Annual Report 2020
As pioneers in mining and metals,
we produce materials essential to human progress
Directors’ Report
Governance
Chairman’s Introduction
Juukan Gorge
Board of Directors
Executive Committee
Governance Framework
Matters Discussed in 2020
Our Stakeholders
Board Insights
Evaluating Our Performance
Nominations Committee Report
Audit Committee Report
Sustainability Committee Report
Remuneration Report
Annual Statement by the
Remuneration Committee Chairman
Remuneration at a Glance
Remuneration Policy
Implementation Report
Additional Statutory Disclosure
Compliance with Governance
Codes and Standards
113
114
116
118
120
121
122
124
126
128
131
136
140
144
151
159
186
191
Strategic Report
Our Business
2020 at a Glance
Chairman’s Statement
Juukan Gorge
Chief Executive’s Statement
Our Business Model
Our Values
Our Stakeholders
Strategic Context
Our Strategy
Key Performance Indicators
Chief Financial Officer’s Statement
Financial Review
Portfolio Management
Business Reviews
Business Development
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Innovation
Commercial
Sustainability
Risk Report
Risk Management
Principal Risks and Uncertainties
Five-year Review
2
6
10
12
16
17
18
20
22
24
29
31
39
40
42
46
50
54
58
60
62
92
95
109
Financial Statements
Group Income Statement
Group Statement of
Comprehensive Income
Group Cash Flow Statement
Group Balance Sheet
Group Statement of Changes
in Equity
Reconciliation with Australian
Accounting Standards
Outline of Dual Listed
Companies Structure and
Basis of Financial Statements
Notes to the 2020 Financial
Statements
Rio Tinto plc Company Balance
Sheet
Rio Tinto plc Company Statement of
Changes in Equity
Rio Tinto Financial Information by
Business Unit
Australian Corporations Act
– Summary of ASIC Relief
Directors’ Declaration
Independent Auditors’ Reports
Auditors’ Independence Declaration
Financial Summary 2011-2020
Summary Financial Data
Production, Reserves
and Operations
Metals and Minerals Production
Ore Reserves
Mineral Resources
Competent Persons
Mines and Production Facilities
Additional Information
Independent Limited Assurance
Report – Sustainability
Shareholder Information
Contact Details
Cautionary Statement about
Forward-Looking Statements
200
201
202
203
204
205
205
206
301
302
306
310
311
312
328
334
335
339
341
345
350
352
373
375
383
384
riotinto.com
Highlights
Zero
fatalities
$47bn
direct economic contribution
$1bn
over five years
for climate-related projects
26%
women in senior leadership,
up 3.5% year on year with
an aim to improve
$15.9bn
net cash generated from
operating activities
(2019: $14.9bn)
$9.4bn
Free cash flow
(2019: $9.2bn)
$9.8bn
net earnings
(2019: $8.0bn)
$12.4bn
Underlying earnings
(2019: $10.4bn)
$23.9bn
Underlying EBITDA
(2019: $21.2bn)
$44.6bn
consolidated sales revenues
(2019: $43.2bn)
27%
Return on capital employed (ROCE)
(2019: 24%)
riotinto.com
Strategic Report
2020 at a Glance
Our business comprises a portfolio of world-class assets that generate
strong cash flows through the cycle.
Group highlights
$15.9bn
Net cash from operating activities
110.1%
Total shareholder return (TSR)
557 cents
Total dividend per share (DPS)
(2019: $14.9bn)
(2019: 49.6%)
(2019: 443 cents)
Product groups
Fe
Iron Ore
Iron ore is the primary raw material used to make steel.
Steel is strong, long-lasting and cost-efficient – making
it perfect for everything from washing machines to cars,
bridges and skyscrapers.
Gross product sales
$27.5bn
(2019: $24.1bn)
Underlying EBITDA
$18.8bn
(2019: $16.1bn)
In the Pilbara region of Western Australia, we produce
five iron ore products including the Pilbara Blend™, the
world’s most recognised brand of iron ore.
Our Dampier Salt operations in Western Australia are
the world’s largest exporter of seaborne salt, produced
from evaporating seawater.
This quality product suite is well positioned to benefit
from continued demand across China, Japan and
other markets.
Al
Aluminium
Aluminium is one of the world’s fastest-growing major
metals. Lightweight and recyclable, it is found in
everything from jet engines to electric vehicles to
smartphones. Our vertically integrated aluminium
portfolio spans high-quality bauxite mines to alumina
refineries to smelters which, in Canada, are powered
entirely by clean, renewable energy with an average
position in the first decile of the cost curve.
Production (100% basis)
333.4mt iron ore
(2019: 326.7mt)
CO2e emissions (100% basis)
3.5mt
All-injury frequency rate
0.53
(2019: 3.2mt)
(2019: 0.66)
Gross product sales
$9.3bn
Underlying EBITDA
$2.2bn
(2019: $10.3bn)
(2019: $2.3bn)
Production (our share)
56.1mt bauxite
(2019: 55.1mt)
3,180kt aluminium
(2019: 3,171kt)
CO2e emissions (our share)
21.8mt
All-injury frequency rate
0.36
(2019: 21.7mt)
(2019: 0.46)
2
Annual Report 2020 | riotinto.com
2020 at a Glance
0.37
4
All-injury frequency rate (AIFR)
New Scope 3 goals
(2019: 0.42)
3.2%
Reduction in CO2e, equivalent emissions
against 2018 baseline
Cu
Copper & Diamonds
Copper is essential to the transition to a low-carbon
future as it plays a key role in electrification and power
generation, including in renewable energy and electric
vehicles. Our operations span the globe, from Mongolia
to Chile to the US, and occupy various stages of the
mining lifecycle. Our white and coloured diamonds are
some of the world’s most sought-after gems.
Ti
B
Fe
Energy & Minerals
Our Energy and Minerals product group provides
materials essential to a wide variety of industries,
ranging from agriculture to renewable energy and
electric vehicles. We produce high-grade low impurity
iron ore pellets and concentrate, titanium dioxide and
borates from our operations in Africa, Canada and the
US. We contribute to Rio Tinto’s sustainable growth by
unlocking value from our high-grade orebodies and
developing new materials. By giving a second life to
mining waste with by-products, we are expanding our
frontiers for the increasing demand for critical minerals.
We apply innovative technology and processes to deliver
products that will contribute to a decarbonising and
sustainable modern world.
Gross product sales
$5.4bn
(2019: $5.8bn)
Underlying EBITDA
$2.2bn
(2019: $2.1bn)
Production (our share)
528kt mined copper
(2019: 577kt)
CO2e emissions (our share)
2.7mt
All-injury frequency rate
0.30
(2019: 2.8 mt)
(2019: 0.29)
Gross product sales
$5.0bn
(2019: $5.2bn)
Underlying EBITDA
$1.6bn
(2019: $1.8bn)
Production (our share)
1,120kt titanium dioxide slag
(2019: 1,206kt)
10.4mt iron ore pellets and concentrates
(2019: 10.5mt)
CO2e emissions (our share)
3.6 mt
All-injury frequency rate
0.41
(2019: 3.8 mt)
(2019: 0.43)
Annual Report 2020 | riotinto.com
3
Strategic Report Strategic
Report
An employee at Boyne Smelters Limited in
Queensland, Australia. Aluminium, found in
a wide range of essential products, including
hospital equipment, is made from bauxite.
4
Annual Report 2020 | riotinto.com
S
a
f
e
t
y
i
s
o
u
r
f
i
r
s
t
v
a
l
u
e
Annual Report 2020 | riotinto.com
5
Zero
fatalities
Strategic Report
As COVID-19 threatened lives and livelihoods,
the entire company mobilised to safeguard our
employees, contractors and communities, and to keep
our operations running. Our success in 2020 was due,
in no small part, to this remarkable effort by
our entire workforce.
Our strong performance in many areas during 2020 was
overshadowed by the destruction of two ancient rock
shelters in the Juukan Gorge. I reiterate our unreserved
apology to the Puutu Kunti Kurrama and Pinikura (PKKP)
people for the destruction of the rock shelters.
We are committed to learning the lessons from
Juukan Gorge to ensure that the destruction of a site
of such exceptional cultural significance
never happens again.
Simon Thompson
Chairman
6
Annual Report 2020 | riotinto.com
Chairman’s Statement
Today, shareholders are increasingly focused not only on
the financial return that they can earn on their investment,
but also on how that return is made. In order to build and
maintain trust in Rio Tinto, we must seek to achieve
environmental and social goals alongside generating profit
for our shareholders. Our purpose as a company is to
produce materials essential to human progress and we are
committed to fulfilling this role in a sustainable and
inclusive way.
In 2020, our safety performance and our response to the COVID-19 global pandemic
were a demonstration of this company at its best. However, the destruction of the
rock shelters at Juukan Gorge, in Western Australia, was a breach of both our values
and the trust placed in us by the Puutu Kunti Kurrama and Pinikura (PKKP) people
and other Traditional Owners of the land on which we operate. In the months and
years to come, we are determined to learn the lessons from Juukan Gorge, to rebuild
the trust that has been lost, and to re-establish our leadership in environmental and
social performance.
Our response to the pandemic
2020 was a difficult and challenging year for
everyone, but I am proud of Rio Tinto’s response to
the global pandemic. As COVID-19 threatened lives
and livelihoods around the world, the entire
company mobilised to safeguard our employees,
contractors and local communities, and to keep our
operations running safely and smoothly.
At our Pilbara iron ore operations, for example,
within a matter of days, thousands of employees
adapted to new rosters and changed fly-in, fly-out
travel schedules. We secured additional charter
flights and redesigned procedures at our camps to
maintain social distancing and we instituted rapid
health screening at airports across Western
Australia. Around the world, we also took measures
to reduce the risk of transmission from our
employees to the remote and vulnerable
communities near our operations. The success of
Rio Tinto in 2020 was due, in no small part, to this
remarkable effort by our entire workforce.
Safety
Despite all these changes, and the uncertainty
created by the pandemic, we achieved a second
consecutive year with zero fatalities. This
remarkable achievement is a testament to the hard
work and dedication of thousands of employees
and contractors, every day, on every shift. But we
need to do even better in our overall safety
performance and will not be satisfied until we have
eliminated all work-related injuries.
