideas-in-global-challenge)
eight technology innovators' submissions to progress beyond the 'Charge On
Innovation Challenge'. This global challenge, a partnership between BHP, Rio
Tinto and Vale, seeks to accelerate commercialisation of effective solutions
for charging large electric haul trucks while demonstrating there is an
emerging market in mining for these solutions.
We also issu
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-calls-for-proposals-for-large-scale-wind-and-solar-power-in-Queensland)
ed
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-calls-for-proposals-for-large-scale-wind-and-solar-power-in-Queensland)
a call for proposals to repower our Gladstone aluminium assets by developing
up to 4GW of large-scale wind and solar renewable energy projects in Central
and Southern Queensland. This is an outcome of the Statement of Cooperation
signed with the Queensland Government in October 2021.
We have established a small team to identify investment opportunities in
nature-based solutions on or near our landholdings. We will look for high
quality, high integrity projects that could deliver carbon offsets with
biodiversity and community benefits.
Climate partnerships across our value chains
In the first half of 2022, we made progress against our Scope 3 goals through
partnerships to decarbonise our value chain.
We signed
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-and-Salzgitter-sign-MOU-to-study-using-Rio-Tinto-iron-ore-in-green-steelmaking)
a Memorandum of Understanding (MoU) with Salzgitter AG to work towards
carbon-free steelmaking. Under the MoU, Rio Tinto and Salzgitter will explore
optimisation of iron ore pellets, lump and fines for use in hydrogen direct
reduction steelmaking and explore the potential for greenhouse gas emission
certification across the steel value chain.
Research work on the Low Carbon Research Project announced in October 2021 is
continuing. We are investigating making iron by using Pilbara iron ore fines,
with a sustainable raw biomass as a coking coal replacement, and microwaves as
a highly efficient supplementary energy source. Initial testing has resulted
in the successful production of highly metallised directly reduced iron with
targeted levels of carbon. Based on these results we have progressed the
design of a larger scale continuous pilot plant to further our research and
development and assess the potential of the process at commercial scale. In
parallel, we continue to progress the other five focus areas for iron and
steel decarbonisation.
Progress against our Gender Diversity targets
We are on track to achieve our target to increase female representation
(including in senior leadership) by two percentage points each year. In the
first half of 2022, representation of women increased by one percentage point
to 22.6% of total workforce.
Progress against the Everyday Respect recommendations
We continue to focus on becoming a more outward-looking and caring company,
ensuring that everyone at Rio Tinto can count on a safe, respectful and
inclusive workplace. To date, over 57% of our ~7,000 leaders have either
registered for or completed the Everyday Respect training. We are also
completing facilities assessments at all our operations and engaging with our
workforce to prioritise rectification and improvement works.
We have created a discrete unit, dedicated to providing early intervention
options for people experiencing harmful behaviours, as well as those providing
support to people experiencing these behaviours, such as leaders and human
resources advisors. We are also enhancing our confidential reporting
("myVoice") programme and investigations framework to ensure people are at the
heart of these processes and feel they are truly cared for and supported every
step of the way.
We are enabling ways for people who have experienced harm to sensitively share
their story in their own words with senior leaders. This allows people to be
heard and is an important part of healing, while surfacing issues
constructively to keep learning and improving.
Leveraging our strong safety culture, we have introduced "Purple Banner"
communications - initially implemented in Iron Ore and now being expanded in
other parts of the company. The intent of a Purple Banner is to increase the
transparency of disrespect and other harmful behaviours that occur across the
business and share important information about incidents that bring to light
different learnings to prevent disrespectful behaviours.
In order to independently measure our progress and shape additional future
actions, we have committed to commissioning another comprehensive independent
review of our workplace culture, which we expect to conduct in 2024.
Progress against our Communities and Social Performance targets
In February, we announced
(https://www.riotinto.com/news/releases/2022/Yinhawangka-people-and-Rio-Tinto-agree-new-social-cultural-heritage-plan)
an agreement with the Yinhawangka Aboriginal Corporation on a new co-designed
management plan to ensure the protection of significant social and cultural
heritage values as part of our proposed development of the Western Range iron
ore project in the Pilbara region of Western Australia. The Social, Cultural
Heritage Management Plan is the result of strong collaboration over the past
year between the Yinhawangka people and Rio Tinto including "on-Country"
visits, archaeological and ethnographic surveys and workshops. As a result,
the mine has been designed to reduce impacts on social and cultural heritage
values. We submitted the plan to Western Australia's Environmental Protection
Authority (EPA) on 1 February 2022, as part of our submission regarding the
Greater Paraburdoo Iron Ore Hub Proposal. The EPA recommended approval of the
Western Range Proposal, subject to certain conditions. We are now awaiting
final environmental approval decisions by the Western Australian State and
Australian federal governments.
In May, we recognised two years since the destruction of the rock shelters on
the land of the Puutu Kunti Kurrama and Pinikura (PKKP) people at our Brockman
iron ore mine in the Pilbara. We are committed to transforming our culture,
building better relationships and ensuring cultural heritage is understood,
valued and better protected. In May, the PKKP Aboriginal Corporation entered a
co-management Heads of Agreement with Rio Tinto. This agreement is an
important step towards rebuilding our relationship with the PKKP peoples and
sets out how we will work together in partnership on a co-management approach
to mining activities on PKKP Country. We also continue to work to remediate
the Juukan Gorge area under the guidance of the Puutu Kunti Kurrama
Traditional Owners.
We continued to build on our relationship reset in Mongolia, with the Oyu
Tolgoi Board approving a $50 million five-year funding programme to support
the long-term, sustainable development of Khanbogd town - our neighbouring
host community in the South Gobi region.
In July, we signed a Memorandum of Understanding (MoU) with four Weipa region
Traditional Owner groups detailing an agreed consultation process around
closure planning for the East Weipa bauxite mine. The MoU was jointly
developed by Traditional Owners and Rio Tinto and lays a path regarding the
eventual return of their lands after mining at East Weipa ceases operation in
2024.
Indigenous leadership and engagement
We have established an Australian Advisory Group (AAG) to provide guidance on
current and emerging issues, and better manage policies and positions that are
important to both Australian communities and our broader business. The AAG
held its second meeting in Weipa, in northern Queensland and continues to
refine its scope and bespoke procedures for providing high quality advice for
the Chief Executive Australia and the Executive Committee. The AAG is focusing
its attention on high level policies including the work of the Everyday
Respect Taskforce, and Rio Tinto's approach to protecting and managing
Cultural Heritage.
Our $50 million investment, announced in 2021, to attract, retain and grow
Indigenous professionals and leaders has enabled us to increase the number of
Indigenous leaders in Rio Tinto fivefold since November 2020, through internal
promotion and recruitment.
Former Panguna copper mine in Bougainville
In late 2021, a joint Committee was formed to oversee a detailed independent
impact assessment of the Panguna mine in Bougainville, Papua New Guinea, to
identify and better understand the environmental and human rights impacts of
the mine. The Committee, which includes representatives from the Autonomous
Bougainville Government, Papua New Guinea Government, community members and
landowners, the Human Rights Law Centre, Bougainville Copper Limited and Rio
Tinto, has met three times since its establishment and the meetings have been
constructive and collaborative. In the second half of the year, the Committee
plans to finalise selection and endorsement of the consulting firm to
undertake the impact assessment.
Underlying EBITDA and underlying earnings by product group
Underlying EBITDA Underlying earnings
2022 2021 Change 2022 2021 Change
Six months ended 30 June US$m US$m % US$m US$m %
Iron Ore 10,395 16,060 (35)% 6,461 10,216 (37)%
Aluminium 2,866 1,924 49% 1,547 921 68%
Copper 1,487 2,048 (27)% 543 885 (39)%
Minerals 1,259 1,398 (10)% 420 498 (16)%
Reportable segment total 16,007 21,430 (25)% 8,971 12,520 (28)%
Other operations (78) (4) 1850% (167) (51) 227%
Inter-segment transactions (1) (6) (83)% - (3) (100)%
Product group total 15,928 21,420 (26)% 8,804 12,466 (29)%
Central pension costs, share-based payments, insurance and derivatives 265 119 123% 237 120 98%
Restructuring, project and one-off costs (86) (36) 139% (61) (23) 165%
Other central costs (397) (346) 15% (363) (294) 23%
Central exploration and evaluation (113) (120) (6)% (95) (100) (5)%
Net interest 105 (3) (3600)%
Total 15,597 21,037 (26)% 8,627 12,166 (29)%
Underlying EBITDA and underlying earnings are APMs used by management to
assess the performance of the business, and provide additional information
which investors may find useful. APMs are reconciled to directly comparable
IFRS financial measures on pages 69 to 76.
Central and other costs
Pre-tax central pension costs, share-based payments, insurance and derivatives
were a $265 million credit compared with a $119 million credit in 2021 first
half, reflecting gains on derivatives recognised in the first half of 2022 of
$65 million, compared to derivative losses recognised in 2021 first half of
$41 million, higher insurance recoveries, along with lower central pension
costs and share based payments.
On a pre-tax basis, restructuring, project and one-off central costs were 139%
higher than 2021 first half mainly associated with specific projects
undertaken to support our CSP objectives including donations to humanitarian
agencies to support those in Ukraine, along with increased compliance and
legal costs.
Other central costs of $397 million were 15% higher than in 2021 first half,
reflecting the Group's investment in the rollout of RTSPS across the Group and
enhancing capability to progress our ESG and CSP objectives.
Central exploration
We have a strong portfolio of exploration projects with activity in 19
countries across seven commodities in early exploration and studies stages,
reflected in our pre-tax central spend of $113 million. In 2022 first half,
we continued to prioritise our exploration portfolio, with a particular focus
on copper projects in Australia, Peru, Zambia and the United States, diamonds
in Canada and Angola, and nickel in Canada and Finland. Mine-lease exploration
continued at our managed businesses including Pilbara Iron in Australia,
Diavik in Canada and Cape York in Australia. The Falcon Project in
Saskatchewan, Canada will remain in care and maintenance until the end of 2022
during which time we will consider alternative commercial options, including
potential exit.
Commentary on financial results
To provide additional insight into the performance of our business, we report
underlying EBITDA and underlying earnings. The principal factors explaining
the movements in underlying EBITDA are set out in this table.
US$m
2021 first half underlying EBITDA 21,037
Prices (3,404)
Exchange rates 312
Volumes and mix 283
General inflation (595)
Energy (560)
Operating cash unit costs (1,259)
Higher exploration and evaluation spend (43)
One-off items - impact of Kitimat strike (339)
Non-cash costs/other 165
2022 first half underlying EBITDA 15,597
Robust financial results driven by significant movement in pricing
We saw significant movement in the pricing for our commodities in the half,
amidst growing recession fears and a decline in consumer confidence.
Movements in commodity prices resulted in a $3,404 million decline in
underlying EBITDA overall compared with 2021 first half. This was primarily
from lower iron ore prices (-$5,739 million), which was partly offset by a
significant price uplift for our Aluminium business ($1,813 million), driven
by a rise in London Metal Exchange (LME) prices, improved market and product
premiums and higher alumina pricing. The pricing impact overall for our Copper
business was broadly flat, including the impact of provisional pricing. We
have included a table of prices and exchange rates on page 28.
The monthly average Platts index for 62% iron fines converted to an FOB basis
was 26% lower on average compared with 2021 first half.
The average LME price for copper was 7% higher, while the LME aluminium price
was 37% higher, compared with 2021 first half. The gold price rose 4%.
The mid-west premium duty paid for aluminium in the US averaged $801 per
tonne, 72% higher than in 2021 first half.
Weaker local currencies during 2022 first half
Compared with 2021 first half, on average, the US dollar strengthened by 6%
against the Australian dollar and by 1% against the Canadian dollar. Currency
movements increased underlying EBITDA by $312 million relative to 2021 first
half.
Improvement in sales volumes and mix
Higher sales volumes and changes in product mix across the portfolio increased
underlying EBITDA by $283 million compared to 2021 first half. This was mostly
attributable to increased iron ore portside sales in China and favourable
market and value-added product premiums for our Aluminium business.
Impact of rising inflation and higher energy prices
Average movements in energy prices compared with 2021 first half reduced
underlying EBITDA by $560 million, mainly due to higher diesel prices for our
trucks, trains and ships. Rising general price inflation across our global
operations resulted in a $595 million reduction in underlying EBITDA,
including $137 million for the impact of higher than expected inflation on
closure provisions (closed / fully impaired sites and environment
liabilities).
Disciplined focus on costs to help offset market-linked increases
We remained focused on cost control throughout the half, in particular
maintaining discipline on our long-run fixed costs: however, a rise in our
operating cash unit costs reduced underlying EBITDA by $1,259 million (on a
unit cost basis) compared with 2021 first half. This mainly reflected
temporary cost pressures over and above general inflation from higher
market-linked prices for raw materials, in our Aluminium and Copper
businesses. We also increased resourcing in our iron ore business, to support
the ramp-up at Gudai-Darri and investment in pit health and system
reliability, and incurred additional costs at the Kitimat and Boyne aluminium
smelters due to production disruptions. The impact of these other costs
increases was relatively muted, reflecting disciplined cost control across the
business.
Increasing our global exploration and evaluation activity
We increased our exploration and evaluation spend by $43 million, or 13%, to
$367 million. This was focused on our greenfield programmes across 19
countries and our highest value evaluation projects.
Net earnings
The principal factors explaining the movements in underlying earnings and net
earnings are set out here.
US$m
2021 first half net earnings 12,313
Total changes in underlying EBITDA (5,440)
Increase in depreciation and amortisation (pre-tax) in underlying earnings (145)
Increase in interest and finance items (pre-tax) in underlying earnings (288)
Decrease in tax on underlying earnings 2,080
Decrease in underlying earnings attributable to outside interests 254
Total changes in underlying earnings (3,539)
Changes in exclusions from underlying earnings:
Gains recognised by Kitimat relating to LNG Canada's project 107
Movement in exchange differences and gains/losses on debt (65)
Movement in closure estimates (non-operating and fully impaired sites) 92
2022 first half net earnings 8,908
Depreciation and amortisation, net interest and finance items, tax and
non-controlling interests
The depreciation and amortisation charge was $145 million higher than 2021
first half, mainly due to depreciation on capitalised closure costs which
increased in 2021 at a number of our Aluminium sites. Our capital base was
also higher in Iron Ore, Copper and Minerals as a result of our investment
activities. This was partially offset by a weaker Australian dollar against
the US dollar.
Interest and finance items (pre-tax) were higher mainly as a result of a $296
million increase in amortisation of discount on provisions, as higher
inflation had an impact on the Group's closure and restoration/environmental
liabilities. The amortisation charge of $503 million (2021 first half: $207
million) is based on expected inflation for 2022 at the start of the year.
Subsequent changes to our outlook on 2022 inflation are recorded as operating
costs within underlying EBITDA (increase of $137 million) and capitalised
within mining properties (increase of $360 million).
The 2022 first half effective corporate income tax rate on underlying
earnings, excluding equity accounted units, was 25.2%, compared with 28.8% in
2021 first half. The effective tax rate on underlying earnings in Australia
was 29% in 2022 first half compared with just over 30% in 2021 first half. We
anticipate the effective tax rate on underlying earnings to be around 30% in
the second half of 2022. We reached
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-settles-all-tax-disputes-with-Australian-Tax-Office)
agreement with the Australian Taxation Office (ATO) on all tax matters in
dispute. We also reached agreement with the Inland Revenue Authority of
Singapore in relation to transfer pricing for the same historical years (2010
to 2021). In the second half of 2022, we will pay additional tax of A$613
million to the ATO, relating to this agreement, which has been fully provided.
Items excluded from underlying earnings
During the first half of 2022, LNG Canada elected to terminate their option to
purchase additional land at Kitimat, Canada. This resulted in a $107 million
gain which includes the release of deferred income and receipt of a
cancellation fee payment. This has been excluded from underlying earnings
consistent with prior years as it is part of a series of material transactions
unrelated to the core business.
In 2022 first half, we recognised a non-cash exchange and derivative gain of
$215 million. This was mainly on US dollar debt in non-US dollar functional
currency Group companies, intragroup balances, and the revaluation of certain
derivatives which do not qualify for hedge accounting. These gains compared
with a 2021 first half gain of $280 million, giving rise to a unfavourable
period-on-period movement of $65 million. The exchange gains are largely
offset by currency translation losses recognised in equity. The quantum of US
dollar debt is largely unaffected and we will repay it from US dollar sales
receipts.
In 2022 first half, we recognised $41 million in closure costs relating to
inflationary increases to closure provisions for non-operating and fully
impaired sites in excess of the unwind of the discount. This was $92 million
lower than 2021 first half closure charges which related to Diavik closure
provision increases and further increases at a number of the Group's legacy
sites where the environmental damage preceded ownership by Rio Tinto.
Profit
Net earnings and underlying earnings refer to amounts attributable to the
owners of Rio Tinto. The net profit attributable to the owners of Rio Tinto in
2022 first half was $8.9 billion (2021 first half: $12.3 billion). We recorded
a profit after tax in 2022 first half of $9.4 billion (2021 first half: $13.1
billion) of which a profit of $0.5 billion (2020: $0.8 billion) was
attributable to non-controlling interests.
Net earnings and underlying earnings
The differences between underlying earnings and net earnings are set out in
this table (all numbers are after tax and exclude non-controlling interests).
Six months ended 30 June 2022 Six months ended 30 June 2021
US$m US$m
Underlying earnings 8,627 12,166
Items excluded from underlying earnings
Gains recognised by Kitimat relating to LNG Canada's project 107 -
Foreign exchange and derivative gains on net debt and intragroup balances and 215 280
derivatives not qualifying for hedge accounting
Net losses from movements to closure estimates (non-operating and fully (41) (133)
impaired sites)
Net earnings 8,908 12,313
On pages 47 to 49 there is a detailed reconciliation from underlying earnings
to net earnings, including pre-tax amounts and additional explanatory notes.
The differences between Profit after tax and underlying EBITDA are set out in
the table on page 48.
Balance sheet
Net cash reduced by $1.3 billion in 2022 first half, resulting in a net cash
position of $0.3 billion at 30 June 2022. This reflected our strong free cash
flow, partly offset by dividend payments of $7.6 billion and the $0.8 billion
acquisition of the Rincon lithium project.
Our net gearing ratio (net cash to total capital) was (1)% at 30 June 2022
(31 December 2021: (3)%), see page 76.