Annual Report 2020 | riotinto.com
7
Strategic Report Strategic Report
Chairman’s Statement
continued
Total dividends declared to
shareholders
$9bn
Our direct economic
contribution in 2020
$47bn
$1bn
over five years on climate-related projects
Financial performance and economic
contribution
As a result of the efforts of our 45,0001 employees in 35
countries to keep our operations running safely, the Group
performed strongly in 2020. The strength and resilience of
our business enabled us to protect thousands of jobs across
our supply chain, and continue to pay taxes and royalties to
governments and dividends to pension funds, when many
other companies were forced to cut back.
We recorded underlying earnings of $12.4 billion
(2019: $10.4 billion) and free cash flow of $9.4 billion
(2019: $9.2 billion) in 2020. Our balance sheet remains
exceptionally strong, with net debt at year-end of $0.7 billion.
These robust results reflect strong demand in our major
markets, especially China, with iron ore prices, in particular,
supported by supply disruptions across the industry.
As many of our host governments spent record sums to
support their people and economies during the pandemic,
our direct economic contribution, including payments to
employees, suppliers, governments and shareholders,
amounted to $47 billion. In 2020, the Rio Tinto Group paid
more than $8 billion in taxes and royalties globally,
including Australia where we are one of the largest
taxpayers, contributing more than $6.5 billion in taxes
and royalties.
In recognition of this strong financial performance, the
Board is recommending a final dividend of 309 US cents
per share (2019: 231 US cents per share) and a special
dividend of 93 US cents per share, taking total dividends
declared this year to $9 billion.
The destruction of the Juukan Gorge
rock shelters
These achievements were overshadowed by the
destruction of two ancient rock shelters in the Juukan
Gorge, at the Brockman 4 iron ore mine in Western
Australia, in May 2020, which should not have happened.
8
Annual Report 2020 | riotinto.com
I would like to reiterate our unreserved apology to the
Puutu Kunti Kurrama and Pinikura (PKKP) people for the
destruction of the rock shelters.
The loss of the Juukan Gorge rock shelters has also
impacted many others, in Australia and beyond, and
within our company it has left many of our employees,
including our Indigenous Australian colleagues, feeling
deeply shocked and ashamed.
Following publication of the Board Review of the events
leading up to the destruction of the rock shelters, and
consultations with shareholders in Australia, Europe and
North America, our Chief Executive, the Chief Executive of
Iron Ore and the Group Executive, Corporate Relations,
have left the company by mutual agreement.
The Board and senior leadership team have taken decisive
action to implement the recommendations set out in the
Board Review and the Interim Report of the Parliamentary
Inquiry. These include measures to ensure that the
destruction of a site of such exceptional cultural
significance never happens again; to re-confirm that we
have recently consulted with Traditional Owners for
potential impacts; and to begin the modernisation process
of our agreements with the Traditional Owners in Western
Australia to increase transparency and redress the
imbalance of power that existed in our older agreements.
We are also reinvigorating our cultural awareness training,
have stepped up our investment in career development
for Indigenous Australians and taken numerous other
measures to ensure that Indigenous Australians have a
stronger voice, not only in our host communities, but also
within Rio Tinto. In parallel with these internal changes,
we have continued to engage with the Government of
Western Australia in relation to reforming the Aboriginal
Heritage Act of 1972.
1. This is the average employee headcount during 2020,
including contractors.
Chairman’s Statement
In November 2020, my fellow director Megan Clark
(Chair of our Sustainability Committee) and I visited the
Juukan Gorge with the PKKP people. It was my first
opportunity to apologise in person to the PKKP people for
the destruction of the rock shelters, and to see and feel
their sadness and pain first-hand. Megan and I subsequently
attended a joint meeting of the PKKP and Rio Tinto Boards
in Perth, where we discussed the steps that
we must take to rebuild trust and to strengthen our
partnership, as well as progress with the remedy process.
Separately, Megan and I also met elders from nine of the
ten Traditional Owners of the lands where we operate in
Western Australia. The Traditional Owners expressed their
sadness and anger at the destruction of the Juukan Gorge
rock shelters, but they also expressed their hopes for a
more equal and respectful relationship with Rio Tinto in
the future.
Traditional Owners recognise the social and economic
benefits that mining brings to their communities, but they
demand a relationship with our company that respects
local customs and traditions and recognises their
obligation to preserve their unique culture for future
generations. It is our responsibility to make sure this
happens both now and into the future, and I know that this
determination is shared throughout our organisation.
The appointment of Jakob Stausholm as
Chief Executive
I am delighted to welcome Jakob Stausholm as our new
Chief Executive with effect from 1 January 2021. Since
joining Rio Tinto as an executive director and Chief
Financial Officer in 2018, Jakob has played a key role in
strategy development and performance management,
allocating capital with discipline and helping to deliver
record shareholder returns. Jakob’s blend of strategic and
commercial expertise, and his collaborative leadership style,
strong values and commitment to sustainable development,
make him the ideal choice for our next Chief Executive.
A further advantage is that, as an internal candidate, he will
be able to apply his existing knowledge and understanding
of the Group to some of the key investment and growth
decisions arising in the shorter term.
Other Board changes
During 2020, we also welcomed three new non-executive
directors – Hinda Gharbi, Jennifer Nason and Ngaire Woods
– and the Board has already benefited from their insights
and expertise in natural resources, finance, technology,
governance, public policy, diversity and inclusion. At the
end of the year, we bid farewell to David Constable, who
steps down to assume the role of Chief Executive Officer at
Fluor Corporation. A search for his replacement is
underway as we seek to strengthen representation on the
Board from our key countries of operation.
Engagement with stakeholders
Despite the limitations imposed by the pandemic, the
Board engaged extensively with stakeholders throughout
2020, including meetings with shareholders, Traditional
Owners, Indigenous leaders, civil society and
governments. During the year, I held one-on-one
meetings with over 70 key shareholders. Together with
the Board Committee chairs, we also arranged two
governance-focused engagements in the UK and Australia
hosted by the Investor Forum and the Australian Council
of Superannuation Investors. Our annual supplier and
customer survey showed improved perceptions of our
performance, as well as a number of areas requiring
The strength and resilience of our
business enabled us to protect
thousands of jobs across our supply
chain, and continue to pay taxes and
royalties to governments and dividends
to pension funds, when many other
companies were forced to cut back.
further attention. We also held a ‘virtual roundtable’ with
civil society organisations, where the discussions focused
on our response to Juukan Gorge, climate change and
continuing concerns about industry lobbying.
In the aftermath of Juukan Gorge, I held a virtual town hall
with senior managers worldwide and a real town hall with
employees in Perth. Board members also held a series of
meetings with smaller groups of leaders around the world,
and made a ‘virtual site visit’ to Oyu Tolgoi, during which
we were able to speak to our employees and partners
in Mongolia.
In these meetings, our employees spoke openly and
honestly about their pride in the company’s response to
COVID-19 and their deep sense of shock at the
destruction of the Juukan Gorge rock shelters. A key topic
for discussion was how we can make the work culture at
Rio Tinto more diverse and inclusive, to ensure that
everyone feels empowered to speak up if something does
not feel right. This will be a strong area of focus for the
Board and leadership team in 2021.
Restoring our reputation as a purpose-led
business
As Jakob takes over as Chief Executive, he takes charge of
a company with outstanding people, world class assets,
an exceptionally strong financial position, a clear climate
change strategy and a robust safety culture. But he also
inherits a company that urgently needs to restore trust
with host communities and in our management of
cultural heritage.
Our purpose is to produce materials essential to human
progress. We are committed to doing so efficiently,
effectively and sustainably, creating value for all
stakeholders while safeguarding the environment and
respecting our host countries and communities.
Thank you
Let me end by thanking the leadership team and the
many thousands of Rio Tinto employees, contractors and
partners who delivered once again for our company and
its shareholders during one of the most difficult and
challenging years in recent memory.
Simon Thompson
Chairman
22 February 2021
Annual Report 2020 | riotinto.com
9
Strategic Report Strategic Report
Juukan Gorge
A breach of our values
We apologise unreservedly to the Puutu Kunti Kurrama and Pinikura (PKKP) people,
and to people across Australia and beyond, for the destruction of Juukan Gorge.
In allowing the destruction of Juukan Gorge to occur, we fell far short of
our values as a company and breached the trust placed in us by the
Traditional Owners of the lands on which we operate. It is our collective
responsibility to ensure that the destruction of a site of such exceptional
cultural significance never happens again, to earn back the trust that has
been lost and to re-establish our leadership in communities and
social performance.
Remediation of the Gorge will be a challenging project. While the Juukan
2 rock shelter is likely to be irreparably damaged, Juukan 1 appears to be
largely intact. Both shelters will be restored to the fullest extent possible
and, if it is safe, access will be re-established. Other parts of the Gorge,
including the Snake pool, which were not impacted by the blast, will
remain protected and its connection to the Juukan 1 and 2 rock shelters
will be re-established.
A nearly two-decade-long timeline
Our relationship with the PKKP people extends over more than 17 years,
with initial agreements covering our operations on PKKP land at
Brockman 4 signed in 2006 and 2011. The decision to destroy the rock
shelters was taken nearly eight years ago but, because mining is such a
long-cycle industry, that decision was not actually implemented
until 2020.
Internal and external reviews of the events leading to the blasting of the
rock shelters at Juukan Gorge have highlighted deficiencies in how our
partnership with the PKKP people was managed, a lack of integration of
our heritage management with our front-line operational teams, and a
work culture that was too focused on business performance and not
enough on building and maintaining relationships with
Traditional Owners.
The archaeological and ethnographic reports received in 2013/14 should
have triggered an internal review of the implications of this material new
information for the mine development plans. Such a review did not take
place. Following completion of the archaeological surveys and other
mitigation measures agreed with the PKKP people in 2014, the site was
reclassified as ‘cleared’ for mining and removed from relevant risk
registers. As a consequence, knowledge and awareness of the location
and significance of the site was progressively lost. Further opportunities
to revise the mine plan were missed in 2018, when the final
archaeological report was received, and again during 2019/20.
Remedy process
We are engaging with the PKKP people to determine an appropriate
remedy process for the destruction of the rock shelters. This includes
providing funding to support their submission to the Joint Standing
Committee on Northern Australia (the Parliamentary Inquiry) and their
effective participation in discussions about how we rebuild and
strengthen our partnership and provide a remedy that respects the
wishes of these Traditional Owners.
A moratorium has been agreed on mining in the Juukan Gorge area and
work is underway on a remediation plan. In partnership with the PKKP
people, we are focusing on understanding how, through the remediation
of the Gorge, we can re-establish a sense of place that recognises the
exceptional cultural significance and connection of the Juukan Gorge area
to past, current, and future PKKP people as well as their aspirations for
future use and interaction with the place.
10
Annual Report 2020 | riotinto.com
Artefacts and other materials salvaged from the rock shelters during
archaeological excavations have already been moved to a purpose-built
conservation facility. Discussions are in progress with the PKKP people
on the provision of an appropriate, permanent ‘keeping place’.
For a more detailed summary of our response to the recommendations
issued by the Parliamentary Inquiry, please visit riotinto.com. Please refer
to pages 114-115 to learn more about the Board review of the events
that led to Juukan Gorge.
Ensuring this never happens again
We have taken decisive action to strengthen our processes and approach
to cultural heritage.
Governance
– Integrated Heritage Management Process (IHMP): The most urgent
task was to ensure that we do not have other sites of exceptional
cultural significance within our existing mine plans. We are currently
completing the first phase of a new IHMP, which is being rolled out at
our Pilbara iron ore business. The lessons from the IHMP will
subsequently be implemented across our business globally while
taking into account local circumstances. In the Pilbara, the IHMP
involves a systematic review of all the heritage sites that we manage
starting with those that may be impacted by our activities over the
next two years. So far, we have reviewed over 1,000 sites and ranked
each one by: (i) cultural significance (which is informed through
consultation with the Traditional Owners of the land on which we
operate); (ii) our re-confirmation that we have recently consulted with
Traditional Owners for potential impacts; and (iii) the materiality of
the impact. Where there is any doubt, we have reclassified the
relevant sites from ‘cleared’ for mining back to ‘protected’ as a
precautionary measure, pending further consultation with the
Traditional Owners.
– Empowering operational management: We have increased the
responsibility of our product groups for Communities and Social
Performance (CSP), partnerships and engagement. This means that
line managers within the product groups directly own the
relationships with host communities, including Indigenous peoples.
All community and heritage management professionals at our
operations now report to product group line management.
– Improved governance and Board oversight: Any direct impacts to
sites categorised as being of ‘high’ or ‘very high’ significance under
the new Integrated Heritage Management Process must also be
approved by the heritage sub-committee of the Executive Committee
Juukan Gorge
or the Board, as appropriate. The Sustainability Committee of the
Board will oversee the implementation of the recommendations
arising from the Board Review and the Parliamentary Inquiry and will
ensure that lessons learned are applied, as appropriate to our
operations worldwide. The Audit Committee of the Board will ensure
that relevant lessons from Juukan Gorge are also applied to all other
risk management processes, particularly those, like Juukan Gorge,
where there is a significant lag between decision and implementation.
Please refer to the risk management and internal control section on
page 115 of this report for more information.
– Strengthened assurance: Second line assurance will be provided by a
new stand-alone CSP Area of Expertise (AoE), reporting to Mark Davies,
our Group Executive, Safety, Technical and Projects, a member of our
Executive Committee, based in Brisbane. The CSP AoE will ensure
conformance with Group policies, standards and procedures, including
the new Integrated Heritage Management Process, and will share
best practice worldwide. The new CSP AoE sits alongside the existing
health, safety, environment (HSE) function. This will help to ensure
that communities and heritage risk processes are aligned with our
existing robust health, safety and environmental systems. The AoE
will also oversee internal assessments and reviews, including deep
dives and operational reviews in conjunction with experts from our
Group Risk function. The framework includes a rigorous annual
self-assessment and certification of impacts and risks. Internal Audit
will provide a third line of defence.
– Modernisation of agreements with Traditional Owners: We have
written to Traditional Owners advising them that we will not enforce
any clauses that restrict Traditional Owners from raising concerns
about cultural heritage matters or that restrict them from applying for
statutory protection of any cultural heritage sites. We have also
offered to modernise agreements in the Pilbara where Traditional
Owners have indicated that the current agreements have not met the
aspirations of partnership we mutually sought at the outset. We will
seek to agree an appropriate mechanism in our revised agreements
so that there is a clear pathway for resolution of any differences of
view that may emerge. We will also continue to work with Traditional
Owners to increase the economic benefits that flow to their
communities from employment, skills, training and business
development.
– Increasing transparency: Subject to the consent of Traditional
Owners in Australia, we intend to make our new agreements public.
We intend to engage with the Traditional Owners on how independent
input can be sought to support this modernisation process.
– Indigenous Advisory Group: We are consulting with Traditional
Owners to create an Indigenous Advisory Group (IAG), intended to
bring Indigenous voices into the senior leadership and oversight of the
business in Australia. An IAG would provide direct input on our
Indigenous strategy in Australia and coaching, mentoring and advice
to senior leadership and, where possible, to the Board.
Work culture and relationships
Making sure that we have the right work culture and relationships will
require sustained effort over many years. We are not underestimating the
time it will take to build a more inclusive work culture that better
recognises and celebrates Indigenous partnership in our business.
– Increasing awareness and understanding of community and
heritage issues: Operational leadership will receive training and
coaching to ensure that they understand their new responsibilities
and have access to the subject matter experts and information they
need to support good decision-making. They will be encouraged to
invest time in building relationships with Traditional Owners to ensure
that they are aware of any concerns, before they escalate into major
issues. To support them, we are reinvigorating our cultural awareness
training, with all frontline staff, including the Board, undertaking both
e-learning and face to face training with Indigenous Australians.
– Fostering Australian Indigenous leadership: In order to increase the
diversity of our leadership team, we have appointed a Chief Advisor,
Indigenous Affairs, reporting directly to our Chief Executive Australia,
and committed a US$50 million investment to advance employment
opportunities and accelerate the career development of Indigenous
Australians in our business. The Chief Advisor, Indigenous Affairs will
also assist and coach operational management in the renegotiation of
our agreements with Traditional Owners.
– Building a more inclusive work culture: It is clear that we need to
create a more inclusive, more diverse work culture, where people feel
empowered to challenge decisions – a priority of the management
team and our new Chief Executive.
External engagement
In parallel with these internal changes, we continue to contribute to the
reform of the Aboriginal Heritage Act 1972 (WA), making clear our
support for a right of appeal by Traditional Owners in relation to
approvals to impact cultural heritage sites on their Country. We are also
engaging with the Chamber of Minerals and Energy in Western Australia,
the Minerals Council of Australia and the ICMM, sharing the lessons that
we have learned from Juukan Gorge.
Annual Report 2020 | riotinto.com
11
Strategic Report Strategic Report
Everything I know about this company –
the talent and commitment of our employees,
the quality of our assets and our contribution
to society – excites me and makes me optimistic
about the future. We have the strength
and capabilities, built over our 148-year history,
to restore our leadership in cultural heritage
and communities and social performance,
and we will emerge a better company for the
lessons we have learned in 2020.
Jakob Stausholm
Chief Executive
12
Annual Report 2020 | riotinto.com
Chief Executive’s Statement
2020 was, in many ways, an extraordinary year –
for our company, and the world at large – and one in
which we saw the best of Rio Tinto, as well as areas
in which we must, and will, improve.
To that end, after the events at Juukan Gorge, we have been working to restore trust with the
Puutu Kunti Kurrama and Pinikura (PKKP) people. Important progress has been made following
a meeting between the PKKP and Rio Tinto boards, as articulated in the December joint
statement at riotinto.com/juukangorge. We are also developing additional measures to
strengthen our partnerships with Traditional Owners in Australia, including a commitment to
modernise and improve agreements in the Pilbara, home to our iron ore business. More broadly,
we are determined to improve our approach to communities and stakeholders globally, in part
by embedding a more inclusive approach that strengthens our overall thinking, decision making
and performance.
It was an honour to have been selected by our Board of Directors to lead Rio Tinto as its
Chief Executive. Everything I know about this company – the talent and commitment of our
employees, the quality of our assets and our contribution to society – excites me and makes
me optimistic about the future. We have the strength and capabilities, built over our
148-year history, to restore our leadership in cultural heritage and communities and social
performance, and we will emerge a better company for the lessons we have learned in 2020.
Annual Report 2020 | riotinto.com
13
Strategic Report Strategic Report
Chief Executive’s Statement
continued
A strong safety culture
I believe a company’s culture is the foundation from which its
performance is built; our strong safety culture allowed us to deliver a
second year with zero fatalities. While we cannot stop improving, this is
an important milestone – one never achieved until 2019. I would like to
personally thank the many thousands of employees, contractors and
partners whose dedication and commitment made it possible. But there
is more to do. While our all-injury frequency rate (AIFR) of 0.37, is
considered industry-leading, we had too many serious safety incidents.
Our focus in 2021 will therefore be on further maturing our safety
system, which will lead to overall improvements in our safety
performance and, at the same time, improve our operations.
I am exceptionally proud of the way we responded, as one, to the global
COVID-19 pandemic: our goal was to keep our employees, contractors
and communities safe and healthy while keeping our operations running
and continuing to deliver the products our customers need. At our Pilbara
iron ore business, for example, in a matter of days, we redesigned rosters
and changed our fly-in, fly-out (FIFO) travel schedules for thousands of
employees. We secured additional charter flights, ensuring compliance
with social distancing guidelines by spacing workers appropriately on
planes, and in airports. With the implementation of rapid screening at
airports in Western Australia for our FIFO workforce, we were one of the
first companies globally to implement large scale rapid screening.
Many of our employees made significant sacrifices this year – often being
away from families and loved ones for extended periods of time – to allow
our company to continue to perform during the pandemic. In Mongolia,
for example, some of our employees took what they thought would be a
domestic, overnight trip but, due to in-country pandemic travel
restrictions, were instead required to spend 21 days in quarantine and
14 days in self-isolation. The pandemic has required incredible resilience,
and our employees have delivered.
I also want to thank our host governments, which actively supported us
and allowed our operations to keep running – and in doing so, allowed
their citizens and economies to benefit.
Juukan Gorge: a breach of our values
One of the reasons I was excited to join Rio Tinto, two years ago, was our
ambition on sustainability, our values, our history – and our purpose: to
produce materials essential to human progress. We know we must fulfil
this purpose in way that is in line with our values.