Our total financing liabilities excluding net debt derivatives at 30 June
2022 (see page 75) were $12.9 billion (31 December 2021: $13.5 billion) and
the weighted average maturity was around 10 years. At 30 June 2022,
approximately 88% of these liabilities were at floating interest rates (95%
excluding leases). The maximum amount within non-current borrowings maturing
in any one calendar year is $1.5 billion, which mature in 2024.
We had $13.7 billion in cash and cash equivalents plus other short-term cash
investments at 30 June 2022 (31 December 2021: $15.2 billion).
Provision for closure costs
At 30 June 2022, provisions for close-down and restoration costs and
environmental clean-up obligations were $14.8 billion (31 December 2021:
$14.5 billion). The principal movements during the half were increases in
existing and new provisions that were partially adjusted to mining properties
($0.3 billion) and partially charged to profit ($0.2 billion). Also
contributing to the increase in the provision was amortisation of discount
($0.5 billion). These increases were partly offset by utilisations of the
provision through spend (-$0.3 billion) and a weaker Australian dollar
against the US dollar (-$0.5 billion).
The provisions are based on risk-adjusted real cash flows using a real-rate
discount rate of 1.5% to reflect obligations at the present value of cash
flows on 30 June 2022 terms.
Our shareholder returns policy
The Board is committed to maintaining an appropriate balance between cash
returns to shareholders and investment in the business, with the intention of
maximising long-term shareholder value.
At the end of each financial period, the Board determines an appropriate total
level of ordinary dividend per share. This takes into account the results for
the financial year, the outlook for our major commodities, the Board's view of
the long-term growth prospects of the business and the company's objective of
maintaining a strong balance sheet. The intention is that the balance between
the interim and final dividend be weighted to the final dividend.
The Board expects total cash returns to shareholders over the longer term to
be in a range of 40 to 60% of underlying earnings in aggregate through the
cycle. Acknowledging the cyclical nature of the industry, it is the Board's
intention to supplement the ordinary dividend with additional returns to
shareholders in periods of strong earnings and cash generation.
50% payout ratio on ordinary dividends maintained
2022 2021
US$ billion US$ billion
Ordinary dividend
Interim 4.3 6.1
Payout ratio on ordinary dividend 50% 50%
Additional returns
Special dividend announced in July 2021, paid in September 2021 n/a 3.0
Total cash returns to shareholders declared* 4.3 9.1
Combined total as % of underlying earnings 50% 75%
*Based on weighted average number of shares and declared dividends per share
for the respective periods and excluding foreign exchange impacts on payment.
We determine dividends in US dollars. We declare and pay Rio Tinto plc
dividends in pounds sterling and Rio Tinto Limited dividends in Australian
dollars. The 2022 interim dividend has been converted at exchange rates
applicable on 26 July 2022 (the latest practicable date before the dividend
was declared). American Depositary Receipt (ADR) holders receive dividends at
the declared rate in US dollars.
Ordinary dividend per share declared 2022 2021
interim interim
Rio Tinto Group
US cents per share 267.00 376.00
Rio Tinto plc
UK pence per share 221.63 270.84
Rio Tinto Limited
Australian cents per share 383.70 509.42
Special dividend per share declared 2022 2021
interim interim
Rio Tinto Group
US cents per share n/a 185.00
Rio Tinto plc
UK pence per share n/a 133.26
Rio Tinto Limited
Australian cents per share n/a 250.64
The 2022 interim ordinary dividend to be paid to our Rio Tinto Limited
shareholders will be fully franked. The Board expects Rio Tinto Limited to be
in a position to pay fully franked dividends for the foreseeable future.
On 22 September 2022, we will pay the 2022 interim ordinary dividend to
holders of ordinary shares and holders of ADRs on the register at the close of
business on 12 August 2022 (record date). The ex-dividend date is 11 August
2022.
Rio Tinto plc shareholders may choose to receive their dividend in Australian
dollars or New Zealand dollars, and Rio Tinto Limited shareholders may choose
to receive theirs in pounds sterling or New Zealand dollars. Currency
conversions will be based on the pound sterling, Australian dollar and New
Zealand dollar exchange rates five business days before the dividend payment
date. Rio Tinto plc and Rio Tinto Limited shareholders must register their
currency elections by 1 September 2022.
We will operate our Dividend Reinvestment Plans for the 2022 interim dividend
- see our website riotinto.com for details. Rio Tinto plc and Rio Tinto
Limited shareholders' election notice for the Dividend Reinvestment Plans must
be received by 1 September 2022. Purchases under the Dividend Reinvestment
Plan are made on or as soon as practicable after the dividend payment date and
at prevailing market prices. There is no discount available.
Review of operations
Iron Ore
Six months ended 30 June 2022 2021 Change
Pilbara production (million tonnes - 100%) 150.3 152.3 (1)%
Pilbara shipments (million tonnes - 100%) 151.4 154.1 (2)%
Salt production (million tonnes - Rio Tinto share)(1) 2.6 2.9 (10)%
Gross product sales (US$ millions) 16,610 21,707 (23)%
Average realised price (US$ per dry metric tonne, FOB basis) 120.5 168.4 (28)%
Underlying EBITDA (US$ millions) 10,395 16,060 (35)%
Pilbara underlying FOB EBITDA margin(2) 70% 79%
Underlying earnings (US$ millions) 6,461 10,216 (37)%
Net cash generated from operating activities (US$ millions) 8,512 11,049 (23)%
Capital expenditure (US$ millions)(3) (1,472) (1,912) (23)%
Free cash flow (US$ millions) 7,023 9,112 (23)%
Underlying return on capital employed(4) 73% 121%
1. Dampier Salt is reported within Iron Ore, reflecting management
responsibility. Iron Ore Company of Canada continues to be reported within
Minerals. The Simandou iron ore project in Guinea is reported within Copper.
2. The Pilbara underlying free on board (FOB) EBITDA margin is defined as
Pilbara underlying EBITDA divided by Pilbara gross product sales,
excluding freight revenue.
3. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets.
4. Underlying return on capital employed (ROCE) is defined as underlying
earnings excluding net interest divided by average capital employed.
Financial performance
Our Pilbara iron ore shipments were 2% lower than 2021 first half due to
skilled labour supply constraints, COVID-19 disruptions, ongoing mine
depletion due to delays to mine replacement projects and significantly higher
than average rainfall in May. Improved second quarter shipments were supported
by a continued focus on mine pit health and commissioning of the new
Gudai-Darri mine. We are currently experiencing elevated levels of unplanned
absences at our Pilbara operations due to COVID-19 case spikes in Western
Australia.
Underlying EBITDA of $10.4 billion was 35% lower than 2021 first half, due to
lower prices ($5.7 billion), following the 26% drop in the monthly average
Platts index for 62% iron fines adjusted to an FOB basis. Higher cash costs
were offset by increased sales portside in China.
2022 first half Pilbara unit cash costs of $21.2 per tonne (excluding
COVID-19 costs of $0.6 per tonne) compared with $17.4 per tonne in 2021 first
half (excluding COVID-19 costs of $0.5 per tonne). Key drivers were higher
input prices for materials, diesel and contractors. We also saw a rise in
labour costs given tight local markets and actions taken to secure critical
skills including core maintenance crews and mining operators to reduce the
impact of COVID-19 disruption. We have maintained our full year guidance of
$19.5 to $21.0 per tonne at an Australian dollar exchange rate of 0.71
(previously 0.75), excluding any additional COVID-19 response costs: we expect
higher volumes in the second half in line with the ramp-up of Gudai-Darri.
Our Pilbara operations delivered an underlying FOB EBITDA margin of 70%,
compared with 79% in 2021 first half, largely due to the change in the iron
ore price.
We price the majority of our iron ore sales (77%) by reference to the average
index price for the month of shipment. In 2022 first half, we priced
approximately 10% of sales with reference to the prior quarter's average index
lagged by one month with the remainder sold either on current quarter average,
current month average or on the spot market. We made approximately 73% of
sales including freight and 27% on an FOB basis.
We achieved an average iron ore price of $110.9 per wet metric tonne on an
FOB basis (2021 first half: $154.9 per wet metric tonne) across our product
suite. This equates to $120.5 per dry metric tonne, assuming 8% moisture (2021
first half: $168.4 per dry metric tonne), which compares with the monthly
average Platts index for 62% iron fines converted to an FOB basis of $128.2
per dry metric tonne (2021 first half: $172.6 per dry metric tonne). The 6%
lower realised price compared to the Platts index was due to the higher
proportion of SP10 volumes (15% of shipments - on a 100% basis - in 2022 first
half compared with 8% in 2021 first half) and increased discounts for lower
grade products.
Gross product sales for our Pilbara operations included freight revenue of
$1.1 billion (2021 first half: $1.0 billion).
Net cash generated from operating activities of $8.5 billion was 23% lower
than 2021 first half, with lower pricing partly offset by favourable working
capital movements. Free cash flow of $7.0 billion was 23% lower than 2021
first half in line with the 23% reduction in capital expenditure to $1.5
billion following completion of brownfield mine replacement tie-in projects.
Review of operations
Pilbara operations produced 150.3 million tonnes (Rio Tinto share 126.1
million tonnes), 1% lower than 2021 first half. While significantly higher
than average rainfall in May impacted mine production, continued focus on mine
pit health and commissioning of Gudai-Darri supported a stronger end to the
half.
First half 2022 shipments of 151.4 million tonnes (Rio Tinto share 126.8
million tonnes) included 22.1 million tonnes of lower grade SP10 products, 15%
of shipments, on a 100% basis (first half 2021: 8%).
We continue to increase our iron ore portside sales in China, with 14.2
million tonnes of sales in the first half of 2022 (5.4 million tonnes in the
first half of 2021). At 30 June, inventory levels are 6.5 million tonnes,
including 4.5 million tonnes of Pilbara product (11.4 million tonnes at the
end of 2021, including 8.8 million tonnes of Pilbara product). In the first
half of 2022 approximately 75% of our portside sales were either screened or
blended in Chinese ports.
Future development
Pilbara system capacity over the medium term remains between 345 and 360
million tonnes per year. Meeting this range, and the planned product mix, will
require approval and delivery of the next tranche of replacement mines. Key
projects to be delivered over the next five years include Western Range, Hope
Downs 2 (includes Bedded Hilltop), and Brockman Syncline 1. We continue to
work closely with local communities, Traditional Owners and government to
progress approvals for the new mining projects.
Aluminium
Six months ended 30 June 2022 2021 Change
Bauxite production (000 tonnes - Rio Tinto share) 27,757 27,264 2%
Alumina production (000 tonnes - Rio Tinto share) 3,765 4,047 (7)%
Aluminium production (000 tonnes - Rio Tinto share) 1,467 1,619 (9)%
Gross product sales (US$ millions) 7,796 5,932 31%
Average realised aluminium price (US$ per tonne) 3,808 2,626 45%
Underlying EBITDA (US$ millions) 2,866 1,924 49%
Underlying EBITDA margin (integrated operations) 41% 36%
Underlying earnings (US$ millions) 1,547 921 68%
Net cash generated from operating activities (US$ millions) 2,088 1,384 51%
Capital expenditure - excluding EAUs (US$ millions)(1) (625) (487) 28%
Free cash flow (US$ millions) 1,450 880 65%
Underlying return on capital employed(2) 20% 12%
1. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets. It excludes equity accounted units (EAUs).
2. Underlying return on capital employed (ROCE) is defined as underlying
earnings excluding net interest divided by average capital employed.
Financial performance
2022 first half saw a continuation in pricing strength and was the key driver
for our Aluminium business to increase underlying EBITDA by 49% to $2.9
billion, lifting our industry-leading underlying EBITDA margin to 41%.
Underlying EBITDA of $2.9 billion benefited from higher product premiums for
primary metal in addition to the stronger pricing environment for primary
metal and alumina. This was partly offset by higher input costs for key
materials such as caustic soda, coke, pitch and anodes, leading to an increase
in cash costs for alumina and primary metal.
We achieved an average realised aluminium price of $3,808 per tonne, 45%
higher than 2021 first half ($2,626 per tonne). This comprised the LME price,
a market premium and a value-added product (VAP) premium. The cash LME price
averaged $3,082 per tonne, 37% higher than 2021 first half, while in our key
US market, the midwest premium duty paid, which is 58% of our volumes (2021
first half: 55%) increased by 72% to $801 per tonne (2021 first half: $467 per
tonne). Our VAP sales improved to 52% of the primary metal we sold (2021 first
half: 50%) and generated product premiums averaging $422 per tonne of VAP sold
(2021 first half: $207 per tonne).
We generated $2.1 billion in net cash from operating activities, reflective of
the higher underlying EBITDA achieved, net of a $0.5 billion cash build in
working capital, driven by the higher cost of key raw materials and supply
chain constraints. Free cash flow increased by 65% to $1.5 billion.
Review of operations
Bauxite production of 27.8 million tonnes was 2% higher than 2021 first half
due to a strong operational performance at Weipa as a result of improved
equipment reliability at Amrun.
We shipped 19.7 million tonnes of bauxite to third parties in 2022 first half,
7% higher than 2021 first half, due to less direct shipping interruptions from
the major weather events. In 2022 first half, gross product sales for bauxite
increased 13% to $1.2 billion: this includes freight revenue of $0.3 billion
(2021 first half: $0.2 billion).
Alumina production of 3.8 million tonnes was 7% lower than 2021 first half.
The refineries in the Pacific (Yarwun and Queensland Alumina Limited) have
been impacted by a range of challenges in the first half including significant
COVID-19 absenteeism, above average rainfall in Eastern Australia, and some
unplanned outages and equipment reliability. Production at the Vaudreuil
refinery in Quebec was impacted by overruns on key shutdowns.
As the result of Queensland Alumina Limited's (QAL) activation of a step-in
process following sanction measures by the Australian Government, Rio Tinto
has taken on 100% of capacity for as long as the step-in continues. This
results in use of Rusal's 20% share of capacity by Rio Tinto under the tolling
arrangement with QAL. This additional output is excluded from our production
results as QAL remains 80% owned by Rio Tinto and 20% owned by Rusal.
Aluminium production of 1.5 million tonnes was 9% lower than 2021 first half
due to reduced capacity at our Kitimat smelter in British Columbia following a
strike which commenced in July 2021, with a controlled restart at the end of
the first half of 2022. Production at the Boyne smelter in Queensland was
impacted by process instability following COVID-19 related absenteeism.
Production has been stabilised and the cells that have been taken offline are
being ramped up over the next 12 months. All of our other smelters continued
to have stable performance.
Future development
ELYSIS, our joint venture with Alcoa, supported by Apple and the Governments
of Canada and Quebec, is developing a breakthrough technology that eliminates
all direct greenhouse gases from the aluminium smelting process. Construction
of the first commercial-scale prototype cells of ELYSIS(TM) inert anode
technology is underway at our Alma smelter. These prototype cells are expected
to become operational in 2023. ELYSIS aims to have its technology available
for installation from 2024 and production of larger volumes of carbon-free
aluminium approximately two years later.
We are investing
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-Expands-Low-carbon-Billet-Production-in-Canada)
$188 million to increase production capacity for low-carbon, high-value
aluminium billets at our Alma smelter in Lac-Saint-Jean, Quebec by 202,000
metric tonnes. Around half will come from non value-added products being
converted to billets, with the rest from the conversion of existing
value-added product. The casting centre at Alma will be expanded to
accommodate new state-of-the-art equipment, including a casting pit and
furnaces, allowing a larger portion of the aluminium produced to be converted
to higher value billets. Construction is set to begin in May 2023 with
commissioning in the first quarter of 2025.
Copper
Six months ended 30 June 2022 2021 Change
Mined copper production (000 tonnes - Rio Tinto share) 251.9 236.1 7%
Refined copper production (000 tonnes - Rio Tinto share) 104.1 111.4 (7)%
Gross product sales (US$ millions) 3,547 3,779 (6)%
Average realised copper price (US cents per pound)(1) 447 415 8%
Underlying EBITDA (US$ millions) 1,487 2,048 (27)%
Underlying EBITDA margin (product group operations) 54% 61%
Underlying earnings (US$ millions) 543 885 (39)%
Net cash generated from operating activities (US$ millions)(2) 1,050 1,232 (15)%
Capital expenditure - excluding EAUs(3) (US$ millions) (731) (668) 9%
Free cash flow (US$ millions) 310 561 (45)%
Underlying return on capital employed (product group operations)(4) 10% 15%
1. Average realised price for all units sold. Realised price does not
include the impact of the provisional pricing adjustments, which negatively
impacted revenues by $140 million (2021 first half: $202 million benefit).
2. Net cash generated from operating activities excludes the operating
cash flows of equity accounted units (EAUs) but includes dividends from EAUs
(Escondida).
3. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets. It excludes EAUs.
4. Underlying return on capital employed (ROCE) is defined as underlying
earnings (product group operations) excluding net interest divided by average
capital employed.
Financial performance
Underlying EBITDA was down 27% to $1.5 billion driven by lower refined copper
at Kennecott and by-product sales volumes, particularly lower gold in
concentrate at Oyu Tolgoi, resulting in associated fixed cost inefficiencies.
Our average realised copper price increased by 8% to 447 US cents per pound,
offset by the provisional pricing adjustment which negatively impacted
revenues by $140 million in 2022 first half. The benchmark gold price rose 4%
to $1,874 per ounce.
Our copper unit costs, at 148 cents per pound in 2022 first half, were in line
with full year guidance of 130 to 150 cents per pound and 108% higher than in
2021 first half, primarily driven by lower gold volumes at Oyu Tolgoi .
Increased pressure on costs for employees, consumables and raw materials were
also key drivers of the increase.
We generated $1.1 billion in net cash from operating activities, a 15%
decrease on 2021 first half, from the same drivers as underlying EBITDA and a
$0.1 billion decrease in dividends from our 30% equity holding in Escondida.
Free cash flow of $0.3 billion reflected the lower operating cash flow and
high level of capital expenditure ($0.7 billion), mainly relating to the
ongoing development of the Oyu Tolgoi underground project, where we have a 34%
effective interest but fully consolidate on the basis of management control.
Review of operations
Mined copper production, at 252 thousand tonnes, was 7% higher than 2021 first
half, due to higher grades and recoveries at Kennecott and an improvement in
concentrator feed grade at Escondida which more than offset lower grades and
recoveries at Oyu Tolgoi.
The 7% decline in refined copper production to 104 thousand tonnes mainly
reflected the impact of unplanned downtime and labour shortages at the
Kennecott smelter.