In Australia, in 1995, our company was the first mining company to
embrace Native Title – the recognition of Indigenous people’s traditional
land and water rights and interests. Our destruction of the 46,000-year-
old rockshelters at Juukan Gorge, in Western Australia, was a breach of
that leadership and our values. Alongside our Board, management team
and employees, I extend my deep apologies to the Puutu Kunti Kurrama
and Pinikura (PKKP) people. We are determined to listen, learn and
change, and to ensure that cultural heritage sites of exceptional
significance, like the Juukan Gorge rock shelters, are never again
destroyed. We must earn the right to become a trusted partner once
more for Traditional Owners, host communities, governments and other
stakeholders. Please refer to pages 10-11 to learn more about the
actions we are taking.
14
Annual Report 2020 | riotinto.com
On a more personal note, the events at Juukan Gorge have taken their
toll on many of us. Many of our employees are disappointed and feel let
down. I am also sorry for this. We are working hard to heal and rebuild our
relationships, credibility and reputation, and I know this will take time and
effort. I believe we all have a role to play and, together, we will learn.
One thing we must do more is put ourselves in others’ shoes – to better
understand their views, improve the way we do things, and make this a
better, more caring company, and one in tune with the world we serve.
This culture must be actively practised and promoted by our leaders. It
needs to be felt by our employees. And it needs to be closely and
regularly monitored by our Executive Committee and Board. This is one
of my top priorities.
A strong financial performance
We are proud that, despite exceptionally challenging circumstances,
we delivered a resilient operating performance this year that enabled
strong financial results: underlying earnings of $12.4 billion, underlying
EBITDA of $23.9 billion and free cash flow of $9.4 billion. We recognise
these strong results are driven by the current pricing environment across
a number of our commodities, particularly iron ore; nevertheless, our
ability to keep operations running amidst a global pandemic was also a
critical factor.
Net debt further reduced to $0.7 billion (2019: $3.7 billion), underpinning
an already strong balance sheet providing both resilience and optionality.
As a result, the Board has recommended a final ordinary dividend of 309
US cents per share and a special dividend of 93 US cents per share,
resulting in total shareholder returns declared this year of $9 billion.
Sustainability in sharp focus
We are working hard to strengthen our cultural heritage processes,
including placing accountability for our relationships with Traditional
Owners with our operational leaders. We are also investing $50 million
to increase and nurture Indigenous leadership across our operations
in Australia.
We made progress across other parts of our business as well. In
December, for example, the Iron Ore Company of Canada signed a
Reconciliation and Collaboration Agreement with the Innu communities
of Uashat mak Mani-utenam and Matimekush-Lac John, re-confirming
the long-term partnership between the company and the two
communities over the coming decades.
We consider climate change the key challenge of our generation, and
have pledged to address our own emissions, and those of our value chain.
Last year, we set Scope 1 and 2 emissions targets: to reduce our absolute
emissions by 15% by 2030 and emissions intensity by 30% (from 2018
levels). These targets are supported by our commitment to spend
approximately $1 billion on climate-related projects from 2020-24.
This year, we set new Scope 3 emissions reduction goals, focused mostly
on our contribution to the development and deployment of low-carbon
technologies, as well as new goals and targets related to emissions from
shipping our products: we will work with customers on steel
decarbonisation pathways and invest in technologies that could deliver
at least a 30% reduction in steelmaking carbon intensity from 2030.
We will work with our partners to develop breakthrough technologies
with the potential to deliver carbon neutral steelmaking pathways by
2050. We will continue to work to scale up breakthrough technology
enabling the production of zero-carbon aluminium. And we will develop
programmes to meet our new ambition to reach, by 2050, net zero
emissions from the shipping of our products.
Chief Executive’s Statement
Underlying earnings
$12.4bn
Zero
fatalities in 2020
Accordingly, this year we committed to invest $10 million in our
partnership with China Baowu Steel Group and Tsinghua University, also
in China, to help address the steel industry’s carbon footprint. This
investment will fund the joint establishment of a Low Carbon Raw
Materials Preparation R&D Centre, which will initially prioritise developing
lower carbon ore preparation processes.
We also signed a memorandum of understanding with Nippon Steel
Corporation, in Japan, to jointly explore a breadth of technologies to
decarbonise the entire steel value chain from iron ore mining to
steelmaking. Please refer to our climate change report, available on our
website, to learn more about our approach to climate change and our
progress against targets.
With respect to our products, our copper joined our aluminium this year
in being third-party-certified as responsible: metal from both the
Kennecott and Oyu Tolgoi mines has been awarded the prestigious
Copper Mark certification.
As detailed in the sustainability section of this report, we are also working
to strengthen other aspects of our work – from biodiversity to human
rights, communities to water. This too, is a personal priority of mine; we
plan to report on our progress regularly and transparently.
Free cash flow
$9.4bn
A look forward
In early 2021, I announced our new Executive Committee, which will
help deliver strong safety and operational performance and make
our company more resilient, an even stronger performer and employer
and a trusted partner for host communities, governments and other
stakeholders. This newly-formed Executive Committee is referenced on
pages 118-119 of this report. I’d like to take this opportunity to
congratulate the team on their new roles. I would also like to sincerely
thank Vera Kirikova, who will leave Rio Tinto in early 2021, for her
significant contributions to our company over many years.
As we look to the months and years ahead, we know we have a lot of hard
work ahead of us. Still, we can look forward to the future of a company
that is today as essential to human progress as at any time in its history.
Our operations are safe, efficient and well-run. Our customers are reliably
served with high-quality products. Our balance sheet is strong, and our
employees have proven they can succeed even in difficult conditions.
All of these things make Rio Tinto well-placed to continue to generate
superior returns for our shareholders, invest in sustaining, innovating and
growing our business and continue to pay taxes and royalties to host
communities and governments – all while creating jobs and partnering
with local businesses.
But none of this will be possible without the dedication and hard work of
our many thousands of employees and contractors. To them, to host
governments and communities, our customers and our many partners,
all of whom make our success possible, I say – thank you.
Jakob Stausholm
Chief Executive
22 February 2021
Annual Report 2020 | riotinto.com
15
Strategic Report Strategic Report
Our Business Model
Our ability to create value is underpinned by the quality of our assets,
the capability of our people, our operational and sustainability
performance, innovative partnerships and disciplined capital allocation.
1
2
3
4
5
Explore and evaluate
We use some of the most advanced exploration technologies in the world to find
potential new sources of minerals and metals. We consider new commodities and
products with an understanding of customers’ and communities’ needs. We are also
mindful of our potential future social and environmental impact as well as the
diversity and balance of our portfolio.
Develop and innovate
We assess each potential operation with a focus on risk, potential returns, and long-term
value and sustainability. Once we have approved an investment, we design and build each
operation, informed by input from those stakeholders most affected. We aim to develop
every potential site to achieve optimal, long-term productivity while minimising risks.
We work in partnership with a growing network of stakeholders – governments,
communities, customers and suppliers – who help expand our thinking, understanding,
capabilities and, ultimately, our ability to deliver mutual benefit.
Mine and process
A safe site is a productive site, and advanced technologies are playing a more important role
in how we achieve both. We share best practices across our assets to create safe,
environmentally responsible working practices and a high-performing culture that targets
production at lower costs. At the same time, our operations aim to benefit local economies
by contributing jobs, taxes and royalties, contracts with local businesses, and social and
community investment. We also support the economic diversification of regions where
we are based, in alignment with national and local government plans, ensuring host
communities can thrive long after our operations close. Our ambition is for our operations
to reach net zero carbon emissions by 2050.
By understanding and respecting our business partners, employees, communities and the
environment, we can create sustainable value for all our stakeholders.
Market and deliver
Our minerals and metals are essential to the transition to a low-carbon future and are used
in a vast array of everyday products – from cars to coffee pods to smartphones. Our
commercial team ensures that we align our products with market and customer needs. And
our network of rail, ports and ships means that we can control end-to-end logistics to deliver
our products safely, efficiently and reliably.
Repurpose and renew
We aim to design and run our assets to create a positive legacy once our mining activity
concludes. We engage stakeholders of our sites nearing closure – including Indigenous
peoples, government, employees and host communities – and actively involve them
in planning.
Applying this approach could entail rehabilitating the land for a nature reserve, for example,
or repurposing it for light industrial use. Each of our sites has rehabilitation plans that we
review every year. We see this long-term approach – planning and operating with the future
in mind – as integral to running a safe, responsible and profitable business.
16
Annual Report 2020 | riotinto.com
Disciplined
capital allocation
Our business is
underpinned by a
disciplined approach
to capital allocation;
we strive to use every
dollar prudently.
Today, our balance sheet
is a key strength,
providing a resilient
platform for strong and
consistent shareholder
returns, as well as
enabling us to invest
throughout the
commodity cycle.
Our Values
Our values reflect our commitment to the safety and wellbeing of our
employees, the integrity of our business and supply chain, and
respect for the environment and host communities.
Safety
Caring for human life and
wellbeing above everything else
We make the safety and wellbeing of
our employees, contractors and
communities our number one priority.
Always. Safely looking after the
environment is an essential part of our
care for future generations.
Teamwork
Collaborating for success
We work together with colleagues,
partners and communities globally to
deliver the products our customers
need. We learn from each other to
improve our performance and
achieve success.
Respect
Fostering inclusion and
embracing diversity
We recognise and respect diverse
cultures, communities and points of
view. We treat each other with fairness
and dignity to make the most of
everyone’s contributions.
Integrity
Having the courage and
commitment to do the right thing
We do the right thing, even when this is
challenging. We take ownership of what
we do and say. And we are honest and
clear with each other, and with
everyone we work with. This helps us to
build trust.
Excellence
Being the best we can be for
superior performance
We challenge ourselves and others to
create lasting value and achieve high
performance. We adopt a pioneering
mindset and aim to do better every day.
Our Culture
We define culture as the system of beliefs and values that guides our
behaviours across our diverse organisation. Our culture helped us achieve
zero fatalities for two years running, and it underpins our ability to
innovate and deliver high-quality products to our customers – reliably
– even through a global pandemic.
But we know that aspects of our culture have let us, and our many
stakeholders, down – and these aspects must be improved. The Board
Review of the destruction of the rock shelters at Juukan Gorge, published
in August, made clear that parts of our business lack connectedness in
organisational structures, decision-making, openness and depth of
engagement with Traditional Owners. They also have rigid processes and
systems, constrained resourcing of key areas and difficulty escalating
unresolved issues. None of these is aligned with the values we espouse or
the standards we set for ourselves.
We are therefore making changes to our structure, to the way we interact
with each other, the way we run certain processes, make decisions and
allocate funds and time, and to elevate our approach to social
performance, including respect for cultural heritage, to the same level as
health, safety and environment. The choices we are making in these
areas seek to both reflect and embed the values we uphold.