Oyu Tolgoi underground project
A comprehensive agreement was reached
(https://www.riotinto.com/news/releases/2022/Oyu-Tolgoi-partners-reach-comprehensive-agreement-and-approve-commencement-of-underground-mining-operations)
with all Oyu Tolgoi partners on 25 January 2022, resetting the relationship
between the partners, increasing the value the project delivers for Mongolia,
and allowing underground operations to commence.
As part of a comprehensive package, Turquoise Hill Resources (TRQ) agreed to
waive in full, funding balances arising from a carry account loan with Erdenes
Oyu Tolgoi (EOT) of $2.4 billion, comprising the amount of common share
investments in Oyu Tolgoi LLC funded by TRQ on behalf of EOT to build the
project to date, plus accrued interest.
In May, we agreed
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-agrees-revisions-to-funding-arrangements-with-Turquoise-Hill-Resources)
to amend the funding plan with TRQ in order to provide liquidity of up to $400
million in short-term early advances, while the Special Committee of TRQ
evaluates our C$34 per share all-cash proposal to acquire the approximately
49% of the issued and outstanding shares of TRQ that Rio Tinto does not
currently own. The deadline in the funding plan for TRQ to conduct an initial
equity offering of at least $650 million has also been extended from the end
of August to the end of 2022.
The first and second drawbells of the Hugo North underground mine were fired
in June. The undercut progression remains on track to achieve first
sustainable production from Panel 0 in the first half of 2023.
A cost and schedule reforecast was completed in June resulting in a total
project cost estimate of $7.06 billion, which remains under review by the Oyu
Tolgoi Board. This $0.3 billion increase against the 2020 Definitive Estimate
is largely related to COVID-19 disruptions. The 2022 reforecast assumes there
are no further COVID-19 disruptions.
Shafts 3 and 4 have been delayed due to COVID-19 restrictions and
reprioritisation of the mobilised workforce, as previously reported. However
progress has been made and the Shafts 3 and 4 are now at depths of 174 metres
and 276 metres, respectively. Both shafts are now expected to be commissioned
in the first half of 2024, 15 months later than the 2020 Definitive Estimate
(previously nine months delay).
Study work for Panels 1 and 2 (required to support the ramp-up to 95,000
tonnes of ore per day) is expected to be completed in the first half of 2023
and will incorporate any potential impacts due to the Shafts 3 and 4 delays.
Future development
Pre-feasibility studies at Kennecott are being progressed to extend open-pit
mining beyond 2032, with a further pushback of the north wall. We are also
advancing studies to support an underground mine below the existing open pit,
due to be complete by 2024. Potential underground mining would occur
concurrently with open pit operations and result in increased copper output.
At Kennecott, we have started
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-starts-tellurium-production-at-Kennecott)
producing tellurium, becoming one of only two U.S. producers of the critical
mineral used in advanced thin film photovoltaic solar panels. We will produce
approximately 20 tonnes of tellurium per year. Tellurium is listed as a
critical mineral by the U.S. Government due to its importance to the economy
and energy security.
Nuton(TM), an innovative new Rio Tinto venture, has entered into two
agreements as we work towards commercialising a portfolio of proprietary
copper leach-related technologies and capability. In March, Nuton(TM) entered
into an Option to Earn-in Agreement with Lion Copper and Gold Corp. to advance
studies and exploration at Lion Copper and Gold's two copper assets in Mason
Valley, Nevada. The parties have progressed to a Stage 1 work programme, which
will include permitting and baseline studies, metallurgical testing of
Nuton(TM) technologies and a drill programme, among other things, at both
assets. In April, Nuton(TM) participated in a private placement offering for
shares of Arizona Sonoran Copper Company (ASCU), which operates the Cactus
Mine and Parks/Salyer projects in Arizona. Under an associated Investor Rights
Agreement, Nuton(TM) has a one-year exclusivity period with ASCU related to
copper heap leach technologies.
Minerals
Six months ended 30 June 2022 2021 Change
Iron ore pellets and concentrates production(1) (million tonnes - Rio Tinto 5,007 5,066 (1)%
share)
Titanium dioxide slag production (000 tonnes - Rio Tinto share) 566 577 (2)%
Borates production (000 tonnes - Rio Tinto share) 260 248 5%
Diamonds production (000 carats - Rio Tinto share)(2) 2,140 1,858 15%
Gross product sales (US$ millions) 3,403 3,270 4%
Underlying EBITDA (US$ millions) 1,259 1,398 (10)%
Underlying EBITDA margin (product group operations) 40% 46%
Underlying earnings (US$ millions) 420 498 (16)%
Net cash generated from operating activities (US$ millions) 636 582 9%
Capital expenditure (US$ millions)(3) (269) (209) 29%
Free cash flow (US$ millions) 353 362 (2)%
Underlying return on capital employed (product group operations)(4) 21% 23%
1. Iron Ore Company of Canada (IOC) continues to be reported within
Minerals.
2. On 17 November 2021, Rio Tinto's interest in Diavik increased from 60%
to 100%. Production and financials reflect this from 1 November 2021.
3. Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets.
4. Underlying return on capital employed (ROCE) is defined as underlying
earnings (product group operations) excluding net interest divided by average
capital employed.
Financial performance
In 2022 first half, we benefited from strong market conditions for titanium
dioxide pigment and borates, partially offset by a weakening market for iron
ore pellets and concentrate. We also saw higher diamond prices compared with
2021 first half, following a pandemic-related build-up of demand and low
inventory levels.
Underlying EBITDA of $1.3 billion was 10% lower than 2021 first half,
primarily due to higher cash costs, energy price increases and lower volumes.
This was partially offset by higher EBITDA in relation to the increased
ownership in Diavik.
Net cash generated from operating activities of $0.6 billion was 9% higher
than 2021 first half, while free cash flow of $0.4 billion was 2% lower,
reflecting lower dividends paid to holders of non-controlling interests.
Review of operations
Production of iron ore pellets and concentrate at Iron Ore Company of Canada
(IOC) was 1% lower than 2021 first half due to the planned 7-day annual
maintenance shutdown which was successfully completed in June (vs September in
2021).
Titanium dioxide production of 0.6 million tonnes was 2% lower than 2021 first
half with a steady performance at Richards Bay Minerals in South Africa and
improved stability of operations at Rio Tinto Fer et Titane (RTFT), Canada.
There were some operational disruptions at QIT Madagascar Minerals following
cyclones.
Borates production was 5% higher than 2021 first half with strong production
rates, higher grades and improved equipment reliability.
At Diavik, our share of carats recovered were 15% higher than 2021 first half,
due to our full ownership since November 2021 (previously 60%), partially
offset by maintenance deficit build-up following COVID-19 disruptions.
Future development
Following completion of the acquisition of the Rincon lithium project in
Argentina for $825 million, the Board has approved $190 million to develop a
small starter battery-grade lithium carbonate plant with a capacity of 3,000
tonnes per year and first saleable production in 2024. The approval also
includes early works to support a full-scale operation, including power line
and associated substations, construction camp and airstrip. We have undertaken
considerable reviews and baseline studies in the last quarter, including
safety and environmental, working closely with the Government of Salta on
permitting requirements. In early July, we were granted a permit by the
provincial regulators and have commenced an exploration campaign to further
understand Rincon's basin and brine reservoir. We will continue to engage with
local communities, the Province of Salta and the Government of Argentina to
ensure open and transparent dialogue on the work plans. We recently signed
(https://www.riotinto.com/news/releases/2022/Ford-Rio-Tinto-sign-MOU-for-battery-and-low-carbon-materials-supply-to-support-net-zero-future)
a non-binding MoU with the Ford Motor Company for a significant off-take
agreement of Rincon lithium, to support Ford's production of electric
vehicles.
In May, we produced
(https://www.riotinto.com/news/releases/2022/Rio-Tinto-becomes-the-first-producer-of-scandium-oxide-in-North-America)
a first batch of high-purity scandium oxide at our RTFT commercial scale
demonstration plant in Sorel-Tracy, becoming the first North American producer
of this critical mineral, which is notably used in solid oxide fuel cells and
in aluminium alloys. The RTFT team is now focusing on production ramp-up to
bring the plant to its nameplate capacity of three tonnes of scandium oxide
per year, representing approximately 20% of the global market. The plant uses
an innovative process developed by RTFT to extract high purity scandium oxide
from the waste streams of titanium dioxide production, without the need for
any additional mining.
Price and exchange rate sensitivities
The following sensitivities give the estimated effect on underlying EBITDA,
assuming that each price or exchange rate moved in isolation. The relationship
between currencies and commodity prices is a complex one; movements in
exchange rates can affect movements in commodity prices and vice versa. The
exchange rate sensitivities quoted here include the effect on operating costs
of movements in exchange rates, but do not include the effect of the
revaluation of foreign currency working capital. Please use them with care.
Average published US$ million impact on
price/exchange rate for full year 2022
2022 first half underlying EBITDA
of a 10% change
in prices/exchange rates
Aluminium - US$ per tonne 3,082 1,374
Copper - US cents per pound 442 629
Gold - US$ per troy ounce 1,874 69
Iron ore realised price (62% Fe CFR freight-adjusted) - US$ per dry metric 120.5 3,112
tonne
Australian dollar against the US dollar 0.72 671
Canadian dollar against the US dollar 0.79 346
Oil (Brent) - US per barrel 105.9 203
The impact of a $100 per tonne change in each of the input costs below is
expected to have the following impact on our Canadian(1) aluminium smelting
unit cash cost(2) of $1,732 per tonne in 2022 first half ($1,262 per tonne in
2021 first half):
US$/t
Alumina (FOB) 191
Green petroleum coke (FOB) 25
Calcined petroleum coke (FOB) 36
Coal tar pitch (FOB) 8
1. Canadian smelters include all fully-owned smelters in Canada (Alma,
AP60, Arvida, Grande-Baie, Kitimat and Laterrière), as well as our share of
the Becancour and Alouette smelters.
2. The smelting unit cash cost refers to all costs which have been
incurred before casting, excluding depreciation but including corporate
allocations and with alumina at market price, to produce one metric tonne of
primary aluminium.
Capital projects
Approved projects Total approved Approved capital remaining to be Status/Milestones
(Rio Tinto 100% capital cost spent from
owned unless (100% unless 1 July 2022
otherwise stated) otherwise stated)
Completed in 2022
Investment in Gudai-Darri, a new production hub in the Pilbara region of $3.1bn $0.4bn The project was initially approved in November 2018 for $2.6 billion, with an
Western Australia. The investment incorporates a processing plant and additional $0.5 billion, approved by the Board in April 2022, due to COVID-19
infrastructure including a 166-kilometre rail line connecting the mine to our impacts, including labour access and supply chain quality issues, as advised
existing network. The mine will have an initial annual capacity of 43 million in February 2022. First ore was delivered in June 2022. Production will
tonnes and an expected life of more than 40 years. continue to ramp up through 2022 and is expected to reach full capacity in
2023.
Investment in a second tunnel at the 1000MW Kemano hydropower facility at $0.8bn $0.1bn The project was first approved in 2017, with $155 million of additional
Kitimat, British Columbia, Canada, which will ensure the long-term reliability capital approved in 2020 and a further $132 million approved in July 2021.
of the power supply to the Kitimat smelter. Works resumed at full capacity in 2021 first half and water flow was achieved
through the second tunnel powerhouse in June 2022, following completion of
tunnel construction works.
Ongoing
Iron ore
Investment in the Robe River Joint Venture (West Angelas C and D and Mesa B, C $1.0bn $0.2bn Approved in October 2018, the investments will enable us to sustain production
and H at Robe Valley) in the Pilbara to sustain production capacity.
of our Pilbara Blend™ and Robe Valley products. Mesa A wet plant
(Rio Tinto share) (Rio Tinto share) commissioning challenges impacted production ramp-up in the first quarter.
Plant performance stabilised in the second quarter and rectification works
remain on track for completion in the third quarter. An additional $0.1
billion (Rio Tinto share) was approved by the Board in April 2022.
Approved projects Total approved Approved capital remaining to be Status/Milestones
(Rio Tinto 100% capital cost spent from
owned unless (100% unless 1 July 2022
otherwise stated) otherwise stated)
Ongoing
Copper
Phase two of the south wall pushback to extend mine life at Kennecott by a $1.5bn $1.2bn Approved in December 2019, the investment will further extend strip waste rock
further six years. mining and support additional infrastructure development. This will allow
mining to continue into a new area of the orebody between 2026 and 2032.
Development of the Oyu Tolgoi underground copper/gold mine in Mongolia (Rio $7.06bn $1.9bn The project was originally approved in May 2016 for $5.3 billion, with an
Tinto 34%), which is expected to produce (from the open pit and underground) additional $1.45 billion approved by the Rio Tinto Board in December 2020,
an average of ~500,000 tonnes(1) of copper per year from 2028 to 2036 and an following completion of the Definitive Estimate. A cost and schedule
average of ~350,000 tonnes(1) of copper per year for a further five years, reforecast was completed in June 2022 resulting in a total project cost
compared with 163,000 tonnes in 2021 (open pit). estimate of $7.06 billion, which remains under review by the Oyu Tolgoi Board.
The $0.3 billion increase is largely related to COVID-19 disruptions. The 2022
reforecast assumes there are no further COVID-19 disruptions. First
sustainable production is expected in the first half of 2023, following the
comprehensive agreement between the Oyu Tolgoi partners announced in January
2022.
Minerals
Development of the Zulti South project at Richards Bay Minerals (RBM) in South $0.5bn $0.3bn Approved in April 2019 to underpin RBM's supply of zircon and ilmenite over
Africa (Rio Tinto 74%). the life of the mine. The project remains on full suspension.
Development of the greenfield Jadar lithium-borates project in Serbia. The $2.4bn $2.4bn The Board committed the funding in July 2021, subject to receiving all
development will include an underground mine with associated infrastructure relevant approvals, permits and licences. We acknowledge the concerns from
and equipment, including electric haul trucks, as well as a beneficiation communities and are engaging meaningfully to explore ways to address them.
chemical processing plant.
1. The 500ktpa target (stated as recovered metal) for the Oyu Tolgoi
underground and open pit mines is underpinned 17% by Proved Ore Reserves and
83% by Probable Ore Reserves for the years 2028-2036. The 350ktpa production
target for the following five years is underpinned 18% by Proved Ore Reserves
and 82% by Probable Ore Reserves. These production targets have been scheduled
from current mine designs by Competent Persons in accordance with the
requirements of the Australasian Code for Reporting of Exploration Results,
Minerals Resources and Ore Reserves, 2012 Edition (the JORC code).
DIRECTORS' REPORT
for the half year ended 30 June 2022
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 2022 and likely future developments are
given on pages 1 to 30. Important events that have occurred during the period
and up until the date of this report are set out below.
Financial
On 7 March 2022, we reached a settlement with the Australian Securities and
Investment Commission regarding the disclosure of the impairment of Rio Tinto
Coal Mozambique, which was reflected in Rio Tinto's 2012 year-end accounts.
On 14 March 2022, we made a non-binding proposal to the Turquoise Hill Board
to acquire the approximately 49% of the issued and outstanding shares of
Turquoise Hill that Rio Tinto did not currently own. Under the terms of the
Proposed Transaction, Turquoise Hill minority shareholders would receive C$34
in cash per Turquoise Hill share, representing a premium of 32% to Turquoise
Hill's closing share price on 13 March 2022 on the Toronto Stock Exchange.
This proposal would value the Turquoise Hill minority share capital at
approximately US$2.7 billion.
On 29 March 2022, we completed the acquisition of the Rincon lithium project
in Argentina for $825 million, following approval from Australia's Foreign
Investment Review Board.
On 6 April 2022, we published our 2021
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.riotinto.com%2Finvest%2Freports%2Ftaxes-paid-report&esheet=52648482&newsitemid=20220404006086&lan=en-US&anchor=Taxes+paid%3A+Our+economic+contribution+report&index=1&md5=3dcd0e59ec461a4f43cc4395517f092a)
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.riotinto.com%2Finvest%2Freports%2Ftaxes-paid-report&esheet=52648482&newsitemid=20220404006086&lan=en-US&anchor=Taxes+paid%3A+Our+economic+contribution+report&index=1&md5=3dcd0e59ec461a4f43cc4395517f092a)
T
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.riotinto.com%2Finvest%2Freports%2Ftaxes-paid-report&esheet=52648482&newsitemid=20220404006086&lan=en-US&anchor=Taxes+paid%3A+Our+economic+contribution+report&index=1&md5=3dcd0e59ec461a4f43cc4395517f092a)
axes paid: Our economic contribution report
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.riotinto.com%2Finvest%2Freports%2Ftaxes-paid-report&esheet=52648482&newsitemid=20220404006086&lan=en-US&anchor=Taxes+paid%3A+Our+economic+contribution+report&index=1&md5=3dcd0e59ec461a4f43cc4395517f092a)
, which details $13.3 billion of global taxes and royalties paid during the
year, up from $8.4 billion in 2020. Despite the ongoing challenges of
COVID-19, Rio Tinto made a total direct economic contribution of $66.6 billion
in the countries and communities where it operates in 2021, compared to $47
billion the previous year. In Australia, which is home to around half of the
company's assets, Rio Tinto paid $11.1 billion (A$14.8 billion) in taxes and
royalties, up from $6.8 billion (A$9.8 billion) the previous year. The company
also made significant payments in Canada ($855 million), Mongolia ($544
million), Chile ($562 million) and the United States ($81 million).
On 19 May 2022, we agreed to amend the previously agreed funding plan with
Turquoise Hill Resources (TRQ) (9 April 2021) in order to provide liquidity of
up to $400 million in short-term early advances, while the Special Committee
of TRQ evaluated Rio Tinto's C$34 per share all-cash proposal to acquire the
approximately 49% of the issued and outstanding shares of TRQ that Rio Tinto
does not currently own.
On 31 May 2022, we published a report on payments to governments made by Rio
Tinto and its subsidiary undertakings for the year ended 31 December 2021 as
required under the UK's Report on Payments to Governments Regulations 2014 (as
amended in December 2015). Rio Tinto paid $13.3 billion of taxes and royalties
and a further $1.5 billion on behalf of its employees during 2021.
Operations
On 25 January 2022, we reached an agreement with TRQ and the Government of
Mongolia to move the Oyu Tolgoi (OT) project forward, resetting the
relationship between the partners and increasing the value the project
delivers for Mongolia. As a result, the OT Board, comprised of representatives
of Rio Tinto, TRQ and Erdenes Oyu Tolgoi which is wholly owned by the
Government of Mongolia, unanimously approved commencement of underground
operations.
On 2 February 2022, we announced that Energy Resources of Australia Ltd had
released the preliminary findings from its reforecast of the cost and schedule
for the Ranger rehabilitation project in Australia's Northern Territory, which
had been subject to an independent review.
On 23 February 2022, we announced changes to estimates of Mineral Resources
and Ore Reserves compared to those published in the 2020 Rio Tinto Annual
Report: Mineral Resources at Rio Tinto's Winu project in Western Australia;
Ore Reserves and Mineral Resources at Rio Tinto Aluminium Pacific Operations
at Weipa; and Ore Reserves and Mineral Resources at Rio Tinto's Jadar project
in Serbia.
On 15 June 2022, we delivered first ore from the Gudai-Darri iron ore mine in
the Pilbara, Western Australia, bringing Rio Tinto's first greenfield mine
online in over a decade.
People
On 25 February 2022, we announced that Hinda Gharbi had notified the Board of
her intention to step down as a non-executive director of Rio Tinto at the
conclusion of the Rio Tinto plc AGM on 8 April 2022.
Rio Tinto 2022 Annual General Meetings ("AGMs")
The annual general meetings of Rio Tinto plc and Rio Tinto Limited were held
on 8 April 2022 and 5 May 2022, respectively. Under Rio Tinto's dual listed
companies structure established in 1995, decisions on significant matters
affecting shareholders of Rio Tinto plc and Rio Tinto Limited in similar ways
are taken through a joint electoral procedure.
At Rio Tinto plc's AGM on 8 April 2022, Resolution 20 ("Authority to purchase
Rio Tinto plc shares"), put to Rio Tinto plc shareholders only, was passed
with less than 80% of votes in favour. Shining Prospect (a subsidiary of the
Aluminium Corporation of China "Chinalco") voted against it. Chinalco has not
sold any of its shares in Rio Tinto plc and now has a holding of over 14%
given its non-participation in the Company's significant share buy-back
programmes. This places Chinalco close to the 14.99% holding threshold agreed
with the Australian Government at the time of its original investment in Rio
Tinto.
Directors
The directors serving on the Boards of Rio Tinto plc and Rio Tinto Limited as
at 30 June 2022 were:
Notes Date of appointment
Chairman
Dominic Barton (R, N and S) 4 April 2022
Executive directors
Jakob Stausholm, Chief Executive Officer 3 September 2018
Peter Cunningham, Chief Financial Officer 17 June 2021
Non-executive directors
Sam Laidlaw (senior independent director, Rio Tinto plc) (R, N and S) 10 February 2017
Simon McKeon (senior independent director, Rio Tinto Limited) (A, R and N) 1 January 2019
Megan Clark (R, N and S) 20 November 2014
Simon Henry (A and N) 1 April 2017
Jennifer Nason (R and N) 1 March 2020
Ngaire Woods (R, N and S) 1 September 2020
Ben Wyatt (A and N) 1 September 2021
Notes
(A) Audit Committee, (R) Remuneration Committee, (N) Nominations Committee,
(S) Sustainability Committee
Dividend
The 2021 final dividend and special dividend was paid on 21 April 2022 to
holders of Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto
plc ADR holders. The 2021 final dividend, equivalent to 417 US cents per share
and the 2021 special dividend, equivalent to 62 US cents, was determined by
the board on 22 February 2022. Rio Tinto plc shareholders received 306.72
pence per share for the final dividend and 45.60 pence per share for the
special dividend and Rio Tinto Limited shareholders received 577.04 Australian
cents per share for the final dividend and 85.80 Australian cents per share
for the special dividend based on the applicable exchange rates on 22 February
2022. ADR holders receive dividends at the declared rate in US dollars.
The 2022 interim dividend, equivalent to 267 US cents per share will be paid
on 22 September 2022 to Rio Tinto Limited, Rio Tinto plc and Rio Tinto plc ADR
shareholders on the register at the close of business on 12 August 2022. The
ex-dividend date for the 2022 interim dividend for Rio Tinto Limited, Rio
Tinto plc and Rio Tinto plc ADR shareholders is 11 August 2022. Rio Tinto plc
shareholders will receive 221.63 pence per share for the interim dividend and
Rio Tinto Limited shareholders will receive 383.70 Australian cents per share
for the interim dividend based on the applicable exchange rates on 26 July
2022. ADR holders receive dividends at the declared rate in US dollars.
Principal risks and uncertainties
The principal risks and uncertainties that could materially impact our ability
to deliver on our strategic priorities are set out on pages 117 to 130 of the
2021 Annual Report. For the remaining six months of the financial year, these
remain broadly consistent with the trends reported in the Annual Report.
Our operations and growth projects continue to be impacted by the high
unplanned absences, tight labour markets, rising input costs and supply chain
disruptions. We continue to monitor areas of uncertainty in the short to
medium term, namely the evolving situation with the war in Ukraine and
potential further Russian sanctions, rising inflation and COVID-19 related
disruptions.
Publication of half year results
In accordance with the UK Financial Conduct Authority's Disclosure Guidance
& 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
KPMG, 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 65 and forms part of
this report.
The Directors' report is made in accordance with a resolution of the Board.
Dominic Barton
Chairman
27 July 2022
Condensed consolidated interim financial statements for the
six months ended 30 June 2022
Contents:
Interim financial statements Page number
Group income statement 35 (#Section16)
Group statement of comprehensive income 3 (#Section17) 6 (#Section17)
Group cash flow statement 37 (#Section18)
Group balance sheet 38 (#Section19)
Group statement of changes in equity 4 (#Section20) 0 (#Section20)
Selected explanatory notes to the interim financial statements
1 Basis of preparation 4 (#Section22) 2 (#Section22)
2 Changes in accounting policies 4 (#Section23) 3 (#Section23)
3 Segmental information 4 (#Section24) 5
4 Segmental information - additional information 5 (#Section25) 0 (#Section25)
5 Taxation 5 (#Section26) 1
6 Acquisitions 5 (#Section27) 2 (#Section27)
7 Cash and cash equivalents 5 (#Section28) 2 (#Section28)
8 Provisions including post-retirement benefits 5 (#Section29) 3
9 Financial instruments 5 (#Section30) 4
10 Commitments and Contingencies 5 (#Section32) 7 (#Section32)
11 Non-controlling interests material to the Group 59 (#Section33)
12 Events after the balance sheet date 6 (#Section34) 0 (#Section34)
Directors' declaration 6 (#Section35) 1 (#Section35)
Independent Auditors' Review Reports of KPMG LLP ("KPMG UK") to Rio Tinto plc 6 (#Section36) 2 (#Section36)
and of KPMG ("KPMG Australia") to the members of Rio Tinto Limited
Lead Auditor's Independence Declaration under Section 307C of the Australian 6 (#Section37) 5 (#Section37)
Corporations Act 2001
Additional voluntary disclosure for the shareholders
Rio Tinto financial information by business unit 6 (#Section38) 6 (#Section38)
Alternative performance measures 69 (#Section39)
Summary financial data in Australian dollars, Sterling and US dollars 77 (#Section40)
Metal prices and exchange rates 78 (#Section41)
Group income statement
Six months ended 30 June Note 2021
2022 US$m
US$m
Consolidated operations
Consolidated sales revenue 3,4 29,775 33,083
Net operating costs (excluding exploration and evaluation) (17,202) (15,322)
Exploration and evaluation costs (367) (324)
Operating profit 12,206 17,437
Share of profit after tax of equity accounted units 468 556
Profit before finance items and taxation 12,674 17,993
Finance items
Net exchange gains on net cash and intragroup balances 387 375
Net losses on derivatives not qualifying for hedge accounting (205) (63)
Finance income 17 42
Finance costs (55) (91)
Amortisation of discount on provisions (503) (207)
(359) 56
Profit before taxation 12,315 18,049
Taxation 5 (2,902) (4,981)
Profit after tax for the period 9,413 13,068
- attributable to owners of Rio Tinto (net earnings) 8,908 12,313
- attributable to non-controlling interests 505 755
Basic earnings per share 550.1c 761.0c
Diluted earnings per share 546.9c 756.1c
The notes on pages 42 to 60 are an integral part of these condensed
consolidated interim financial statements.
Group statement of comprehensive income
Six months ended 30 June Note 2021
2022 US$m
US$m
Profit after tax for the period 9,413 13,068
Other comprehensive (loss)/income
Items that will not be reclassified to the income statement:
Re-measurement gains on pension and post-retirement healthcare plans 829 712
Changes in the fair value of equity investments held at fair value through (8) 12
other comprehensive income (FVOCI)
Tax relating to these components of other comprehensive income (216) (219)
Share of other comprehensive income of equity accounted units, net of tax 5 12
610 517
Items that have been/may be subsequently reclassified to the income statement:
Currency translation adjustment((a)) (1,512) (365)
Fair value movements:
- Cash flow hedge losses (79) (142)
- Cash flow hedge losses/(gains) transferred to the income statement 100 (20)
Net change in costs of hedging reserve (38) (20)
Tax relating to these components of other comprehensive loss 8 55
Share of other comprehensive (losses)/income of equity accounted units, net of (7) 10
tax
Other comprehensive (loss)/income for the period, net of tax (918) 35
Total comprehensive income for the period 8,495 13,103
- attributable to owners of Rio Tinto 8,063 12,342
- attributable to non-controlling interests 432 761
(a) Excludes a currency translation charge of US$185 million for the period
ended 30 June 2022 (30 June 2021: charge of US$82 million) arising on Rio
Tinto Limited's share capital, which is recognised in the Group statement of
changes in equity on page 40.
Group cash flow statement
Six months ended 30 June Note 2021
2022 US$m
US$m
Cash flows from consolidated operations((a)) 13,912 18,179
Dividends from equity accounted units 633 726
Cash flows from operations 14,545 18,905
Net interest paid (217) (208)
Dividends paid to holders of non-controlling interests in subsidiaries (41) (407)
Tax paid (3,813) (4,629)
Net cash generated from operating activities 10,474 13,661
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets (3,146) (3,336)
Acquisitions of subsidiaries, joint ventures and associates 6 (825) -
Disposals of subsidiaries, joint ventures, unincorporated joint operations and - 10
associates
Purchases of financial assets (66) (18)
Sales of financial assets 52 16
Sales of property, plant and equipment and intangible assets 1 26
Net (funding of)/receipts from equity accounted units (48) 28
Other investing cash flows 10 (33)
Net cash used in investing activities (4,022) (3,307)
Cash flows before financing activities 6,452 10,354
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (7,595) (6,435)
Proceeds from additional borrowings 144 137
Repayment of borrowings and associated derivatives (211) (257)
Lease principal payments (183) (170)
Proceeds from issue of equity to non-controlling interests 22 28
Other financing cash flows 1 6
Net cash used in financing activities (7,822) (6,691)
Effects of exchange rates on cash and cash equivalents (26) (21)
Net (decrease)/increase in cash and cash equivalents (1,396) 3,642
Opening cash and cash equivalents less overdrafts 12,805 10,381
Closing cash and cash equivalents less overdrafts 7 11,409 14,023
(a) Cash flows from consolidated operations
Profit after tax for the period 9,413 13,068
Adjustments for:
- Taxation 5 2,902 4,981
- Finance items 359 (56)
- Share of profit after tax of equity accounted units (468) (556)
- Depreciation and amortisation 2,459 2,307
- Provisions (including exchange differences on provisions) 8 496 485
- Pension settlement - (291)
Utilisation of provision for post-retirement benefits 8 (66) (76)
Utilisation of provisions 8 (363) (349)
Change in inventories (582) (518)
Change in receivables and other assets (128) (966)
Change in trade and other payables 267 250
Other items((b)) (377) (100)
13,912 18,179
(b) Other items includes realised losses of US$242 million on
currency forwards not designated as hedges (30 June 2021: realised gain US$10
million).
Group balance sheet
Note 30 June 2022 31 December 2021
US$m US$m
Non-current assets
Goodwill 849 879
Intangible assets 6 3,607 2,832
Property, plant and equipment 64,379 64,927
Investments in equity accounted units 3,392 3,504
Inventories 194 196
Deferred tax assets 3,411 3,375
Receivables and other assets 2,175 2,194
Tax recoverable 4 29
Other financial assets 477 528
78,488 78,464
Current assets
Inventories 5,798 5,436
Receivables and other assets 3,645 3,574
Tax recoverable 60 72
Other financial assets 2,502 2,543
Cash and cash equivalents 7 11,412 12,807
23,417 24,432
Total assets 101,905 102,896
Current liabilities
Borrowings and other financial liabilities (1,770) (1,381)
Trade and other payables (7,986) (7,733)
Tax payable (1,045) (1,407)
Provisions including post-retirement benefits 8 (2,308) (2,106)
(13,109) (12,627)
Non-current liabilities
Borrowings and other financial liabilities (11,976) (12,788)
Trade and other payables (624) (798)
Tax payable (45) (660)
Deferred tax liabilities (3,729) (3,503)
Provisions including post-retirement benefits 8 (15,324) (15,930)
(31,698) (33,679)
Total liabilities (44,807) (46,306)
Net assets 57,098 56,590
Capital and reserves
Share capital((a))
- Rio Tinto plc 207 207
- Rio Tinto Limited 3,385 3,570
Share premium account 4,322 4,320
Other reserves 8,562 9,998
Retained earnings 34,081 33,337
Equity attributable to owners of Rio Tinto 50,557 51,432
Attributable to non-controlling interests 6,541 5,158
Total equity 57,098 56,590
Group balance sheet (continued)
(a) At 30 June 2022, Rio Tinto plc had 1,249.3 million ordinary shares in
issue and held by the public, and Rio Tinto Limited had 371.2 million shares
in issue and held by the public. There were no cross holdings of shares
between Rio Tinto Limited and Rio Tinto plc in either periods presented. As
required to be disclosed under the ASX Listing Rules, the net tangible assets
per share amounted to US$28.45 (31 December 2021: US$29.47).
Group statement of changes in equity
Six months ended 30 June 2022 Attributable to owners of Rio Tinto
Share capital Share premium Other reserves Retained earnings Total Non-controlling Total
US$m account US$m US$m US$m interests equity
US$m US$m US$m
Opening balance 3,777 4,320 9,998 33,337 51,432 5,158 56,590
Change in accounting policy (refer to note 2) - - - (17) (17) - (17)
Revision to opening balance 3,777 4,320 9,998 33,320 51,415 5,158 56,573
Total comprehensive income for the period - - (1,457) 9,520 8,063 432 8,495
Currency translation arising on Rio Tinto Limited's share capital (185) - - - (185) - (185)
Dividends((a)) - - - (7,584) (7,584) (266) (7,850)
Own shares purchased from Rio Tinto shareholders to satisfy share awards to - - (3) (3) (6) - (6)
employees((b))
Change in equity interest held by Rio Tinto (refer to note 11) - - - (484) (484) 484 -
Treasury shares reissued and other movements - 2 - - 2 - 2
Equity issued to holders of non-controlling interests (refer to note 11) - - - (711) (711) 733 22
Employee share awards charged to the income statement - - 24 23 47 - 47
Closing balance 3,592 4,322 8,562 34,081 50,557 6,541 57,098
Six months ended 30 June 2021 Attributable to owners of Rio Tinto
Share capital Share premium Other reserves Retained earnings Total Non-controlling Total
US$m account US$m US$m US$m interests equity
US$m US$m US$m
Opening balance 3,988 4,314 11,960 26,792 47,054 4,849 51,903
Total comprehensive income for the period - - (466) 12,808 12,342 761 13,103
Currency translation arising on Rio Tinto Limited's share capital (82) - - - (82) - (82)
Dividends((a)) - - - (6,435) (6,435) (407) (6,842)
Own shares purchased from Rio Tinto shareholders to satisfy share awards to - - (13) (4) (17) - (17)
employees((b))
Change in equity interest held by Rio Tinto - - - 37 37 (37) -
Treasury shares reissued and other movements - 6 - - 6 - 6
Equity issued to holders of non-controlling interests - - - - - 28 28
Employee share awards charged to the income statement - - 28 42 70 - 70
Closing balance 3,906 4,320 11,509 33,240 52,975 5,194 58,169
Group statement of changes in equity (continued)
(a) Dividends per share announced or paid during the period are summarised
below:
For six months ended 30 June 2021
2022 US$m
US$m
Dividends per share: Ordinary - paid during the period 417.0c 309.0c
Dividends per share: Special - paid during the period 62.0c 93.0c
Ordinary dividends per share: announced with the results for the period 267.0c 376.0c
Special dividends per share: announced with the results for the period - 185.0c
(b) Net of contributions received from employees for share awards.
Selected explanatory notes to the interim financial statements
1. Basis of preparation
The condensed consolidated interim financial statements included in this
report have been prepared in accordance with: International Accounting
Standard ('IAS') 34 'Interim Financial Reporting' as issued by the
International Accounting Standards Board ('IASB') and as adopted for use in
the United Kingdom ('UK'), the Companies Act 2006 applicable to companies
reporting under International Financial Reporting Standards, applicable UK law
and applicable Australian law as amended by the Australian Securities and
Investments Commission Order dated 16 July 2021.
These condensed consolidated interim financial statements represent a
'condensed set of financial statements' as referred to in the Disclosure
Guidance and Transparency Rules sourcebook ('DTR') issued by the Financial
Conduct Authority ('FCA') applicable to interim financial reporting.
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 2021 and any
public announcements made by the Group during the interim reporting period.
The 2021 annual financial statements were prepared on a going concern basis in
accordance with UK-adopted international accounting standards, applicable UK
law and applicable Australian law as amended by the Australian Securities and
Investments Commission Order dated 16 July 2021 and also with International
Financial Reporting Standards ('IFRS') as issued by the IASB and
interpretations issued from time to time by the IFRS Interpretations Committee
(IFRS IC) which were mandatory at 31 December 2021.
These condensed consolidated interim 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 as at 31 December 2021
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.
Going concern
Management has prepared detailed cash flow forecasts for the next eighteen
months and has updated life of mine plan models with longer term cash flow
projections. These forecasts demonstrate that the Group has sufficient cash,
other liquid resources and undrawn credit facilities to enable the Group to
meet its obligations as they fall due. As such the directors considered it
appropriate to adopt the going concern basis of accounting in preparing the
interim financial information.