We will continue to work across the organisation to ensure our values are
reflected in the behaviours we demonstrate – every shift, every day. We
are also making an investment in developing our leaders’ cultural
awareness, through training programmes and diversity in leadership, and
their ability to engage respectfully and effectively with Traditional
Owners and other First Nations groups. And, as this company begins its
next chapter, our management team is committed to re-setting and
evolving the culture of our nearly-150-year-old company.
Annual Report 2020 | riotinto.com
17
Strategic Report Strategic Report
Our Stakeholders
Our business touches the lives and livelihoods of many people
around the world. We recognise our responsibility to listen to – and
hear – their views and take account of their interests.
Employees
Civil society
This year, our employees faced unique challenges, from working
through the COVID-19 pandemic to the sober reflection required by
the global movements for social justice and in the aftermath of
Juukan Gorge.
To understand employees’ views on how to make our business better,
we held virtual focus groups with almost 1,000 people from our sites
and offices. Sessions were set aside specifically for Indigenous
employees, employees of Asian heritage, Black employees, female
employees and LGBTI+ employees. We heard our employees’
appreciation of our response to COVID-19, their disappointment with the
company on Juukan Gorge – and their views on many other topics,
ranging from work culture, inclusion and diversity, the desired qualities of
the new Chief Executive and the importance of sustainability. These
sessions were supported by a series of engagements held in November
by the Chairman and some of the non-executive directors.
In our most recent employee survey, conducted in November, we saw
that, despite a year that tested employees in many ways, we maintained
a high level of engagement overall. For the second time in a row, our
employee net promoter score (eNPS) is in positive territory and currently
sits at +5, one point higher than last year and the highest since we began
our survey in 2016. And our employee satisfaction (eSAT) and
recommend scores are also at their highest, each moving up a point to 73
and 72, respectively.
It is clear we have work to do. Our current priorities include improving
overall safety performance and health, particularly during COVID-19
restrictions; transforming our culture to make it more inclusive and
welcoming of diverse and/or dissenting perspectives, including women
and Indigenous voices; continuing to offer competitive pay and benefits
and ensuring a reasonable work-life balance, including a focus on
strengthening mental health.
Communities
Communities are the places where we operate, where we live, and work,
and call home – from the Pilbara, Western Australia, to KwaZulu-Natal,
South Africa, to Saguenay–Lac-Saint-Jean, Quebec, Canada. But more
than that, communities are made up of people – employees, Indigenous
peoples, suppliers and neighbours – with whom we strive to build
long-term, positive partnerships. Our strength is built upon their strength.
We recognise that, in parts of our business, we have work to do to meet
our own standards on open, transparent engagement. We continue to
strive to engage consistently and honestly with communities on a
number of issues: from jobs and local procurement to the impact of our
operations on the local environment.
This year, we established a communities and social performance (CSP)
Area of Expertise (AoE), which will deliver a more rigorous assurance
framework across our operations and elevate communities risk processes
to align with our health and safety systems. We also changed the way we
structure our global CSP teams, so that product group and operational
leaders directly own relationships with their host communities, including
Indigenous peoples. We have taken decisive action to strengthen our
processes and approach to cultural heritage. We are currently completing
the first phase of a new Integrated Heritage Management Process (IHMP),
which is being rolled out at our Pilbara iron ore business. The lessons
from the IHMP will subsequently be implemented across our business
globally while taking into account local circumstances.
18
Annual Report 2020 | riotinto.com
Civil society organisations, whether local or global, play an important role
in our society and in the governance of the world’s natural resources.
We believe that preventing and addressing the world’s many complex,
multifaceted environmental, social and governance challenges, such as
climate change, human rights violations and bribery and corruption, can
only be achieved through genuine dialogue and engagement with civil
society and other stakeholders.
As a result, we regularly engage civil society organisations and, although
we acknowledge instances in which our opinions may differ, we genuinely
respect their views and the role they play in communities and in our
business. Since 2018, we have held annual civil society roundtables to
listen, learn and understand how we can improve. In 2020, we partnered
with many organisations to help our communities affected by the
COVID-19 pandemic and discussed matters of cultural heritage with
many civil society organisations.
Governments
Governments – federal, state and provincial, and local – are also critical
stakeholders for our business. We regularly engage officials at all three
levels on matters from how we explore, mine and process ore, to
conditions of land tenure, and health, safety and environmental
requirements, as well as how we operate as a company in relation to
securities, taxation, intellectual property, competition and foreign
investment, provisions to protect data privacy, conditions of trade and
export and infrastructure access.
A key item of discussion is the economic contribution our business makes
to governments around the world: a decade ago, we were the first
company in our industry to disclose our payments to governments in
detail, and we have been reporting on our taxes and royalties paid, and
our economic contribution, in increasing detail ever since.
Over the past ten years we have paid more than $71 billion in taxes and
royalties globally; more than 75%, or $54 billion, was paid in Australia.
In 2020, the Rio Tinto Group paid more than $8 billion in taxes and
royalties globally. In Australia, where we are one of the largest taxpayers,
we contributed more than $6.5 billion in taxes and royalties.
This is important because our businesses and the funds we provide to
governments and communities support the basic infrastructure of society
– bridges and roads, schools and hospitals – as well as other local
development priorities, like job creation and skills training. This is one,
very important way we fulfil our purpose: to produce materials essential
to human progress. Being transparent about where these payments go
helps our stakeholders better understand how these funds may be used
to deliver economic and social benefit through our business.
At the global level, we also engage international state-based
organisations from the World Bank and the International Finance
Corporation to the United Nations to the Organisation for Economic
Co-operation and Development (OECD), as well as key multi-stakeholder
initiatives in which governments participate, such as the Extractive
Industries Transparency Initiative (EITI) and the Voluntary Principles on
Security and Human Rights. These bodies also help define the industry
operating environment and contribute to joint problem-solving.
Our Stakeholders
Investors
Customers & Suppliers
Our investors include pension funds, global fund managers, bondholders,
employees and tens of thousands of individuals around the world. They
have trusted us with their investment and, in return, they expect a
financial return. But they are increasingly focused on how that return is
made. They want to invest in companies that behave responsibly across
environmental, social and governance (ESG) measures.
We could not produce materials essential to human progress without our
suppliers, who help us at every stage of our business. Our customers turn
them into the products upon which the modern world is built. We recognise
that building trust with these critical stakeholders, and keeping it,
requires us to deliver on our promises consistently, and to act with
transparency, respect and integrity.
We engaged with current and potential investors through virtual forums
for the majority of 2020, providing an opportunity for meetings with
executive directors, the Chairman and non-executive directors.
Additionally, our two annual general meetings (AGMs) in the UK and
Australia provide an opportunity for all investors to question and engage
with the Board. The Board also commissioned an independent perception
study in April, seeking the views of institutional investors representing
around 40% of the active Rio Tinto register in the US, the UK and Australia.
Given the growing importance of issues such as climate change,
governance, social performance and environment, we present and
engage regularly on these topics. In April, we held a sustainability
seminar focused on our approach to climate and water management.
Members of the executive team and subject matter experts provided an
update on progress with our climate change strategy and our water
management focus areas, including targets for both topics.
The Chairman and other non-executive directors engaged extensively
with investors following the events at Juukan Gorge. Following the Board
Review of Cultural Heritage Management, and extensive consultation
with our global investor base, the Board announced changes to the
Executive Committee in September. The company has moved with pace
to take a number of actions to strengthen cultural heritage governance
and controls, including an enhanced level of governance over the impact
on sites of heritage significance.
We use deep insights generated from everything we buy, sell and move
around the world to ensure the needs of our customers are central to our
operational decision making. Through the volatility of 2020, we engaged
customers and suppliers to safely maintain our operations and the
uninterrupted flow of materials and products through the value chain.
The disruption of COVID-19 also gave us the opportunity to accelerate
and expand our use of digital solutions – such as offering customers
the opportunity to buy our products through a mobile app and conducting
end-to-end digital transactions using blockchain technology.
We also continue to engage with our iron ore customers, such as Baowu
Steel in China and Nippon Steel Corporation in Japan, to tackle emissions
across the steel value chain – and to work with others, like AB InBev, to
help make their supply chains more sustainable through the use of our
low-carbon, Canadian aluminium. In 2020, our Kennecott and Oyu Tolgoi
operations were the first and second producers globally to be awarded
the ‘Copper Mark’, the industry’s new independently assessed
responsible production programme.
Suppliers are also an important way we have a positive impact on
communities: in 2020, we spent $15.5 billion with suppliers globally,
including A$8.2 billion in Western Australia, and A$293 million
with Indigenous suppliers across Australia. In Mongolia, between
2010 and the fourth quarter of 2020, Oyu Tolgoi spent $3.54 billion on
national procurement(a).
The Chairman of the Remuneration Committee also consulted with
investors in 2020 on proposed changes to the Remuneration Policy,
due for renewal at the 2021 AGMs.
This year, we introduced new payment terms in Australia to ensure
smaller suppliers are paid quickly. As a result of the new policy,
approximately 90% of our suppliers in Australia are paid within 20 days.
Two governance-focused engagements were also held by the Chairman
and our Board Committee Chairs in December, facilitated by the Investor
Forum (in the UK) and the Australian Council of Superannuation
Investors (ACSI).
We intend to hold further environmental, social and governance forums
in 2021 in response to growing investor interest in the company’s
progress in a number of areas including climate change, heritage and
communities, closure and environment.
(a) Oyu Tolgoi’s (OT) national procurement figure represents spend with suppliers registered in
Mongolia and more than 50% owned by Mongolian citizens. It relates to the OT operations
only, and does not include the underground project.
There is more detailed information on our stakeholder engagement
in the Sustainability section on pages 62-91 and we set out how the
Board takes account of stakeholder interests (our ‘section 172(1)
Statement’) in the Governance section on pages 122-123.
We meet with the Climate Action 100+ (CA100+) group regularly at the Board, Executive
Committee and climate team levels, and we value their co-ordination of investor engagement.
We welcome the opportunity to join investors in the development and implementation of net zero
transition action plans. As a supporter of the Task Force on Climate-related Financial Disclosures
(TCFD) recommendations, we will work towards disclosures consistent with the evolving CA100+
benchmark and intend to put our annual TCFD-aligned reporting to an advisory vote at our 2022
annual general meetings.