Alternative performance measures
The Group presents certain alternative performance measures ('APM's),
including underlying earnings, which are reconciled to directly comparable
IFRS financial measures. The reconciliations included on pages 69 to 76 of
this report do not form part of these condensed consolidated interim financial
statements. These APMs are used 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 supplementary to those
measures.
1. Basis of preparation (continued)
Reconciliation with Australian Accounting Standards
The Group's financial statements have been prepared in accordance with IFRS as
defined on page 42, 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 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 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$378 million at 30 June 2022 (31 December
2021: US$377 million).
Save for the exception described above, the Group's financial statements drawn
up in accordance with IFRS are consistent with the requirements of AAS.
2. Changes in 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 2021, except for the modifications set out below. This basis of
accounting is referred to as 'IFRS' in this report. Adoption of changes to
IFRS applicable in 2022 did not have a significant impact on the Group's
financial statements.
Basis of preparation of the financial statements - accounting policies:
During the six months ended 30 June 2022, the Group did not early adopt any
amendments, standards or interpretations that have been issued but are not yet
mandatory.
The Group adopted Proceeds before Intended Use (Amendments to IAS 16
"Property, Plant and Equipment") at 1 January 2022. The amendment prohibits
the deduction, from the cost of major project construction work in progress,
of proceeds (net of additional processing costs) from selling items before the
related item of property, plant and equipment is available for use. Under the
amendment such proceeds are recognised in the income statement together with
the costs of producing those items. During 2021 the Group completed a review
of the impact of these amendments and concluded that adjustments to Group
retained earnings as at 1 January 2020, and restatement of the 2020 and 2021
Group Income Statement and Balance Sheet upon adoption of the amendments were
insignificant and as a result no restatements were made to comparative
periods.
The Group adopted Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37 "Provisions, Contingent Liabilities and Contingent
Assets") at 1 January 2022. The amendments specify that the costs an entity
includes in determining whether a contract is onerous comprise all directly
related costs, including both incremental amounts and an allocation of other
directly related expenditure. Previously, the Group made provision for onerous
contracts when the assets dedicated to the contract were fully impaired or the
contract became stranded as a result of a business decision (refer to note
1(i) of Annual Report 2021). From 2022, the Group records a provision if a
contract is found to be loss-making on a stand-alone basis following
allocation of all directly related costs as required by the amendments to IAS
37.
2. Changes in accounting policies(continued)
The Group has applied the amendments without revision to comparative amounts,
with a reduction to retained earnings as at 1 January 2022 of US$17 million.
The Group is continuing to evaluate the impact of IAS 12 "Income Taxes" -
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction, mandatory in 2023 and not yet endorsed by the UK. Narrow-scope
amendments to IAS 12 introduce an exception to the initial recognition
exemption for transactions that give rise to equal taxable and deductible
temporary differences. The most significant impact from implementing these
amendments is expected to be from temporary differences related to the Group's
provisions for close-down and restoration / environmental and lease
obligations and corresponding capitalised closure costs and right-of-use
assets. Our existing accounting policy states that "where the recognition of
an asset and liability from a single transaction gives rise to equal and
off-setting temporary differences, Rio Tinto applies the Initial Recognition
Exemption allowed by IAS 12, and consequently recognises neither a deferred
tax asset nor a deferred tax liability in respect of these temporary
differences".
Under the amendment, deferred tax assets and liabilities will be required to
be recognised in respect of such temporary differences. Upon transition in
2023, the Group anticipates material adjustments to gross deferred tax assets
and deferred tax liabilities (prior to required offsetting within the same tax
jurisdiction) as at 1 January 2021 and that these adjustments will partially
offset one another, with the net difference recorded in reserves. Work is
ongoing to quantify the impact. There will be no impact on tax cash flows or
balance sheet tax recoverable or payable as a result of implementing these
amendments and the unwind of the newly recognised deferred tax is not expected
to materially impact the income statement.
Principal accounting policies:
Principal accounting policy information has been amended to reflect changes in
2022 to the following policies:
Proceeds before Intended Use (Amendments to IAS 16 "Property, Plant and
Equipment"). Proceeds from selling items before the related item of property,
plant and equipment is available for use are recognised within "Consolidated
sales revenue" in the income statement along with the costs of producing those
items within "Net operating costs (excluding exploration and evaluation)".The
production cost of material sold is determined using an unit of production
method for allocating development expenditure during the period, based on
production in the period as a proportion of total expected production over the
life of mine based on total ore reserves.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37
"Provisions, Contingent Liabilities and Contingent Assets"). The cost of
fulfilling a contract comprises all directly related costs, including both
incremental amounts and an allocation of other directly related expenditure in
determining the cost of fulfilling a contract for the purpose of assessing
whether the contract is onerous. The Group records a provision if a contract
is found to be loss-making on a stand-alone basis following allocation of all
directly related costs.
3. Segmental information
Rio Tinto's management structure is based on the principal product groups
(PGs) together with global support functions whose leaders make up the
Executive Committee. The Executive Committee members each report directly to
the Chief Executive of Rio Tinto who is the chief operating decision maker
(CODM) and is responsible for allocating resources and assessing performance
of the operating segments. The CODM monitors the performance of each product
group based on a number of measures, including underlying earnings, underlying
EBITDA, capital expenditure, net cash generated from operating activities and
free cash flow. Our primary measure of profit is underlying EBITDA. Finance
items and net cash are managed on a group-wide basis and are therefore
excluded from the segmental results
The Group's reportable segments are based on principal Product Groups (PGs)
and are consistent with the internal reporting structure as at 30 June 2022.
Business units (BUs) are allocated to PGs based on management structure. The
reportable segments are described as follows:
Reportable segment Principal activities
Iron Ore Iron ore mining, salt and gypsum production in Western Australia.
Aluminium Bauxite mining; alumina refining; aluminium smelting.
Copper Mining and refining of copper, gold, silver, molybdenum and other by-products;
exploration activities together with the Simandou iron ore project, which is
the responsibility of the Copper product group chief executive.
Minerals Includes businesses with products such as borates, lithium, titanium dioxide
feedstock together with the Iron Ore Company of Canada (iron ore mining and
iron concentrate/pellet production). Also includes diamond mining, sorting and
marketing.
The Rio Tinto financial information by business unit provided on pages 66 to
68 provides additional voluntary business unit disclosure which the Group
considers useful to the users of the financial statements.
3. Segmental information (continued)
Six months ended 30 June 2022 Gross product sales((a)) Underlying EBITDA((b)) Underlying earnings((c)) Capital expenditure((d))
US$m US$m US$m US$m
Iron Ore 16,610 10,395 6,461 1,472
Aluminium 7,796 2,866 1,547 681
Copper 3,547 1,487 543 867
Minerals 3,403 1,259 420 268
Reportable segments total 31,356 16,007 8,971 3,288
Other Operations 107 (78) (167) 9
Inter-segment transactions (149) (1) - -
Product group total 31,314 15,928 8,804 3,297
Other items 41
Share of equity accounted units (1,539) (193)
Proceeds from disposal of property, plant and equipment 1
Central pension costs, share-based payments & insurance & derivatives 265 237
Restructuring, project and one-off costs (86) (61)
Central costs (397) (363)
Central exploration and evaluation (113) (95)
Net interest 105
Consolidated sales revenue/Capital expenditure 29,775 3,146
Underlying EBITDA/Underlying Earnings 15,597 8,627
3. Segmental information (continued)
Six months ended 30 June 2021 Gross product sales((a)) Underlying EBITDA((b)) Underlying earnings((c)) Capital expenditure((d))
US$m US$m US$m US$m
Iron Ore 21,707 16,060 10,216 1,912
Aluminium 5,932 1,924 921 524
Copper 3,779 2,048 885 750
Minerals 3,270 1,398 498 209
Reportable segments total 34,688 21,430 12,520 3,395
Other Operations 85 (4) (51) -
Inter-segment transactions (145) (6) (3) -
Product group total 34,628 21,420 12,466 3,395
Other items 35
Share of equity accounted units (1,545) (120)
Proceeds from disposal of property, plant and equipment 26
Central pensions, share-based payments, insurance and derivatives 119 120
Restructuring, project and one-off costs (36) (23)
Central costs (346) (294)
Central exploration and evaluation (120) (100)
Net interest (3)
Consolidated sales revenue/Capital expenditure 33,083 3,336
Underlying EBITDA/ Underlying Earnings 21,037 12,166
(a) Gross product sales include the sales revenue of equity accounted
units on a proportionate basis (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 product
sales.
(b) Underlying EBITDA (calculated on page 48) is reported to provide
greater understanding of the underlying business performance of Rio Tinto's
operations. It represents profit before tax, net finance items, depreciation
and amortisation excluding the EBITDA impact of the same items that are
excluded in arriving at underlying earnings (as defined below).
(c) Underlying earnings (calculated on page 49) represent net earnings
attributable to the owners of Rio Tinto, adjusted to exclude items, which do
not reflect the underlying performance of the Group's operations. Underlying
earnings and net earnings both represent amounts attributable to owners of Rio
Tinto. Exclusions from underlying earnings relating to equity accounted units
are stated after tax and included in "Pre-tax" earnings, consistent with the
requirements of the equity accounting method.
Exclusions from underlying earnings are those gains and losses, that
individually, or in aggregate with similar items, are of a nature and size to
require exclusion in order to provide additional insight into underlying
business performance.
3. Segmental information (continued)
The following items are excluded from net earnings in arriving at underlying
earnings in each period irrespective of materiality:
- Net gains/(losses) on disposal of interests in businesses.
- Impairment charges and reversals.
- Profit/(loss) after tax from discontinued operations.
- Exchange and derivative gains and losses. This exclusion includes
exchange gains/(losses) on external net cash and intragroup balances,
unrealised gains/(losses) on currency and interest rate derivatives not
qualifying for hedge accounting, unrealised gains/(losses) on certain
commodity derivatives not qualifying for hedge accounting, and unrealised
gains/(losses) on embedded derivatives not qualifying for hedge accounting.
- Adjustments to closure provisions where the adjustment is associated to
an impairment charge and for legacy sites where the disturbance or
environmental contamination relates to the pre-acquisition period.
(d) Capital expenditure is the net cash outflow on purchases less sales of
property, plant and equipment, capitalised evaluation costs and purchases less
sales of other intangible assets. The details provided include 100% of
subsidiaries' capital expenditure and Rio Tinto's share of the capital
expenditure of joint operations and equity accounted units.
Reconciliation of underlying EBITDA to profit after taxation
For six months ended 30 June 2021
2022 US$m
US$m
Underlying EBITDA 15,597 21,037
Depreciation and amortisation in subsidiaries excluding capitalised (2,405) (2,253)
depreciation
Depreciation and amortisation in equity accounted units (242) (249)
Finance items in subsidiaries (359) 56
Taxation in subsidiaries (2,902) (4,981)
Taxation and finance items in equity accounted units (363) (365)
Gains recognised by Kitimat relating to LNG Canada's project 116 -
Gains/(Losses) on embedded commodity derivatives not qualifying for hedge 14 (2)
accounting (including foreign exchange)
Increase in closure estimates (non-operating and fully impaired sites) (43) (175)
Profit after tax 9,413 13,068
3. Segmental information (continued)
Reconciliation of underlying earnings to net earnings
Six months ended 30 June Pre-tax Taxation Non-controlling Net amount Net amount
2022 2022 interests 2022 2021
US$m US$m 2022 US$m US$m
US$m
Underlying earnings 12,044 (2,918) (499) 8,627 12,166
Items excluded from underlying earnings
Foreign exchange and derivative gains/(losses):
- Foreign exchange gains on external net cash, intragroup balances and 383 (15) - 368 347
derivatives((a))
- Losses on currency and interest rate derivatives not qualifying for hedge (194) 42 (2) (154) (45)
accounting((b))
- Gains/(Losses) on embedded commodity derivatives not qualifying for hedge 9 (4) (4) 1 (22)
accounting((c))
Gains recognised by Kitimat relating to LNG Canada's project((d)) 116 (9) - 107 -
Losses from movements to closure estimates (non-operating and fully impaired (43) 2 - (41) (133)
sites)((e))
Total excluded from underlying earnings 271 16 (6) 281 147
Net earnings 12,315 (2,902) (505) 8,908 12,313
(a) Foreign exchange gains on external net cash and intragroup balances
comprise post-tax gains of US$508 million (30 June 2021:US$351 million) on
intragroup balances offset by post-tax foreign exchange losses on net cash of
US$140 million (30 June 2021: US$4 million) primarily as a result of the
Australian dollar weakening against the US dollar.
(b) Valuation changes on currency and interest rate derivatives, which are
ineligible for hedge accounting, other than those embedded in commercial
contracts, and the currency revaluation of embedded US dollar derivatives
contained in contracts held by entities whose functional currency is not the
US dollar.
(c) Valuation changes on derivatives, embedded in commercial contracts, that
are ineligible for hedge accounting, but for which there will be an offsetting
change in future Group earnings. Mark-to-market movements on commodity
derivatives entered into with the commercial objective of achieving spot
pricing for the underlying transaction at the date of settlement are included
in underlying earnings.
(d) During the first half of 2022, LNG Canada elected to terminate their
option to purchase additional land and facilities for expansion of their
operations at Kitimat, Canada. This has been excluded from underlying
earnings consistent with prior years as it is part of a series of transactions
that together were material.
(e) In 2022 the charge relates to inflationary increases to the closure
provision for non-operating and fully impaired sites in excess of the unwind
of the discount. In 2021, the charge related to an increase to the Diavik
closure provision to reflect the final results of the Pre-Feasibility Study
that was in progress when the asset was fully impaired in 2020 and further
increases at a number of the Group's legacy sites where the environmental
damage preceded ownership by Rio Tinto.
4. Segmental information - additional information
Geographical analysis (by destination)
Consolidated sales revenue by destination((a)) Six months ended 30 June
2022 2021 2022 2021
% % US$m US$m
China 52.1% 59.9% 15,521 19,805
United States of America 16.3% 11.5% 4,848 3,816
Asia (excluding China and Japan) 9.1% 9.5% 2,698 3,157
Japan 6.8% 7.2% 2,039 2,373
Europe (excluding UK) 6.7% 5.0% 1,995 1,667
Canada 3.1% 2.4% 933 793
Australia 2.0% 1.6% 596 519
UK 0.4% 0.5% 133 166
Other countries 3.5% 2.4% 1,012 787
Consolidated sales revenue 100.0% 100.0% 29,775 33,083
(a) Consolidated sales revenue by geographical destination is based on the
ultimate country of the product's destination, if known. Where the ultimate
destination is not known, we have defaulted to the shipping address of the
customer. Rio Tinto is domiciled in both the UK and Australia.
Product analysis (by revenue type)
Six months ended 30 June 2022 Six months ended 30 June 2021
Consolidated sales revenue by product Revenue from Other Consolidated Revenue from contracts Other Consolidated sales revenue
contracts revenue((a)) sales revenue with customers revenue((a)) 2021
with 2022 2022 2021 2021 US$m
customers US$m US$m US$m US$m
2022
US$m
Iron ore 17,547 91 17,638 21,964 1,108 23,072
Aluminium, alumina and bauxite 7,321 298 7,619 5,733 84 5,817
Copper 1,702 (38) 1,664 1,472 77 1,549
Industrial minerals (comprising titanium dioxide slag, borates and salt) 1,233 (3) 1,230 1,141 4 1,145
Gold 322 9 331 506 (6) 500
Diamonds 465 - 465 160 - 160
Other products((b)) 829 (1) 828 827 13 840
Consolidated sales revenue 29,419 356 29,775 31,803 1,280 33,083
(a) Certain of the Group's products may be provisionally priced at the date
revenue is recognised. The change in value of the provisionally priced
receivables is based on relevant forward market prices and is included in
"Other revenue" above.
(b) "Other products" includes metallic co-products, molybdenum, silver and
other commodities with immaterial revenues.
5. Taxation
Prima facie tax reconciliation
Six months ended 30 June 2021
2022 US$m
US$m
Profit before taxation 12,315 18,049
Deduct: share of profit after tax of equity accounted units((a)) (468) (556)
Parent companies' and subsidiaries' profit before tax 11,847 17,493
Prima facie tax payable at UK rate of 19% (2021: 19%)((b)) 2,251 3,324
Higher rate of taxation of 30% on Australian underlying earnings (2021: 30%) 924 1,609
Other tax rates applicable outside the UK and Australia on underlying earnings 60 77
Impact of items excluded in arriving at underlying earnings((c)):
- Losses/gains on foreign exchange and on derivatives (61) (34)
- Losses from increases to closure estimates (non-operating and fully impaired 6 (9)
sites)
- Utilisation of capital losses on the gain recognised by Kitimat relating to (13) -
LNG Canada's project
Impact of changes in tax rates and laws (12) -
Recognition of previously unrecognised deferred tax assets((d)) (209) (77)
Write-down of previously recognised deferred tax assets 8 8
Adjustments in respect of prior periods((e)) (137) 43
Other items 85 40
Total taxation charge((a)) 2,902 4,981
(a) This tax reconciliation relates to the Group's parent companies,
subsidiaries and joint operations, and excludes equity accounted units. The
Group's share of profit of equity accounted units is net of tax charges of
US$289 million (30 June 2021: US$318 million).
(b) As a UK headquartered and listed Group, the reconciliation of expected
tax on accounting profit to tax charge uses the UK corporation tax rate to
calculate the prima facie tax payable. Rio Tinto is also listed in Australia,
and the reconciliation includes the impact of the higher tax rate in Australia
where a significant proportion of the Group's profits are currently earned.
The impact of other tax rates applicable outside the UK and Australia is also
included. The weighted average statutory corporation tax rate on profit before
tax is approximately 29% (30 June 2021: 29%).
(c) The impact for each item includes the effect of tax rates applicable
outside the UK.
(d) In the period to 30 June 2022 and 30 June 2021 the recognition of
previously unrecognised deferred tax assets relates to the recognition of
prior year deferred tax assets at Oyu Tolgoi due to improved deferred tax
asset recovery expectations.
(e) In the period to 30 June 2022, adjustments in respect of prior periods
includes amounts related to the settlement of all tax disputes with the
Australian Tax Office for the years 2010 to 2021.
5. Taxation (continued)
Future tax developments
We continue to closely monitor the Organisation for Economic Co-operation and
Development's (OECD) Two Pillar Solution to address the Tax Challenges Arising
from the Digitalisation of the Economy which are currently expected to be
enacted in 2023 with application to the Group from 1 January 2024. We note the
release of associated draft legislation on 20 July 2022 by the UK government
in relation to a proposed "Multinational Top-up Tax" on a country-by-country
basis in line with the OECD Pillar Two 15% global minimum tax.
We are in the process of evaluating the cash tax and accounting implications
of the Pillar Two global minimum tax rules under IAS 12. Given the UK
legislation is only in draft form and is subject to further consultation it is
too early to reliably estimate the potential impact. Recognition of any such
impact will only occur once legislation has been substantively enacted. We
will closely monitor developments to the proposed legislation accordingly.
6. Acquisitions
On 29 March 2022 we completed the acquisition of Rincon Mining Pty Limited,
the owner of a lithium project in Argentina. Total cash consideration was
US$825 million, following approval from Australia's Foreign Investment Review
Board (FIRB). The transaction has been treated as an asset purchase with
US$822 million of capitalised exploration and evaluation recorded for the
principal economic resource. The balance of total consideration has been
allocated to property, plant & equipment and other assets / liabilities.
No goodwill was recorded on the transaction as the Rincon project's activities
did not, at the time of purchase, meet the definition of a business as defined
by IFRS 3 "Business Combinations".
7. Cash and cash equivalents
Closing cash and cash equivalents less overdrafts for the purposes of the cash
flow statement differs from cash and cash equivalents on the Group balance
sheet as per the following reconciliation:
Closing cash and cash equivalents less overdrafts 30 June 31 December 30 June
2022
2021
2021
US$m US$m US$m
Balance per Group balance sheet 11,412 12,807 14,027
Bank overdrafts repayable on demand (unsecured) (3) (2) (4)
Balance per Group cash flow statement 11,409 12,805 14,023
8. Provisions including post-retirement benefits
Pensions Other Close-down Other Total
and employee and 30 June 2022
post-retirement entitlements((a)) restoration/ environmental((b))
healthcare
US$m US$m US$m US$m US$m
Opening Balance 2,098 394 14,542 1,002 18,036
Change in accounting policy((c)) - - - 17 17
Revision to opening balance 2,098 394 14,542 1,019 18,053
Adjustment on currency translation (20) (19) (514) (34) (587)
Adjustments to mining properties/right of use assets:
- increases to existing and new provisions((d)) - - 345 - 345
Charged/(credited) to profit:
- increases to existing and new provisions((d)) 62 57 206 200 525
- unused amounts reversed - (10) (18) (26) (54)
- exchange losses on provisions - - 24 1 25
- amortisation of discount((d)) - - 503 1 504
Utilised in the period (66) (56) (256) (51) (429)
Re-measurement gains recognised in other comprehensive income (739) - - - (739)
Transfers and other movements - - 3 (14) (11)
Closing balance 1,335 366 14,835 1,096 17,632
Balance sheet analysis:
Current 68 293 1,145 802 2,308
Non-current 1,267 73 13,690 294 15,324
Total 1,335 366 14,835 1,096 17,632
(a) The provision for other employee entitlements includes a provision for
long service leave of US$275 million (31 December 2021: US$272 million),
based on the relevant entitlements in certain Group operations and includes
US$31 million (31 December 2021: US$60 million) of provision for redundancy
and severance payments.
(b) Close-down, restoration and environmental liabilities at 30 June 2022
have not been adjusted for closure related receivables amounting to
US$391 million (31 December 2021: US$410 million) due from the ERA trust
fund and other financial assets held for the purposes of meeting closure
obligations. These are included within "Receivables and other assets" on the
balance sheet.
(c) The way we calculate the cost of fulfilling a contract when assessing
whether it is onerous has changed with the adoption of the amendments of IAS
37 (refer to note 2). This has led to an increase in the opening provision by
US$17 million.
(d) Higher inflation has driven increases in closure and
restoration/environmental liabilities. The Income Statement charge for
amortisation of discount of US$503 million (30 June 2021: US$207 million)
incorporates inflation expectations for 2022 as at the start of the year. We
also recorded adjustments to mining properties and charges within operating
costs of US$360 million and US$180 million respectively, reflecting changes
in forecast cash flows due to our current outlook on inflation being in excess
of expectations at the start of the year.
9. Financial Instruments
Except where stated, the information relates to the financial instruments of
the parent companies and their subsidiaries and joint operations, and excludes
those of equity accounted units.
Valuation hierarchy of financial instruments carried at fair value on a
recurring basis
The Group classifies its financial assets into those to be measured
subsequently at fair value and those to be held at amortised cost. Trade and
other financial payables are recognised initially at fair value, net of
transaction cost incurred and are subsequently measured at amortised cost. The
table below shows the classifications of financial instruments carried at fair
value by valuation method in accordance with IFRS 13 at 30 June 2022 and
31 December 2021:
At 30 June 2022 At 31 December 2021
Held at fair value Held at fair value
Level 1((a)) Level 2((b)) Level 3((c)) Level 1((a)) Level 2((b)) Level 3((c))
US$m US$m US$m US$m US$m US$m
Assets
Cash and cash equivalents((d)) 3,916 - - 4,138 - -
Investments in equity shares and funds 76 - 63 64 - 53
Other investments, including loans((e)) 2,326 - 254 2,422 - 238
Trade and other financial receivables((f)) 3 1,365 - 1 1,163 -
Derivatives (net)
Forward contracts and option contracts: designated as hedges((g)) - - (148) - - (125)
Forward contracts and option contracts, not designated as hedges((g)) - 32 17 - (131) 11
Derivatives related to net cash - (566) - - (101) -
Liabilities
Trade and other financial payables - (80) - - (67) -
Total 6,321 751 186 6,625 864 177
9. Financial Instruments (continued)
(a) Valuation is based on unadjusted quoted prices in active markets for
identical financial instruments.
(b) Valuation is based on inputs that are observable for the financial
instruments, which include quoted prices for similar instruments or identical
instruments in markets which are not considered to be active, or inputs,
either directly or indirectly based on observable market data.
(c) Valuation is based on inputs that cannot be observed using market data
(unobservable inputs). The change in valuation of our level 3 instruments for
the six months to 30 June 2022 is below:
30 June 2022
Level 3 financial assets and liabilities US$m
Opening balance 177
Currency translation adjustments (8)
Total realised gains/(losses) included in:
- consolidated sales revenue 11
- net operating costs (31)
Total unrealised gains included in:
- net operating costs 32
Total unrealised losses transferred into other comprehensive income through (60)
cash flow hedges
Additions to financial instruments 36
Disposals/maturity of financial instruments 29
Closing balance 186
Net gains included in the income statement for assets and liabilities held at 20
period end
(d) Our "cash and cash equivalents" of US$11,412 million, includes US$3,916
million relating to money market funds which are treated as fair value through
profit or loss (FVPL) under IFRS 9 with the fair value movements going into
finance income.
(e) Other investments, including loans, comprise: cash deposits in
rehabilitation funds, government bonds, managed investment funds and royalty
receivables.
(f) Trade receivables include provisionally priced invoices. The related
revenue is initially based on forward market selling prices for the quotation
periods stipulated in the contracts with changes between the provisional price
and the final price recorded separately within "Other revenue". The selling
price can be measured reliably for the Group's products, as it operates in
active and freely traded commodity markets. At 30 June 2022, US$1,155 million
(31 December 2021: US$1,114 million) of provisionally priced receivables were
recognised.
(g) Level 3 derivatives consist of derivatives embedded in electricity
purchase contracts linked to the LME, midwest premium and billet premium with
terms expiring between 2025 and 2036 (31 December 2021: 2025 and 2036).
There were no material transfers between level 1 and level 2, or between level
2 and level 3 in the period ended 30 June 2022 or in the year ended
31 December 2021.
9. Financial Instruments (continued)
Valuation techniques and inputs
The techniques used to value our material fair value assets/(liabilities)
categorised under Level 2 and Level 3 are summarised below:
Description Fair Value Valuation technique Significant Inputs
US$m
Level 2
Interest rate swaps (257) Discounted cash flows Applicable market quoted swap yield curves
Credit default spread
Cross currency interest rate swaps (309) Discounted cash flows Applicable market quoted swap yield curves
Credit default spread
Market quoted FX rate
Provisionally priced receivables 1,155 Closely related listed product Applicable forward quoted metal price
Level 3
Derivatives embedded in electricity contracts (178) Discounted cash flows/option model LME forward aluminium price
Midwest premium and billet premium
Royalty receivables 235 Discounted cash flows Forward commodity price
Mine production
Sensitivity analysis in respect of level 3 financial instruments
For assets/(liabilities) classified under Level 3, the effect of changing the
significant unobservable inputs on carrying value has been calculated using a
movement that we deem to be reasonably probable.
To value the long-term aluminium embedded power derivatives, we use
unobservable inputs when the term of the derivative extends beyond observable
market prices. Changing the level 3 inputs to reasonably possible alternative
assumptions does not change the fair value significantly, taking into account
the expected remaining term of contracts for either reported period. The fair
value of these derivatives are a net liability of US$178 million at 30 June
2022 (31 December 2021:net liability of US$146 million).
Royalty receivables includes amounts arising from our divested coal businesses
with a carrying value of US$146 million (31 December 2021: US$136 million).
These are classified as "Other investments", including loans within "Other
financial assets". The fair values are determined using level 3 unobservable
inputs. This royalty receivable includes US$55 million from forecast
production beyond 2030. This has not been adjusted for potential changes in
production rates that could occur due to climate change targets impacting the
operator.
The main unobservable input is the long-term coal price used over the life of
this royalty receivable. A 15% increase in the coal spot price would result in
a US$15 million increase (31 December 2021: US$63 million increase) in the
carrying value. A 15% decrease in the coal spot price would result in a US$41
million decrease (31 December 2021: US$53 million decrease) in the carrying
value. We have
9. Financial Instruments (continued)
used a 15% assumption to calculate our exposure as it represents the annual
coal price movement that we deem to be reasonably probable (on an annual basis
over the long run).
Fair values disclosure of financial instruments
The following table shows the carrying amounts and fair values of our
borrowings including those which are not carried at an amount which
approximates their fair value at 30 June 2022 and 31 December 2021. The fair
values of our remaining financial instruments approximate their carrying
values because of their short maturity, or because they carry floating rates
of interest.
30 June 2022 31 December 2021
Carrying Fair Carrying Fair
value value value value
US$m US$m US$m US$m
Borrowings (including overdrafts) 11,587 11,997 12,168 13,904
Total borrowings with a carrying value of US$6.7 billion (31 December 2021:
US$7.3 billion) relate to listed bonds with a fair value of US$7.0 billion
(31 December 2021: US$8.7 billion) and are categorised as level 1 in the fair
value hierarchy. Borrowings with a carrying value of US$4.1 billion
(31 December 2021: US$4.2 billion) relate to project finance drawn down by
Oyu Tolgoi, with a fair value of US$4.3 billion (31 December 2021: US$4.4
billion) using a number of level 3 valuation inputs. Our remaining
borrowings have a fair value measured by discounting estimated cash flows with
an applicable market quoted yield, and are categorised as level 2 in the fair
value hierarchy.
10. Commitments and contingencies
Capital commitments at 30 June 2022
Capital commitments, excluding the Group's share of joint venture capital
commitments, were US$2,905 million (31 December 2021: US$2,551 million). Our
capital commitments include open purchase orders for managed operations and
expenditure on major projects already authorised by our Investment Committee
for non-managed operations. It does not include the estimated incremental
capital expenditure relating to decarbonisation projects of US$7.5 billion
between 2022 and 2030 unless otherwise contractually committed. On a legally
enforceable basis, capital commitments would be approximately US$1.3 billion
(31 December 2021: US$1.1 billion) as many of the contracts relating to the
Group's projects have various cancellation clauses.
The Group's share of joint venture capital commitments was US$17 million at
30 June 2022 (31 December 2021: US$11 million).
Contingent liabilities (subsidiaries, joint operations joint ventures and
associates)
Contingent liabilities, indemnities and other performance guarantees represent
the potential outflow of funds from the Group for the satisfaction of
obligations including those under contractual arrangements (for example
undertakings related to supplier agreements) not provided for in the balance
sheet, where the likelihood of the contingent liabilities, guarantees or
indemnities being called is assessed as possible rather than probable or
remote.
10. Commitments and contingencies (continued)
Contingent liabilities, indemnities and other performance guarantees were
US$275 million at 30 June 2022 (31 December 2021: US$441 million).
There were no material contingent liabilities arising in relation to the
Group's joint ventures and associates.The Group has not established provisions
for certain additional legal claims in cases where we have assessed that a
payment is either not probable or cannot be reliably estimated. A number of
Group companies are, and will likely continue to be, subject to various legal
proceedings and investigations that arise from time to time. As a result, the
Group may become subject to substantial liabilities that could affect our
business, financial position and reputation. Litigation is inherently
unpredictable and large judgments may at times occur. The Group may incur, in
the future, judgments or enter into settlements of claims that could lead to
material cash outflows. We do not believe that any of these proceedings will
have a materially adverse effect on our financial position.
Contingent liabilities - not quantifiable
The current status of the following contingent liabilities means it is not
practicable to provide a reliable estimate of possible financial exposure:
Litigation disputes
In October 2017, Rio Tinto announced that it had been notified by the U.S.
Securities and Exchange Commission (SEC) that the SEC had filed a complaint in
relation to Rio Tinto's disclosures and timing of the impairment of Rio Tinto
Coal Mozambique (RTCM). The impairment was reflected in Rio Tinto's 2012
year-end accounts. The SEC alleges that Rio Tinto, a former chief executive,
Tom Albanese, and a former chief financial officer, Guy Elliott, committed
violations of the antifraud, reporting, books and records and internal control
provisions of the federal securities law by not accurately disclosing the
value of RTCM and not impairing it when Rio Tinto published its 2011 year-end
accounts in February 2012 or its 2012 interim results in August 2012. In June
2019, the trial court dismissed an associated US class action on behalf of
securities holders. In August 2020, the appeals court partially overturned the
court's dismissal and the trial court dismissed the case again in 2022.
On 6 March 2022 we reached a settlement with the Australian Securities and
Investment Commission (ASIC) regarding the disclosure of the impairment of Rio
Tinto Coal Mozambique (RTCM), which was reflected in Rio Tinto's 2012 year-end
accounts. As part of this court approved settlement, we paid a A$750,000
penalty for a single contravention of its continuous disclosure obligations in
the period 21 December 2012 to 17 January 2013, immediately preceding the
impairment announcement. As part of this court approved settlement between
ASIC and Rio Tinto, there were no findings of fraud or any systemic or
widespread failure by Rio Tinto. The case against Tom Albanese and Guy Elliott
brought by ASIC has been wholly dismissed.
Rio Tinto continues to co-operate fully with relevant authorities in
connection with their investigations in relation to contractual payments
totalling US$10.5 million made to a consultant who had provided advisory
services in 2011 on the Simandou project in Guinea. In August 2018, the court
dismissed a related US class action commenced on behalf of securities holders.
At 30 June 2022, the outcomes of these matters remain uncertain, but they
could ultimately expose the Group to material financial cost. We believe these
cases are unwarranted and will defend the allegations vigorously. No
provisions have been recognised for these cases however a dedicated Board
committee continues to monitor the progress of these matters, as appropriate.
10. Commitments and contingencies (continued)
Other contingent liabilities
The Group is in the process of modernising agreements with Traditional Owner
groups as outlined in our response to the Juukan Gorge incident. We have
provided for our best estimate of historical claims; however, the process is
incomplete and it is possible that further claims could arise relating to past
events.
Close-down and restoration provisions are not recognised for those operations
that have no known restrictions on their lives as the date of closure cannot
be reliably estimated. This applies primarily to Canadian aluminium smelters
which are not dependent upon a specific orebody and have access to
indefinite-lived power from owned hydro-power stations with water rights
permitted by local governments. In these instances a closure obligation may
exist at the reporting date; however, due to the indefinite nature of asset
lives it is not possible to arrive at a sufficiently reliable estimate for the
purposes of recognising a provision. Close-down and restoration provisions are
recognised at these operations for separately identifiable closure activities
which can be reasonably estimated, such as the demolition and removal of fixed
structures after a pre-determined period, refer to note 8. Any contingent
liability for these assets will crystallise into a closure provision if and
when a decision is taken to cease operations.
11. Non-controlling interests material to the Group
Since 31 December 2021 the only significant changes at subsidiaries that have
non-controlling interest that are material to the Group related to Turquoise
Hill Resources Limited (Turquoise Hill).
On 25 January 2022, Turquoise Hill waived in full, funding balances arising
from a carry account loan with Erdenes Oyu Tolgoi (Erdenes) of US$2.4 billion,
comprising the amount of common share investments in Oyu Tolgoi LLC (Oyu
Tolgoi) funded by Turquoise Hill on behalf of Erdenes to build the project,
plus US$1.0 billion of accrued interest. The waiver formed part of a
comprehensive project budget and funding package undertaken between Rio Tinto,
Turquoise Hill and the Government of Mongolia, upon agreement to commencement
of underground operations.
Prior to the waiver agreement, funding balances owing from Erdenes to
Turquoise Hill were expected to be repaid via a pledge over Erdenes' share of
future Oyu Tolgoi common share dividends. For this reason, and because the
arrangement was between Turquoise Hill and Erdenes rather than with Oyu Tolgoi
itself, both the principal and interest were treated as transactions with
owners acting in their capacity as owners. Consequently, at 31 December
2021, related amounts were recorded as a reduction in the share of equity
attributable to non-controlling interests, resulting in an increase to the
effective interest in Oyu Tolgoi attributable to owners of Rio Tinto.
Accumulation of interest on the funding balances increased the share of
retained earnings attributable to Rio Tinto as it was accrued.
Waiving the funding balances increased Erdenes' economic share through earlier
entitlement to cash flows from future dividends of Oyu Tolgoi. In the six
months ended 30 June 2022, there was no Group Income Statement charge for loan
forgiveness or write-off as a result of the waiver. The waiver did not have
an impact on the Group's assessment of impairment indicators for the Oyu
Tolgoi cash generating unit at 30 June 2022.