Annual Report 2020 | riotinto.com
19
Strategic Report Strategic Report
Strategic Context
A new era
of complexity
We recognise our success is
predicated upon our ability to build
and strengthen our resilience, and
form partnerships that enable us to
quickly adapt to future realities
and opportunities.
Society
A world where
climate change and
the environment,
as well as inclusive
growth and
sustainability,
are critical.
Geopolitics
A world of
growing political
fragmentation,
nationalism and
weak global
collaboration.
Technology
A world where
automation,
data and artificial
intelligence drive
improved
performance.
In a world of increasing complexity, we continue to view
the strategic context in which we operate through the lens
of plausible scenarios, structured by the interplay of three
global forces: geopolitics, society and technology. While it
is still too early to delineate many mid- to long-term
implications of COVID-19, it is fair to say that within each
of these forces, the pandemic has the potential to amplify
or decelerate trends already evident before the crisis.
20
Annual Report 2020 | riotinto.com
Strategic Context
In China, growth has been central to social stability, and,
with the country now past its phase of rapid economic
development, a broader focus may be needed, as
indicated by President Xi Jinping’s recent commitment to
carbon neutrality by 2060. However, with budget deficits
in several countries already approaching World War II
levels, it will be difficult to close the gap between societal
expectations and governments’ ability to deliver.
Taken together, this dynamic promises to only increase
pressures on businesses and the financial sector to step
up their sustainability credentials. This is certainly true for
our sector. The integration of sustainability, including
cultural heritage, local economic contribution and
climate change, into our strategy is another of our key
strategic priorities.
Technology
Digital connectivity has been a defining feature of how
the world adapted to life during a global pandemic.
Investment and adoption rates in digital communication
tools have leapt forward, upending traditional ways of
working. This will likely have long-lasting effects on the
future of work, cities and transport.
It remains to be seen whether the rapid digitalisation
of work will boost medium-term global economic
productivity and growth. But there is no doubt that
increased online focus, across sectors, is helping to
accelerate and concentrate wealth towards owners and
operators of global digital platforms, adding another
strand to concerns about economic inequality.
In addition, the development and cost reduction of
low-carbon technologies is an ongoing trend that may
further benefit from pandemic stimulus packages
targeted at ‘building back better’ and advancing a green
recovery. This in turn promises to accelerate the global
energy transition – and therefore, potentially, future
climate outcomes.
In the mining sector, technology has an important role to
play in addressing productivity, growth and sustainability
challenges. This is another core element to our strategy;
our approach is to look for the best solutions through
partnerships with our suppliers, technology providers and
others across our value chains.
Annual Report 2020 | riotinto.com
21
Geopolitics
We have witnessed an evolution in the global
geopolitical context over the past few years, marked
by an erosion of global trust in elites and institutions,
a backlash in some quarters against globalisation and
a marked shift in the relationship between the
United States and China. The growing sense of
a fragmenting world order has been exacerbated
by the unco-ordinated response to the COVID-19
global pandemic.
Tensions between the United States and China
have become more structurally ingrained, reaching
beyond trade into broader issues such as technological
leadership and access to data. The pandemic has also
accentuated concerns about security of the global supply
chain, including for critical minerals, and self-sufficiency.
Still, the economies of the United States and China
remain closely intertwined and, despite growing talks
of decoupling, this new era of competition will be
shaped as much by how and where both countries
agree to co-operate.
Other countries, including many in which we operate
such as Australia, face the conundrum of how to position
their economic and foreign policies towards the United
States and China, knowing that how they do so will have
implications for global growth and trade, both of which
are critical to the outlook of the mining sector.
For Rio Tinto, balancing the relationships we have
with our host country governments, as well as other
stakeholders, alongside those we have with China as a key
customer and supplier, market, technology partner and
shareholder, is one of our top strategic priorities.
Society
The initial economic shock from the global pandemic has
been sharper than the 2008 global financial crisis (GFC).
And, as with the GFC, its impact has been uneven,
particularly in countries that lack social safety nets and in
low-income service sectors in which social distancing and
remote working are difficult.
Social movements, such as Black Lives Matter, are not a
product of the pandemic, but the global context and the
shared, digitally-connected lockdown experience have
facilitated linking local issues to a global narrative.
Societal expectation for social equality, fairness and
sustainability is today an increasingly powerful force.
The aftermath of the GFC saw a rising wave of populist
sentiment. As the world turns to the rebuilding of the
global economy after the pandemic, governments are
facing growing calls for a new social contract.
Strategic Report Strategic Report
Our Strategy
Our strategy is to create superior, sustainable value for shareholders,
in partnership with our stakeholders, by meeting customers’ needs,
maximising cash from world-class assets and allocating capital with discipline.
P
Portfolio
P
People
Low-cost, long-life assets that deliver
attractive returns
Our portfolio of low-cost, long-life assets delivers
attractive returns through the cycle. After a significant
portfolio reshaping, we are invested in commodities
with strong, long-term fundamentals and material
growth opportunities.
Building capability to drive performance
Attracting, developing and retaining the best people is
crucial to our success. We continue to strengthen our
technical and commercial capabilities through our Centres
of Excellence, and are committed to building an inclusive
and diverse workforce across our global business.
In 2018, with the sale of the last of our coal businesses, we
became the first major diversified global mining company to
divest all of our coal assets; this was part of our $12 billion
portfolio reshaping, which also included the decision to divest our
stake in the Grasberg copper mine, in Indonesia, and the
Dunkerque aluminium smelter, in France.
In 2020, we continued to evolve and strengthen our portfolio, in
part by progressing important growth options, including those in
Mongolia (the Oyu Tolgoi underground project), Australia (Winu,
Gudai-Darri), Serbia (Jadar), Guinea (Simandou iron ore) and the
United States (Resolution Copper). In 2021, we will also begin
producing scandium oxide at a new plant in Quebec, Canada.
Please refer to pages 40 to 41 for more on these growth projects,
and pages 54 to 57 for more on our scandium oxide plant.
We have also announced a new electricity agreement that makes
the Tiwai Point aluminium smelter, operated by New Zealand
Aluminium Smelter (NZAS), economically viable and competitive
over the next four years. The smelter will continue operating until
31 December 2024, providing certainty to employees, the local
community and customers while providing more time for all
stakeholders to plan for the future.
Work to progress ELYSIS™ – our joint venture with Alcoa that
aims to eliminate direct greenhouse gases from the aluminium
smelting process, launched with the support of the governments
of Canada and Quebec – also continued this year with the
completion of its Research & Development Centre in the
Saguenay, Quebec.
We have said that our company must become more
representative of the communities in which we operate and the
world we serve. Ultimately, we aspire to an environment where all
aspects and dimensions of diversity are represented. In Australia,
we have committed $50 million to increasing Indigenous
leadership. In 2021, we will also focus on improving the
representation of women.
Women currently comprise approximately 20% of our workforce;
we have increased the number of women in our senior leadership
roles, from 19% to 26% in five years, an increase of 35%. But we
are not where we want to be on any measure. And we know when
we make an effort, women respond – a recent recruitment drive in
Western Australia resulted in more than 2,000 applications from
women for 100 jobs. And so, in 2021, we aim to do better.
Ultimately, we want to achieve a gender balance across our
business of at least 40% women. But we recognise that will take
time, and so for the first time, in 2021 we will have a target to
increase female representation at Rio Tinto by 2% – or nearly
900 more women at all levels. Our commitment to increase the
number of women in senior leadership roles by 2% every year
also remains.
20%
$50 million
of the global scandium oxide market to be met by our
new plant in Quebec, Canada
to attract, retain and grow Indigenous professionals
and leaders
22
Annual Report 2020 | riotinto.com
Our Strategy
P
Performance
P
Partners
Safety, operational and commercial excellence
drive superior margins and returns
Safety is our number one priority. We aim to generate
value from mine to market and also to prioritise value over
volume in our investment decisions. We work to maximise
value in other ways – for example, by developing new
markets for our materials, including as part of the
transition to a low-carbon economy. We focus on
operational excellence to improve efficiency.
Working with others for future success
Partnerships and collaboration are essential to the
long-term success of our business. We work closely with
technology partners, local suppliers, governments,
community groups, industry leaders and civil society
organisations at all stages of the mining lifecycle, from
exploration to rehabilitation and closure. We believe this
gives us a competitive edge and also allows us to work
more thoughtfully and responsibly, and to deliver real
benefits to all our stakeholders.
This year was marked by strong performance. Our strong safety
culture allowed us to deliver a second year with zero fatalities, with
an all-injury frequency rate (AIFR) of 0.37, marking a year-on-year
improvement. However, we recognise there is more to do.
Thanks to the significant sacrifices of many of our employees and
the actions of host governments, we responded well to the global
COVID-19 pandemic, acting to keep our employees, contractors
and communities safe and healthy while keeping our operations
running, continuing to deliver the products our customers need.
Despite challenging circumstances, we delivered a resilient
financial performance in 2020, with underlying earnings of
$12.4 billion, underlying EBITDA of $23.9 billion and free cash flow
of $9.4 billion. Net debt further reduced to $0.7 billion (2019:
$3.7 billion), underpinning an already strong balance sheet
providing both resilience and optionality.
This year, we added the word ‘partnership’ to our strategy
statement, in recognition of the critical role our partners play in
our performance across a variety of metrics. As part of our
climate change strategy, for example, we signed a series of
agreements (see page 79) with partners in China and Japan to
address emissions across the steel value chain, in which our iron
ore plays an important role.
In Canada, we signed a historic agreement between the Iron Ore
Company of Canada and the communities of Uashat mak
Mani-utenam and Matimekush-Lac John, in Newfoundland and
Labrador and Quebec, two of our First Nations communities and
partners. Through this partnership, nearly two years in the
making, we will support local education and jobs, and preserve
the environment, unique customs and cultural practices of both
communities. The agreement is called Ussiniun, or ‘renewal’, in
the Innu language, and it marks both a new beginning and a
shared commitment to a strong future.
Our partnerships were also affected by our destruction of the
rock shelters at Juukan Gorge (see pages 114 to 115). Our work
to earn back the trust we have lost, with the PKKP people, other
Traditional Owners, Indigenous leaders and many other partners,
in Australia and elsewhere, is one of our most important
priorities this year.
0.37
all-injury frequency rate
$14.5 million
committed to advance Scope 3 climate
change partnerships
Annual Report 2020 | riotinto.com
23
Strategic Report Strategic Report
Key Performance Indicators
We use a range of financial and non-financial metrics, reported
periodically, to measure Group performance against the four key
areas of our strategy (portfolio, people, performance and partners).
All-injury frequency rate (AIFR)
per 200,000 hours worked
2016
2017
2018
2019
2020
0.44
0.42
0.44
0.42
0.37
Relevance to strategy & executive remuneration
P P P
Safety is our number one priority, it is the first of our core
values and essential to everything we do. We are
committed to maintaining zero fatalities, preventing
catastrophic events and reducing injuries. We are a
learning organisation enabling a safe, responsible and
productive business that protects and cares for human life
and wellbeing. In 2019, we introduced the safety maturity
model and safety coaching framework. These programmes
focus on building strong safety culture and leadership
capability through the line. In 2020, we continued to
implement these programmes. Our facilities also
developed improvement plans and improved their safety
maturity despite the pandemic-related challenges faced
during 2020. This is supported by fewer injuries and
serious incidents in 2020 compared to previous years.
We are focused and committed to strengthening our
partnerships with industry and associated committees
(eg ICMM), contracting partners and local communities
with the priority of learning and sharing to protect
everyone’s health, safety and wellbeing.
Link to executive remuneration
Included as a performance metric in the safety component
of the short-term incentive plan.
We marked a second year in a row of zero fatalities,
aligning with our top safety objective. As we recognise this
milestone, we are not forgetting the colleagues we have
lost in the past. Sadly, a permanent disabling injury
occurred at our Richards Bay Minerals Smelter in October,
when one of our employees lost their hand while
undertaking operational activities. We also had a
permanent disabling injury at the Diavik Diamond Mine,
in Canada. We are doing everything we can to support our
colleagues and their families and endeavouring to learn
and improve from these tragic incidents. Our all-injury
frequency rate has improved to 0.37 from 0.42 in 2019,
continuing the performance trend delivered over the past
ten years, reducing from 0.69 in 2010. In 2020, our
management of catastrophic event prevention continued
to mature through embedding of improved standards,
assurance and governance processes. The strong safety
performance of 2020, accomplished while facing and
adapting to the challenges of the COVID-19 pandemic, is
testament to the organisation’s relentless focus on safety.
Forward plan
We will:
– Continue to implement our critical risk management
programme and safety maturity model
– Strengthen our safety leadership and coaching
programmes
– Work more closely with contractors and joint venture
partners to improve our safety record
– Continue to implement our major hazard standards,
including process safety, water and tailings, with
strong assurance processes
– Innovate to reduce exposure to safety and health risks
Associated risks focus
(see page 95):
– Operational
– ESG
Definition
The number of injuries per 200,000 hours worked by employees and contractors at operations that we manage. AIFR includes medical treatment cases, restricted workday and lost day injuries.
Link to strategy
P
Portfolio
P
People
P
Performance
P
Partners
24
Annual Report 2020 | riotinto.com
Key Performance Indicators
Total shareholder return (TSR)1
measured over the preceding five years (using annual average share price)
2016
2017
2018
2019
2020
(40.7%)
5.8%
33.4%
49.6%
110.1%
110.1%
TSR performance over the five-year period was driven
principally by movements in commodity prices and
changes in the global macro environment. Rio Tinto
significantly outperformed the EMIX Global Mining Index
over the five-year period, and slightly outperformed the
MSCI World Index.
Associated risks focus
(see page 95):
– Economic
– Strategic
– ESG
Relevance to strategy & executive remuneration
P P
Our strategy aims to maximise shareholder returns through
the commodity cycle, and TSR is a direct measure of that.
Link to executive remuneration
Reflected in long-term incentive plans, measured equally
against the EMIX Global Mining Index and the MSCI World
Index (see pages 146-147).
Forward plan
We will continue to focus on generating the free cash flow
from our operations. This allows us to return cash to
shareholders (short-term returns) while investing in the
business (long-term returns).
Definition
Combination of share price appreciation (using annual average share price) and dividends paid and reinvested to show the total return to the shareholder over the preceding five years.
Underlying earnings and underlying EBITDA
$ millions
2016
2017
2018
2019
2020
Underlying earnings of $12.4 billion were $2.1 billion higher
than in 2019. Underlying EBITDA of $23.9 billion was
$2.7 billion higher than 2019. The 13% increase in
underlying EBITDA resulted from higher iron ore and copper
prices and lower energy costs, partly offset by lower prices
for aluminium, movements in sales volumes and changes in
product mix across the portfolio and higher operating
cash costs.
Associated risks focus
(see page 95):
– Economic
– Operational
– ESG
5,100
13,510
8,627
18,580
8,808
18,136
10,373
21,197
12,448
12,448
23,902
23,902
Underlying earnings
Underlying EBITDA
Forward plan
We will continue to drive superior margins and returns
through a focus on operational and commercial excellence
and our value over volume approach.
Relevance to strategy & executive remuneration
P P
These financial KPIs measure how well we are managing
costs, increasing productivity and generating the most
revenue from each of our assets.
Link to executive remuneration
Underlying earnings is reflected in the short-term
incentive plan; in the longer term, both measures
influence TSR, which is the primary measure for long-term
incentive plans (see pages 146-147).
Definition
Underlying earnings 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. These items are
explained in note 2 of the financial statements.
Underlying EBITDA represents profit before tax, net finance items, depreciation and amortisation. It excludes the EBITDA impact of the items mentioned above.
1.
The TSR calculation for each period is based on the change in the calendar year average share prices for Rio Tinto plc and Rio Tinto Limited over the preceding five years. This is consistent with the
methodology used for calculating the vesting outcomes for Performance Share Awards (PSA). The data presented in this chart accounts for the dual corporate structure of Rio Tinto.
Annual Report 2020 | riotinto.com
25
Strategic Report Strategic Report
Key Performance Indicators
continued
Return on capital employed (ROCE)
%
2016
2017
2018
2019
2020
ROCE increased increased 3% to 27% in 2020, reflecting
the increase in underlying earnings driven by higher iron
ore prices, partially offset by an increase in capital
employed due to capital expenditure and exchange
rate movements.
Associated risks focus
(see page 95):
– Strategic
– Economic
– ESG
11%
18%
19%
24%
27%27%
Forward plan
We will continue to focus on maximising returns from our
assets over the short, medium and long term. We will also
maintain our disciplined and rigorous approach and invest
capital only in projects that we believe will deliver returns
that are well above our cost of capital.
Relevance to strategy & executive remuneration
P P
Our portfolio of low-cost, long-life assets delivers
attractive returns throughout the cycle and has been
reshaped significantly in recent years. ROCE measures
how efficiently we generate profits from investment in our
portfolio of assets.
Link to executive remuneration
Underlying earnings, as a component of ROCE, is included
in the short-term incentive plan. In the longer term,
ROCE also influences TSR, which is included in long-term
incentive plans.
Definition
Underlying earnings before interest divided by average capital employed (operating assets before net debt).
Net cash generated from operating activities
$ millions
2016
2017
2018
2019
2020
8,465
13,884
11,821
14,912
15,875
15,875
Net cash generated from operating activities of
$15.9 billion was 6% higher than 2019. This was primarily
due to higher iron ore prices, partially offset by higher
taxes paid and an increase in working capital.
Associated risks focus
(see page 95):
– Economic
– Operational
– ESG
Relevance to strategy & executive remuneration
P P
This KPI measures our ability to convert underlying
earnings into cash.
Link to executive remuneration
Included in the short-term incentive plan; in the longer
term, the measure influences TSR, which is included in
long-term incentive plans (see pages 146-147).
Forward plan
We will focus on effectively converting earnings into cash,
underpinned by operational and commercial excellence,
including our careful management of working capital.
Definition
Cash generated by our operations after tax and interest, including dividends received from equity accounted units and dividends paid to non-controlling interests in subsidiaries.
26
Annual Report 2020 | riotinto.com
Key Performance Indicators
Free cash flow
$ millions
2016
2017
2018
2019
2020
Free cash flow increased by $0.2 billion to $9.4 billion in
2020, primarily due to the increase in net cash generated
from operating activities. This was partially offset by an
increase in capital expenditure.
5,807
9,540
6,977
9,158
9,407
9,407
Associated risks focus
(see page 95):
– Economic
– Operational
– ESG
– Strategic
Forward plan
We will focus on effectively converting earnings into cash,
underpinned by operational and commercial excellence,
including our careful management of working capital.
Relevance to strategy & executive remuneration
P P
This KPI measures the net cash returned by the business
after the expenditure of sustaining and growth capital.
This cash can be used for shareholder returns, reducing
debt and other investment.
Link to executive remuneration
Included in the short-term incentive plan; in the longer
term, the measure influences TSR, which is included in
long-term incentive plans (see pages 146-147).
Definition
Net cash generated from operating activities minus purchases of property, plant and equipment and payments of lease principal, plus sales of property, plant and equipment.
Net cash/(net debt)
$ millions
2016
2017
2018
2019
2020
Net debt decreased by $3 billion to $0.7 billion. This
reflects $9.4 billion of free cash flow in 2020, partially
offset by $6.3 billion of cash returns to shareholders
through dividends and share buy-backs.
(9,587)
(3,845)
255
(3,651)
(664)
(664)
Associated risks focus
(see page 95):
– Strategic
– Economic
– Operational
– ESG
Forward plan
We will focus on effectively converting earnings into cash,
underpinned by operational and commercial excellence,
including our careful management of working capital.
Relevance to strategy & executive remuneration
P P
This measures how we are managing our balance sheet
and capital structure. A strong balance sheet is essential
for giving us flexibility to take advantage of opportunities
as they arise, and for returning cash to shareholders.
Link to executive remuneration
Net debt is, in part, an outcome of free cash flow, which
itself is reflected in the short-term incentive plan. In the
longer term, net debt influences TSR, which is reflected in
long-term incentive plans (see pages 146-147).
Definition
Net borrowings after adjusting for cash and cash equivalents, other liquid investments and derivatives related to net debt (see note 23 of the financial statements).
Annual Report 2020 | riotinto.com
27
Strategic Report
Strategic Report
Key Performance Indicators
continued
Scope 1 and 2 greenhouse gas emissions
(equity Mt CO2e)
Associated risks focus
(see page 95):
– Strategic
– ESG
2018
2019
2020
32.6*
31.5
31.5
This year, the Remuneration Committee approved
revisions to how we include climate change in the STIP.