11. Non-controlling interests material to the Group (continued)
A reallocation of the net asset value attribution between owners of Oyu Tolgoi
has been recorded in the Group Statement of Changes in Equity for the six
months ended 30 June 2022 by reducing equity attributable owners of Rio Tinto
and increasing equity attributable to non-controlling interests:
Retained earnings Non-controlling interests
US$m US$m
Change in equity interest held by Rio Tinto
- interest accrued in 2022 (between 1 January and waiver date) 6 (6)
- total accrued interest on funding balances waived on 25 January 2022 (490) 490
(484) 484
Equity issued to owners of non-controlling interests
- funding balance principal waived on 25 January 2022 (711) 711
- equity issued to owners of non-controlling interests (subsidiaries other - 22
than Turquoise Hill)
(711) 733
12. Events after the balance sheet date
On 20 July 2022 we announced that agreement had been reached with the
Australian Taxation Office (ATO) on all tax matters in dispute. We also
reached agreement with the Inland Revenue Authority of Singapore in relation
to transfer pricing for the same historical years (2010 to 2021). In the
second half of 2022, we will pay additional tax of A$613 million to the ATO,
relating to this agreement. This was fully provided for at 30 June 2022.
There were no other significant events after the balance sheet date requiring
disclosure.
Directors' declaration
Directors' statement of responsibility
In the directors' opinion:
The condensed consolidated interim financial statements on pages 35 to 60
including the notes have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the UK, applicable UK law, and applicable
Australian law as amended by the Australian Securities and Investments
Commission Order dated 16 July 2021. We have used the most appropriate
accounting policies for Rio Tinto's business, 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 2022 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 4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during the first
six months and their impact on the condensed set of consolidated interim
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.
Dominic Barton
Chairman
27 July 2022
Jakob Stausholm
Chief executive
27 July 2022
Peter Cunningham
Chief financial officer
27 July 2022
Independent Auditors' Review Reports of KPMG LLP ("KPMG UK") to Rio Tinto plc
and of KPMG ("KPMG Australia") to the members of Rio Tinto Limited
Conclusions
For the purpose of these reports, the terms 'we' and 'our' denote KPMG UK in
relation to UK responsibilities and reporting obligations to Rio Tinto plc,
and KPMG Australia in relation to Australian responsibilities and reporting
obligations to the members of Rio Tinto Limited.
We have reviewed the accompanying interim financial information ("Interim
Financial Statements") in the Interim Results 2022 ("Interim Report") of the
Rio Tinto Group ("the Group") as at and for the six months ended 30 June 2022
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
• The notes to the Interim Financial Statements on pages 42 to 60
comprising a summary of significant accounting policies and other explanatory
information.
Rio Tinto ('the Group' or 'Rio Tinto Group') consists of Rio Tinto plc, Rio
Tinto Limited and their respective subsidiaries including the Group's share of
joint arrangements and associates at 30 June 2022 or during the six months
ended 30 June 2022. KPMG Australia considers the Directors' Declaration to be
part of the Interim Financial Statements when forming its conclusion.
Review conclusion by KPMG UK
Based on our review, nothing has come to our attention that causes us to
believe that the Interim Financial Statements are not prepared, in all
material respects, in accordance with International Accounting Standard
('IAS') 34 Interim Financial Reporting as adopted for use in the UK and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Review conclusion by KPMG Australia
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the Interim Financial Statements, including
the Directors' Declaration, are not in accordance with the Australian
Corporations Act 2001 as amended by the Australian Securities and Investments
Commission Order dated 16 July 2021, including:
• giving a true and fair view of the Group's financial position as
at 30 June 2022 and of its performance for the six months ended on that date;
and
• complying with International Accounting Standard ('IAS') 34
Interim Financial Reporting as adopted for use in the UK and the Australian
Corporations Regulations 2001.
Basis for Conclusions
KPMG UK conducted its review in accordance with International Standard on
Review Engagements (UK) 2410 Review of Interim Financial Information Performed
by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in
the UK.
In conducting its review, KPMG UK has complied with the ethical and
independence requirements of the UK FRC Ethical Standard as applied to listed
public interest entities.
KPMG Australia conducted its review in accordance with Auditing Standard on
Review Engagements ASRE 2410 Review of a Financial Report Performed by the
Independent Auditor of the Entity ("ASRE 2410"), as issued by the Australian
Auditing and Assurance Standards Board.
KPMG Australia is independent of the Group in accordance with the auditor
independence requirements of the Australian Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical Standards
Board's APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to its audit of the
annual consolidated financial report in Australia. In conducting its review,
KPMG Australia has also fulfilled its other ethical responsibilities in
accordance with these requirements.
KPMG UK's and KPMG Australia's responsibilities are further described in the
Auditors' Responsibilities for the Review of the Interim Financial Statements
section of our report.
KPMG UK's conclusions relating to going concern
Based on KPMG UK's review procedures, which are less extensive than those
performed in an audit as described in the Basis for conclusions section of
this report, nothing has come to KPMG UK's attention that causes it to believe
that the directors have inappropriately adopted the going concern basis of
accounting, or that the directors have identified material uncertainties
relating to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
Responsibilities of the Directors for the Interim Financial Statements and
Interim Report
The Interim Report is the responsibility of, and has been approved by, the
Directors of Rio Tinto plc and the Directors of Rio Tinto Limited.
The Directors of Rio Tinto plc are responsible for:
▪ preparing the Interim Report in accordance with the DTR of the UK
FCA; and
▪ the preparation of Interim Financial Statements in accordance with
IAS 34 as adopted for use in the UK. As disclosed in note 1, the annual
financial statements of the group are prepared in accordance with UK-adopted
international accounting standards.
▪ assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so, in the preparation of the Interim Financial Statements.
The Directors of Rio Tinto Limited are responsible for:
• the preparation of Interim Financial Statements, including the
Directors' Declaration, that give a true and fair view in accordance with
International Accounting Standard 34 Interim Financial Reporting as adopted
for use in the UK and the Australian Corporations Act 2001 as amended by the
Australian Securities and Investments Commission Order dated 16 July 2021; and
• such internal control as the Directors of Rio Tinto Limited
determine is necessary to enable the preparation of the Interim Financial
Statements, including the Directors' Declaration, that give a true and fair
view and are free from material misstatement, whether due to fraud or error.
Auditors' Responsibilities for the Review of the Interim Financial Statements
KPMG UK's responsibility is to express to Rio Tinto plc a conclusion on the
Interim Financial Statements based on its review. KPMG UK's conclusion,
including its conclusions relating to going concern, are based on procedures
that are less extensive than audit procedures, as described in the Basis for
Conclusions section of this report.
KPMG Australia's responsibility is to express a conclusion on the Interim
Financial Statements, including the Directors' Declaration, based on its
review.
ASRE 2410 requires KPMG Australia to conclude whether we have become aware of
any matter that makes us believe that the Interim Financial Statements,
including the Directors' Declaration, do not comply with the Corporations Act
2001 as amended by the Australian Securities and Investments Commission Order
dated 16 July 2021, including giving a true and fair view of the Group's
financial position as at 30 June 2022 and its performance for the six months
ended on that date, and complying with International Accounting Standard 34
Interim Financial Reporting as adopted for use in the UK and the Corporations
Regulations 2001.
A review of Interim Financial Statements consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
that accompanies the Interim Financial Statements and is contained in the
Interim Report and consider whether it contains any apparent misstatements or
material inconsistencies with the information in the Interim Financial
Statements.
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, neither KPMG UK or KPMG Australia expresses an audit opinion.
The purpose of our review work and to whom we owe our responsibilities
KPMG UK's report is made solely to Rio Tinto plc in accordance with the terms
of KPMG UK's engagement to assist Rio Tinto plc in meeting the requirements of
the DTR of the UK FCA. Our review work has been undertaken so that we might
state to Rio Tinto plc those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than Rio Tinto plc for
our review work, for this report, or for the conclusions we have reached.
KPMG Australia's report is made solely to Rio Tinto Limited's members, as a
body, in accordance with the Australian Corporations Act 2001 as amended by
the Australian Securities and Investments Commission Order dated 16 July 2021.
Our review work has been undertaken so that we might state to the members of
Rio Tinto Limited those matters we are required to state to them in this
report, and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than Rio Tinto
Limited's members, as a body, for our review work, for this report, or for the
conclusion we have reached.
Jonathan Downer
Trevor Hart
for and on behalf of KPMG
LLP
Partner
Chartered
Accountants
Perth
London
27 July 2022
27 July
2022
KPMG
27 July 2022
KPMG, an Australian partnership and KPMG LLP, a UK limited liability
partnership, are member firms of the KPMG global organisation of independent
member firms affiliated with KPMG International Limited, a private English
company limited by guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of the KPMG
global organisation. KPMG Australia's liability limited by a scheme approved
under Professional Standards Legislation.
Lead Auditor's Independence Declaration under Section 307C of the Australian
Corporations Act 2001
To the Directors of Rio Tinto Limited
I declare that, to the best of my knowledge and belief, in relation to the
review of Rio Tinto Limited for the six months ended 30 June 2022 there have
been:
a) no contraventions of the auditor independence requirements as set out
in the Australian 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 financial period.
KPMG
Trevor Hart
Partner
Perth
27 July 2022
Liability limited by a scheme approved under Professional Standards
Legislation
Rio Tinto financial information by business unit
Gross product sales((a)) Underlying EBITDA((a)) Underlying earnings((a))
Six months ended 30 June Rio Tinto 2022 2021 2022 2021 2022 2021
interest US$m US$m US$m US$m US$m US$m
%
Iron Ore
Pilbara (b) 15,517 21,476 10,119 16,207 6,227 10,348
Dampier Salt 68.4 161 145 9 21 - 5
Evaluation projects/other (c) 1,698 1,003 268 161 234 110
Intra-segment (c) (766) (917) (1) (329) - (247)
Total Iron Ore 16,610 21,707 10,395 16,060 6,461 10,216
Aluminium
Bauxite 1,219 1,082 337 338 68 105
Alumina 1,716 1,359 415 295 227 155
Primary Metal 4,246 3,193 1,714 1,101 1,002 564
Pacific Aluminium 1,705 1,285 463 273 306 174
Intra-segment and other (1,724) (1,391) 12 (36) - (40)
Integrated operations 7,162 5,528 2,941 1,971 1,603 958
Other product group items 634 404 26 17 19 12
Product group operations 7,796 5,932 2,967 1,988 1,622 970
Evaluation projects/other - - (101) (64) (75) (49)
Total Aluminium 7,796 5,932 2,866 1,924 1,547 921
Copper
Kennecott 100.0 983 1,318 442 676 68 323
Escondida 30.0 1,401 1,486 966 1,033 490 537
Oyu Tolgoi and Turquoise Hill (d) 805 844 313 528 142 152
Product group operations 3,189 3,648 1,721 2,237 700 1,012
Simandou iron ore project (e) - - (54) (6) (33) (2)
Evaluation projects/other 358 131 (180) (183) (124) (125)
Total Copper 3,547 3,779 1,487 2,048 543 885
Minerals
Iron Ore Company of Canada 58.7 1,480 1,807 775 1,105 268 398
Rio Tinto Iron & Titanium (f) 1,090 973 337 305 139 146
Rio Tinto Borates 100.0 359 300 57 64 21 34
Diamonds (g) 465 160 193 16 91 5
Product group operations 3,394 3,240 1,362 1,490 519 583
Evaluation projects/other 9 30 (103) (92) (99) (85)
Total Minerals 3,403 3,270 1,259 1,398 420 498
Other operations (h) 107 85 (78) (4) (167) (51)
Inter-segment transactions (149) (145) (1) (6) - (3)
Product group total 31,314 34,628 15,928 21,420 8,804 12,466
Central pension costs, share-based payments, insurance and derivatives 265 119 237 120
Restructuring, project and one-off costs (86) (36) (61) (23)
Central costs (397) (346) (363) (294)
Central exploration and evaluation (113) (120) (95) (100)
Net interest 105 (3)
Underlying EBITDA/earnings 15,597 21,037 8,627 12,166
Items excluded from underlying EBITDA/earnings 87 (177) 281 147
Reconciliation to Group income statement
Share of equity accounted unit sales and intra-subsidiary/equity accounted (1,539) (1,545)
unit sales
Depreciation and amortisation in subsidiaries excluding capitalised (2,405) (2,253)
depreciation
Depreciation and amortisation in equity accounted units (242) (249)
Taxation and finance items in equity accounted units (363) (365)
Finance items (359) 56
Consolidated sales revenue/profit before taxation/net earnings 29,775 33,083 12,315 18,049 8,908 12,313
Rio Tinto financial information by business unit (continued)
Capital expenditure((a)) Depreciation and amortisation Operating assets((i))
for the six months for the six months as at
ended 30 June ended 30 June
Rio Tinto 2022 2021 2022 2021 30 June 2022 31 December 2021
interest US$m US$m US$m US$m US$m US$m
%
Iron Ore
Pilbara (b) 1,459 1,907 1,013 1,011 16,823 16,850
Dampier Salt 68.4 13 5 10 11 164 159
Evaluation projects/other (c) - - - - 807 1,283
Intra-segment (c) - - - - (255) (255)
Total Iron Ore 1,472 1,912 1,023 1,022 17,539 18,037
Aluminium
Bauxite 84 67 180 165 2,404 2,542
Alumina 164 113 96 80 1,999 2,258
Primary Metal 364 285 348 347 9,628 9,734
Pacific Aluminium 68 58 60 53 352 228
Intra-segment and other 1 1 1 - 934 839
Total Aluminium 681 524 685 645 15,317 15,601
Copper
Kennecott 100.0 246 203 298 249 2,371 2,404
Escondida 30.0 137 83 171 174 2,654 2,515
Oyu Tolgoi and Turquoise Hill (d) 484 460 88 98 8,246 8,998
Product group operations 867 746 557 521 13,271 13,917
Simandou iron ore project (e) - - - - 26 13
Evaluation projects/other - 4 2 2 202 210
Total Copper 867 750 559 523 13,499 14,140
Minerals
Iron Ore Company of Canada 58.7 126 90 99 96 1,160 1,077
Rio Tinto Iron & Titanium (f) 106 83 113 109 3,374 3,369
Rio Tinto Borates 100.0 13 17 25 25 472 487
Diamonds (g) 22 11 17 2 (36) (19)
Product group operations 267 201 254 232 4,970 4,914
Evaluation projects/other 1 8 - - 869 43
Total Minerals 268 209 254 232 5,839 4,957
Other operations (h) 9 - 133 92 (1,347) (1,533)
Inter-segment transactions (19) (12)
Product group total 3,297 3,395 2,654 2,514 50,828 51,190
Other items 41 35 47 42 (562) (1,334)
Less: equity accounted units (193) (120) (242) (249)
Total 3,145 3,310 2,459 2,307 50,266 49,856
Add back: Proceeds from disposal of property, plant and equipment 1 26
Total capital expenditure per cash flow statement 3,146 3,336
Add: Net cash 291 1,576
Equity attributable to owners of Rio Tinto 50,557 51,432
Notes to financial information by business unit
Business units are classified according to the Group's management
structure.
(a) Gross product sales, Underlying EBITDA, Underlying Earnings and Capital
expenditure are defined and calculated in note 3 on pages 47 to 49.
(b) Pilbara represents the Group's 100% holding in Hamersley, 50% holding in
Hope Downs Joint Venture and 65% holding in Robe River Iron Associates. The
Group's net beneficial interest in Robe River Iron Associates is 53%, as 30%
is held through a 60% owned subsidiary and 35% is held through a 100% owned
subsidiary.
(c) Gross product sales, Underlying EBITDA, Net Earnings and Operating
assets within Evaluation projects/other include activities relating to the
shipment and blending of Pilbara and Iron Ore Company of Canada (IOC) iron ore
inventories held at portside in China and sold to domestic customers.
Transactions between Pilbara and our portside trading business are eliminated
through the Iron Ore "intra-segment" line and transactions between IOC and the
portside trading business are eliminated through "inter-segment transactions".
(d) Our interest in Oyu Tolgoi is held indirectly through our 50.8%
investment in Turquoise Hill Resources Ltd (TRQ), where TRQ's principal asset
is its 66% investment in Oyu Tolgoi LLC, which owns the Oyu Tolgoi copper-gold
mine.
(e) Simfer Jersey Limited, a company incorporated in Jersey, in which the
Group has a 53% interest, has an 85% interest in Simfer S.A., the company that
manages the Simandou project in Guinea. The Group therefore has a 45.05%
indirect interest in Simfer S.A. These entities are consolidated as
subsidiaries and together referred to as the Simandou iron ore project.
(f) Includes our interests in Rio Tinto Fer et Titane (100%), QIT Madagascar
Minerals (QMM, 80%) and Richards Bay Minerals (attributable interest of 74%).
(g) Includes our interests in Argyle (100%) residual operations which
relates to the sale of remaining inventory and Diavik. Prior to 18 November
2021 we recognised our 60% share of assets, revenue and expenses relating to
the Diavik joint venture. Liabilities were recognised according to Diavik
Diamond Mine Inc's contractual obligations at 100%, with a corresponding 40%
receivable or contingent asset representing the co-owner's share where
applicable. Post acquisition, we now consolidate (100%) of the Diavik Diamond
Mine. From 1 June 2021, management responsibility for rehabilitation of the
Argyle site moved from Minerals to Rio Tinto Closure (RTC), hence, Argyle
closure is reported in Other operations effective from 1 January 2021.
(h) Other operations include our 100% interest in the Gove alumina refinery
(under rehabilitation), Rio Tinto Marine, and the remaining legacy liabilities
of Rio Tinto Coal Australia. These include provisions for onerous contracts,
in relation to rail infrastructure capacity, partly offset by financial assets
and receivables relating to contingent royalties and disposal proceeds.From 16
June 2022, Commercial Treasury and related central costs are reported as part
of Other Operations instead of other items in previous periods. We have not
restated prior year balances as the impact was not significant.
(i) Operating assets of the Group represents equity attributable to Rio
Tinto adjusted to remove net cash. Operating assets of subsidiaries, joint
operations and the Group's share relating to equity accounted units are
comprised of net assets adjusted to remove net cash and post-retirement assets
and liabilities, net of tax. Operating assets are stated after the deduction
of non-controlling interests, these are calculated by reference to the net
assets of the relevant companies (i.e. inclusive of such companies' debt and
amounts due to or from Rio Tinto Group companies).
Alternative performance measures
The Group presents certain alternative performance measures (APMs) which are
reconciled to directly comparable IFRS financial measures below. These APMs
are used by management to assess the performance of the business and provide
additional information, which investors may find useful. APMs are presented in
order to give further insight into the underlying business performance of the
Group's operations.
APMs are not consistently defined and calculated by all companies, including
those in the Group's industry. Accordingly, these measures used by the Group
may not be comparable with similarly titled measures and disclosures made by
other companies. Consequently, these APMs should not be regarded as a
substitute for the IFRS measures and should be considered supplementary to
those measures.
The following tables present the Group's key financial measures not defined
according to IFRS and a reconciliation between those APMs and their nearest
respective IFRS measures.
APMs derived from the income statement
The following income statement measures are used by the Group to provide
greater understanding of the underlying business performance of its operations
and to enhance comparability of reporting periods. They indicate the
underlying commercial and operating performance of our assets including
revenue generation, productivity and cost management.
Gross product sales
Gross product sales include consolidated sales revenue plus the equivalent
sales revenue of equity accounted units in proportion to our equity interest
(after adjusting for sales to/from subsidiaries).
Gross product sales measures revenue on a basis that is comparable to our
Underlying EBITDA metric.
For six months ended 30 June 2021
2022 US$m
US$m
Consolidated sales revenue 29,775 33,083
Share of equity accounted unit sales and inter-subsidiary/equity accounted 1,539 1,545
unit sales
Gross product sales 31,314 34,628
Underlying EBITDA
Underlying EBITDA represents profit before tax, net finance items,
depreciation and amortisation excluding the EBITDA impact of the same items
that are excluded in arriving at underlying earnings (as defined in the
underlying earnings section below). The reconciliation of underlying EBITDA to
profit after tax can be found in the segmental information note on page 48.
Alternative performance measures (continued)
Underlying EBITDA margin
Underlying EBITDA margin is defined as Group underlying EBITDA divided by
gross product sales.
For six months ended 30 June 2021
2022 US$m
US$m
Underlying EBITDA 15,597 21,037
Gross product sales 31,314 34,628
Underlying EBITDA margin 50% 61%
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is defined as Pilbara
underlying EBITDA divided by Pilbara gross product sales, excluding freight
revenue.
For six months ended 30 June 2021
2022 US$m
US$m
Pilbara
Underlying EBITDA 10,119 16,207
Pilbara gross product sales 15,517 21,476
Less: Freight revenue (1,110) (1,023)
Pilbara gross product sales, excluding freight revenue 14,407 20,453
Pilbara underlying FOB EBITDA margin 70% 79%
Underlying EBITDA margin from Aluminium integrated operations
Underlying EBITDA margin from integrated operations is defined as underlying
EBITDA divided by gross product sales.
For six months ended 30 June 2021
2022 US$m
US$m
Aluminium
Underlying EBITDA - integrated operations 2,941 1,971
Gross product sales - integrated operations 7,162 5,528
Underlying EBITDA margin from integrated operations 41% 36%
Alternative performance measures (continued)
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined as underlying
EBITDA divided by gross product sales.
For six months ended 30 June 2021
2022 US$m
US$m
Copper
Underlying EBITDA - product group operations 1,721 2,237
Gross product sales - product group operations 3,189 3,648
Underlying EBITDA margin - product group operations 54% 61%
For six months ended 30 June 2021
2022 US$m
US$m
Minerals
Underlying EBITDA - product group operations 1,362 1,490
Gross product sales - product group operations 3,394 3,240
Underlying EBITDA margin - product group operations 40% 46%
Underlying earnings
The definition and reconciliation of underlying earnings to net earnings can
be found in the segmental information note on pages 47 to 49 .
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying earnings
divided by the weighted average number of shares outstanding during the
period.
On a per share basis, this allows the comparability of underlying financial
performance adjusted to exclude items, which do not reflect the underlying
performance of the Group's operations.
For six months ended 30 June 2021
2022
Net earnings (US$ million) 8,908 12,313
Weighted average number of shares (millions) 1,619.3 1,618.1
Basic earnings per ordinary share (cents) 550.1 761.0
Items excluded from underlying earnings per share (cents)((a)) (17.4) (9.1)
Basic underlying earnings per ordinary share (cents) 532.7 751.9
(a) Calculation of items excluded from underlying earnings per share 2021
2022
Income excluded from underlying earnings (refer to page 49) (281) (147)
Weighted average number of shares (millions) 1,619.3 1,618.1
Items excluded from underlying earnings per share (cents) (17.4) (9.1)
Alternative performance measures (continued)
Interest cover
Interest cover is a financial metric used when managing our risk. It
represents the number of times finance income and finance costs (including
amounts capitalised) is covered by profit before taxation before finance
income, finance costs, share of profit after tax of equity accounted units and
items excluded from underlying earnings, plus dividends from equity accounted
units.
For six months ended 30 June 2021
2022 US$m
US$m
Profit before taxation 12,315 18,049
Add back
Finance income (17) (42)
Finance costs 55 91
Share of profit after tax of equity accounted units (468) (556)
Items excluded from underlying earnings (271) (131)
Add: Dividends from equity accounted units 633 726
Calculated earnings 12,247 18,137
Finance income 17 42
Finance costs (55) (91)
Add: Amounts capitalised (208) (174)
Total Finance income/costs before capitalisation (246) (223)
Interest cover 50 81
Payout ratio
The payout ratio is used by us to guide the dividend policy we implemented in
2016, with which we have sought to return 40-60% of underlying earnings, on
average through the cycle to shareholders as dividends. It is calculated as
total equity dividends per share to owners of Rio Tinto declared in respect of
the financial year divided by underlying earnings per share (as defined
above). Dividends declared usually include an interim dividend paid in the
year, and a final dividend paid after the end of the year. Any special
dividends declared in respect of the financial year are also included.
For six months ended 30 June 2021
2022 (cents)
(cents)
Interim dividend declared per share 267.0 376.0
Interim special dividend declared per share - 185.0
Total dividend declared per share for the period 267.0 561.0
Underlying earnings per share 532.7 751.9
Payout ratio 50% 75%
Alternative performance measures (continued)
APMs derived from cash flow statement
Capital expenditure
Capital expenditure comprises the net sustaining and development expenditure
on property, plant and equipment and on intangible assets. This is equivalent
to "Purchases of property, plant and equipment and intangible assets" in the
cash flow statement less "Sales of property, plant and equipment and
intangible assets".
This measure is used to support management's objective of effective and
efficient capital allocation as we need to invest in existing assets in order
to maintain and improve productive capacity, and in new assets to grow the
business.
Rio Tinto share of capital investment
Rio Tinto share of capital investment represents the Group's economic
investment in capital projects. It has been newly introduced to better
represent the group's share of funding for capital projects which are jointly
funded with other shareholders, which may differ from the consolidated basis
included in the Capital expenditure APM. This better reflects the Group's
approach to capital allocation.
The measure is based upon the Capital expenditure APM, adjusted to deduct
equity or shareholder loan financing provided to partially owned subsidiaries
by non-controlling interests in respect of major capital projects in the
period. Where funding which would otherwise be provided directly by
shareholders is replaced with project financing, an adjustment is also made to
deduct the share of project financing attributable to the non-controlling
interest. This adjustment is not made in cases where Rio Tinto has
unilaterally guaranteed this project financing. Lastly, funding contributed
by the Group to Equity Accounted Units for its share of investment in their
major capital projects is added to the measure. No adjustment is made to the
Capital expenditure APM where capital expenditure is funded from the operating
cash flows of the subsidiary or Equity Accounted Unit.
In the current and prior periods the Capital expenditure APM and Rio Tinto
share of capital investment are identical. However, the capital guidance on
page 5 has been provided on this new basis and a reconciliation of the measure
will be published in future periods when the two measures differ.
Alternative performance measures (continued)
Free cash flow
Free cash flow is defined as net cash generated from operating activities
minus purchases of property, plant and equipment and intangibles and payments
of lease principal, plus proceeds from the sale of property, plant and
equipment and intangible assets.
This measures the net cash returned by the business after the expenditure of
sustaining and development capital. This cash can be used for shareholder
returns, reducing debt and other investing/financing activities.
For six months ended 30 June 2021
2022 US$m
US$m
Net cash generated from operating activities 10,474 13,661
Less: Purchase of property, plant and equipment and intangible assets (3,146) (3,336)
Less: Lease principal payments (183) (170)
Add: Sales of property, plant and equipment and intangible assets 1 26
Free cash flow 7,146 10,181
Alternative performance measures (continued)
APMs derived from the balance sheet
Net cash
Net cash is total borrowings plus lease liabilities less cash and cash
equivalents and other liquid investments, adjusted for derivatives related to
net cash.
Net cash measures how we are managing our balance sheet and capital structure.
Financing liabilities Other assets
Six months ended 30 June 2022 Borrowings Lease liabilities((b)) Net-cash related derivatives (included in Other financial Cash and cash equivalents including overdrafts Other investments((d)) Net cash
assets/liabilities)((c))
US$m
excluding overdrafts((a)) US$m
US$m US$m
US$m
US$m
Analysis of changes in consolidated net cash
Opening balance (12,166) (1,363) (101) 12,805 2,401 1,576
Foreign exchange adjustment 116 50 (97) (26) - 43
Cash movements excluding exchange movements 67 183 (2) (1,370) (52) (1,174)
Other non-cash movements 399 (142) (366) - (45) (154)
Closing balance (11,584) (1,272) (566) 11,409 2,304 291
(a) Borrowings excluding overdrafts and including lease liabilities at
30 June 2022 of US$12,856 million (31 December 2021: US$13,529 million)
differ from total borrowings and other financial liabilities of US$13,746
million (31 December 2021: US$14,169 million) on the balance sheet as they
exclude other current financial liabilities of US$360 million (31 December
2021: US$245 million), other non-current financial liabilities of US$527
million (31 December 2021: US$393 million) and bank overdraft of US$3 million
(31 December 2021: US$2 million).
(b) Other movements in lease liabilities include the net impact of
additions, modifications and terminations during the period.
(c) Included within "Net cash-related derivatives" are interest rate and
cross currency interest rate swaps that are in hedge relationships with the
Group's debt. This also includes currency forwards that we use to mitigate the
foreign exchange exposure on our non-US dollar separately managed funds. These
forwards are not in a hedge relationship but are included within the Group's
net cash definition.
(d) Other investments comprise US$2,304 million (31 December 2021: US$2,401
million) of highly liquid financial assets held in managed investment funds
classified as held for trading.
Alternative performance measures (continued)
Net gearing ratio
Net gearing ratio is defined as net cash divided by the sum of net cash and
total equity at the end of each period. It demonstrates the degree to which
the Group's operations are funded by debt versus equity.
30 June 2022 31 December 2021
US$m US$m
Net cash 291 1,576
Net cash 291 1,576
Total equity (57,098) (56,590)
Net cash plus total equity (56,807) (55,014)
Net gearing ratio (0.5%) (3%)
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as underlying
earnings excluding net interest divided by average capital employed (operating
assets).
Underlying ROCE measures how efficiently we generate profits from investment
in our portfolio of assets.
30 June 2022 30 June 2021
US$m US$m
Profit after tax attributable to owners of Rio Tinto (net earnings) 8,908 12,313
Items added back to derive underlying earnings (refer to page 49) (281) (147)
Underlying earnings 8,627 12,166
Add/(deduct):
Finance income per the income statement (17) (42)
Finance costs per the income statement 55 91
Tax on finance cost (120) (10)
Non-controlling interest share of net finance costs (40) (52)
Net interest cost in equity accounted units (Rio Tinto share) 17 16
Net interest (105) 3
Adjusted underlying earnings 8,522 12,169
Annualised adjusted underlying earnings 17,044 24,338
Equity attributable to owners of Rio Tinto - beginning of the period 51,432 47,054
Net (cash)/debt - beginning of the period (1,576) 664
Capital employed - beginning of the period 49,856 47,718
Equity attributable to owners of Rio Tinto - end of the period 50,557 52,975
Net (cash) - end of the period (291) (3,140)
Capital employed - end of the period 50,266 49,835
Average capital employed 50,061 48,777
Underlying return on capital employed 34% 50%
Summary financial data in Australian dollars, sterling and US dollars
30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021
A$m A$m £m £m US$m US$m
41,374 42,876 22,915 23,823 Consolidated sales revenue 29,775 33,083
43,512 44,879 24,100 24,935 Gross product sales 31,314 34,628
17,112 23,392 9,478 12,997 Profit before tax from continuing operations 12,315 18,049
13,080 16,936 7,244 9,410 Profit for the period from continuing operations 9,413 13,068
12,378 15,958 6,856 8,866 Net earnings attributable to Rio Tinto shareholders 8,908 12,313
21,673 27,264 12,004 15,148 Underlying EBITDA 15,597 21,037
11,988 15,767 6,640 8,761 Underlying earnings((a)) 8,627 12,166
764.4c 986.2c 423.4p 548.0p Basic earnings per ordinary share((b)) 550.1c 761.0c
740.3c 974.4c 410.0p 541.4p Basic underlying earnings per ordinary share((a)(b)) 532.7c 751.9c
Dividends per share to Rio Tinto shareholders((c))
577.04c 397.48c 306.72p 221.86p - paid - ordinary dividend 417.0c 309.0c
85.80c 119.63c 45.60p 66.77p - paid - special dividend 62.0c 93.0c
383.70c 509.42c 221.63p 270.84p - proposed - ordinary interim dividend 267.0c 376.0c
- 250.64c - 133.26p - proposed - special interim dividend - 185.0c
8,965 13,419 4,966 7,456 Cash flow before financing activities 6,452 10,354
30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021
A$m A$m £m £m US$m US$m
423 2,173 240 1,168 Net cash 291 1,576
73,516 70,906 41,707 38,108 Equity attributable to Rio Tinto shareholders 50,557 51,432
(a) Underlying earnings excludes income of US$281 million (30 June 2021:
US$147 million), which are analysed on page 49.
(b) Basic earnings per ordinary share and basic underlying earnings per
ordinary share do not recognise the dilution resulting from share options on
issue.
(c) The Australian dollar and sterling amounts are based on the US dollar
amounts, retranslated at average or closing rates as appropriate, except for
the dividends which are the actual amounts.
Metal prices and exchange rates
Six months to 30 June 2022 Six months to 30 June 2021 Increase/ (Decrease) Year to 31 December 2021
Metal prices - average for the period
Copper - US cents/lb 442 413 7 % 422
Aluminium - US$/tonne 3,082 2,246 37 % 2,480
Gold - US$/troy oz 1,874 1,805 4 % 1,799
Six months average to 30 June At 30 June
Exchange rates against the US dollar 2022 2021 Increase/ (Decrease) 2022 2021 Increase/ (Decrease) At 31 December 2021
Pound sterling 1.30 1.39 (6) % 1.21 1.38 (12) % 1.35
Australian dollar 0.72 0.77 (6) % 0.69 0.75 (8) % 0.73
Canadian dollar 0.79 0.80 (1) % 0.78 0.81 (4) % 0.78
Euro 1.09 1.21 (10) % 1.05 1.19 (12) % 1.13
South African rand 0.065 0.069 (6) % 0.062 0.070 (11) % 0.06
Forward-looking statements
This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts included in this report, including, without
limitation, those regarding Rio Tinto's financial position, business strategy,
plans and objectives of management for future operations (including
development plans and objectives relating to Rio Tinto's products, production
forecasts and reserve and resource positions), are forward-looking statements.
The words "intend", "aim", "project", "anticipate", "estimate", "plan",
"believes", "expects", "may", "should", "will", "target", "set to" or similar
expressions, commonly identify such forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Rio Tinto, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding Rio Tinto's present and future business
strategies and the environment in which Rio Tinto will operate in the future.
Among the important factors that could cause Rio Tinto's actual results,
performance or achievements to differ materially from those in the
forward-looking statements include, but are not limited to: an inability to
live up to Rio Tinto's values and any resultant damage to its reputation; the
impacts of geopolitics on trade and investment; the impacts of climate change
and the transition to a low-carbon future; an inability to successfully
execute and/or realise value from acquisitions and divestments; the level of
new ore resources, including the results of exploration programmes and/or
acquisitions; disruption to strategic partnerships that play a material role
in delivering growth, production, cash or market positioning; damage to Rio
Tinto's relationships with communities and governments; an inability to
attract and retain requisite skilled people; declines in commodity prices and
adverse exchange rate movements; an inability to raise sufficient funds for
capital investment; inadequate estimates of ore resources and reserves; delays
or overruns of large and complex projects; changes in tax regulation; safety
incidents or major hazard events; cyber breaches; physical impacts from
climate change; the impacts of water scarcity; natural disasters; an
inability to successfully manage the closure, reclamation and rehabilitation
of sites; the impacts of civil unrest; the impacts of the Covid-19 pandemic;
breaches of Rio Tinto's policies, standard and procedures, laws or
regulations; trade tensions between the world's major economies; increasing
societal and investor expectations, in particular with regard to
environmental, social and governance considerations; the impacts of
technological advancements; and such other risks identified in Rio Tinto's
most recent Annual Report and accounts in Australia and the United Kingdom and
the most recent Annual Report on Form 20-F filed with the United States
Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to, or
filed with, the SEC. Forward-looking statements should, therefore, be
construed in light of such risk factors and undue reliance should not be
placed on forward-looking statements. These forward-looking statements speak
only as of the date of this report. Rio Tinto expressly disclaims any
obligation or undertaking (except as required by applicable law, the UK
Listing Rules, the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority and the Listing Rules of the Australian Securities Exchange)
to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Rio Tinto's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
Nothing in this report should be interpreted to mean that future earnings per
share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed
its historical published earnings per share.
Contacts
media.enquiries@riotinto.com
www.riotinto.com
Follow @riotinto on Twitter
Media Relations, United Kingdom Media Relations, Australia
Illtud Harri Jonathan Rose
M +44 7920 503 600 M +61 447 028 913
David Outhwaite Matt Chambers
M +44 7787 597 493 M +61 433 525 739
Matthew Klar Jesse Riseborough
M +44 7796 630 637 M +61 436 653 412
Media Relations, Americas
Simon Letendre
M +1 514 796 4973
Investor Relations, United Kingdom Investor Relations, Australia
Menno Sanderse Amar Jambaa
M +44 7825 195 178 M +61 472 865 948
David Ovington
M +44 7920 010 978
Clare Peever
M +44 7788 967 877
Group Company Secretary Joint Company Secretary
Steve Allen Tim Paine
Rio Tinto plc Rio Tinto Limited
6 St James's Square Level 7, 360 Collins Street
London SW1Y 4AD Melbourne 3000
United Kingdom Australia
T +44 20 7781 2000 T +61 3 9283 3333
Registered in England Registered in Australia
No. 719885 ABN 96 004 458 404
This announcement is authorised for release to the market by Rio Tinto's Group
Company Secretary.
LEI: 213800YOEO5OQ72G2R82
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