See pages 172-173 of the Remuneration Report for
further detail.
Prior to 2018 we reported our greenhouse gas emissions on a 100%
managed basis.
*
The 2018 figure is the baseline for our 2030 emissions target and has been
adjusted to exclude emissions from assets divested in that year. Actual
emissions in 2018 were 34.0Mt CO2e.
Relevance to strategy & executive remuneration
P P
Climate risks and opportunities have formed part of our
strategic thinking and investment decisions for over two
decades. We now have a portfolio that is well positioned
for the transition to a low-carbon economy and most of
our assets already sit in the low end of their respective
commodity carbon intensity curves.
Link to executive remuneration
Since 2018, our Chief Executive’s performance objectives
have been reflected in the short-term incentive plan
(STIP), which includes delivery of the Group’s strategy
on climate change. These are cascaded down into the
annual objectives of relevant members of the Executive
Committee and other members of senior leadership.
Since 2018, we have reduced Scope 1 and 2 emissions by
1.1Mt CO2e, or 3%, which is on track with our 2030 target
for absolute emissions. However, in 2020 our emissions
remained at the same level as in 2019 at 31.5Mt CO2e.
We expect progress on emissions to accelerate
in the target period as we start to deliver our
decarbonisation plans.
Forward plan
Our ambition is to reach net zero emissions by 2050
across our operations. Our 2030 greenhouse gas targets
are to reduce our emissions intensity by 30% and our
absolute emissions by 15%, compared with our 2018
equity baseline. These targets are consistent with a 45%
reduction in absolute emissions relative to 2010 levels
and the Intergovernmental Panel on Climate Change
(IPCC) pathways to 1.5°C.
Our targets are supported by our commitment to spend
approximately $1 billion on emissions reduction initiatives,
research and development and activities to enhance the
climate resilience of our business over the first five years
of the ten-year target period.
Definition
Equity emissions: equity share of Scope 1 & 2 emissions from managed and non-managed operations expressed in million metric tonnes of carbon dioxide equivalent.
Gender diversity
Gender balance in senior leadership
2016
2017
2018
2019
2020
In 2020, we increased our female representation in senior
leadership by 3.5% to 26.1%, surpassing our 2%
year-on-year target. After a number of years of limited
progress, this result represents significant focus on both
attraction and retention of senior women in our
organisation.
Associated risks focus
(see page 95):
– Strategic
– ESG
19.2%
22.4%
22.6%
22.6%
26.1%
Relevance to strategy & executive remuneration
P
Inclusion and diversity is an imperative for the long-term
sustainable success of our business. Having a diverse
workforce where people are valued for who they are and
what they contribute is key to our sustained performance
and growth. This KPI measures the number of women in
the senior leadership cohort.
Link to executive remuneration
Included in the short-term incentive plan (see page 173).
Forward plan
In 2021, we will focus on improving the representation of
women, who comprise half the world’s population but only
about 20% of our workforce. We do this because we aim
to have our company reflect the perspectives of the
communities in which we operate; we undertake this
effort alongside others, including efforts to strengthen
Indigenous leadership across our business in Australia.
Definition
We define senior leadership as general managers, chief advisers and managing directors, including people not available for work due to extended leave.
28
Annual Report 2020 | riotinto.com
Chief Financial Officer’s statement
Our world-class assets, combined with our very
strong balance sheet, supports our ability to
provide superior cash returns to shareholders.
Underlying EBITDA
$23.9bn
13% increase
Net cash generated from operating activities
$15.9bn
6% increase
Net debt
$0.7bn
Down $3.0bn in 2020
Agile operating performance drives strong
financials
In 2020, we have been agile and adapted our way of
working to deliver another resilient operating performance
while navigating the new and ongoing challenges of
COVID-19. Against this backdrop, we generated
underlying EBITDA of $23.9 billion equivalent to an
underlying EBITDA margin of 51%.
This 13% increase on 2019 underlying EBITDA was
principally driven by higher prices, which added around
$3.4 billion in aggregate. Whilst our iron ore business
benefited from robust demand and resilient prices,
other commodities experienced significant volatility
throughout the year. In aluminium, the impact of
COVID-19 reduced prices sharply in the first half of 2020,
as demand shrunk, in particular from the automotive
sector, but we saw these recover later in the year, on the
back of strong demand from China and tight scrap
markets. Copper initially followed the same path as
aluminium, in line with the world economy, but has since
recovered strongly. This was partly due to supply
disruption and was amplified by investor positioning.
Lower sales volumes and changes in product mix reduced
underlying EBITDA by $0.5 billion. This was mainly driven
by lower gold volumes following a reduction in grades at
Oyu Tolgoi and at Kennecott, lower titanium dioxide
feedstock volumes and lower sales of value-added products
in our aluminium business in line with market demand.
Annual Report 2020 | riotinto.com
29
Strategic Report Strategic Report
Chief Financial Officer’s statement
continued
While we continue to adapt to an unpredictable
external environment, one thing that does not
change is our capital allocation framework.
Our strong balance sheet provides resilience
We ended 2020 with net debt of just $0.7 billion, a decrease of
$3.0 billion during the year due to the strength of our free cash flow, net
of the $6.3 billion of returns we paid to shareholders in 2020.
Our world-class assets, combined with our very strong balance sheet,
support our ability to provide superior cash returns to shareholders. They
also enable us to manage the business through cycles – which means we
can act counter-cyclically – and provide us with optionality. Our strong
balance sheet is particularly valuable in the current volatile environment.
Our payout ratio has now averaged 73% over the past
five years
We implemented our returns policy in 2016, committing to total cash
returns to shareholders, over the longer term, of 40-60% of underlying
earnings, on average through the cycle. Since its inception, we have
consistently paid out well above this range in every year.
We have built on our returns track record over five years – this year, we
are returning 72% of underlying earnings to shareholders. This is
comprised of the full year ordinary dividend of 464 US cents per share
and special dividend of 93 US cents per share, which brings the total
dividend to 557 US cents, or $9.0 billion.
Peter Cunningham
Interim Chief Financial Officer
22 February 2021
Despite the disruptions to operations and markets caused by COVID-19,
our operational performance was strong and we delivered production
broadly in line with guidance.
Our focus on cost control and productivity improvements continued
throughout the year. The pandemic-induced economic slowdown led to
significantly lower energy costs, increasing underlying EBITDA by
$0.5 billion, mainly from lower diesel prices for our trucks, trains and
ships and reduced coal prices for two of our Pacific Aluminium smelters.
We also benefited from continued respite on cost inflation for certain raw
materials for our aluminium business, in particular caustic soda, pitch,
petroleum coke and alloys. However, this was outweighed by other cost
pressures, notably the fixed cost inefficiencies in our Copper business: at
Kennecott, due to the extended smelter maintenance, and at Oyu Tolgoi
in line with a temporary reduction in gold grades. Overall, our higher unit
cash costs, excluding energy and general inflation, reduced underlying
EBITDA by $0.4 billion compared with 2019. In addition, we incurred
$0.3 billion of costs associated with tackling COVID-19 across our operations.
No change to our disciplined capital allocation
framework
While we continue to adapt to an unpredictable external environment,
one thing that does not change is our capital allocation framework.
We will continue to invest in safely managing our assets and improving
their performance. This means that sufficient spending on sustaining
capital is always the priority. The next priority is allocating capital to our
shareholders - through our ordinary dividend. Then we carefully consider;
allocating to growth opportunities, balance sheet strength, and further
shareholder returns.
Our investment decisions are carried out with incredible rigour. I believe
that this is the best assurance for our shareholders – that we will only
invest in opportunities that create value – even more so during turbulent
times. Growth for us is all about value generation and returns for our
shareholders. It is not about volume. It is about building sustainable
cash flow.
In 2020, we increased our capital expenditure by 13% to $6.2 billion, as
we continue to invest through the cycle. This was comprised of
$3.2 billion of development capital, of which $2.1 billion was replacement
capital, and $3.0 billion was sustaining capital. Our most significant
growth project remains the Oyu Tolgoi copper/gold underground mine in
Mongolia where we invested around $1 billion in 2020, on a 100% basis
as we fully consolidate Oyu Tolgoi. Much of this year’s increase relates to
our Pilbara replacement iron ore mines as we ramped up the pace of
construction at Gudai-Darri (formerly Koodaideri), at the Robe River Joint
Venture mines and at Tom Price. We expect first tonnes from these
mines in 2021 and 2022.
30
Annual Report 2020 | riotinto.com
Financial Review
Financial Review
Non-GAAP measures
In addition to IFRS measures, management uses non-GAAP measures internally to assess
performance. Full reconciliations are provided on pages 329-333. These measures are
highlighted with the symbol: •
At year end
Net cash generated from operating activities (US$ millions)
Capital expenditure1 (US$ millions)
Free cash flow2 (US$ millions)•
Consolidated sales revenue (US$ millions)
Underlying EBITDA2 (US$ millions)•
Net earnings (US$ millions)
Underlying earnings per share2 (EPS) (US cents)•
Ordinary dividend per share (US cents)
Total dividend per share (US cents)
Net debt2 (US$ millions)•
Return on capital employed (ROCE)2 •
2020
15,875
6,189
9,407
44,611
23,902
9,769
769.6
464.0
557.0
(664)
27%
2019
14,912
5,488
9,158
43,165
21,197
8,010
636.3
382.0
443.0
(3,651)
24%
Change
6%
13%
3%
3%
13%
22%
21%
21%
26%
Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). Footnotes are set out on page 33.
– $15.9 billion net cash generated from operating activities was
– Strong balance sheet with net debt2 of $0.7 billion, a decrease of
$3.0 billion, reflected the strength of our free cash flow, partly offset
by $6.3 billion of cash returns to shareholders in 2020.
– $9.0 billion full-year dividend, equivalent to 557 US cents per share
and 72% of underlying earnings, includes $5.0 billion record final
ordinary dividend (309 US cents per share) and $1.5 billion special
dividend (93 US cents per share) declared today.
6% higher than 2019 primarily driven by higher iron ore prices and
stability in operating performance. These flowed through to
3% higher free cash flow2 of $9.4 billion, which was net of a
$0.7 billion increase in capital expenditure1 to $6.2 billion.
– $23.9 billion underlying EBITDA2 was 13% above 2019, with an
underlying EBITDA margin2 of 51%.
– $12.4 billion underlying earnings2 (underlying EPS2 of US 769.6 cents)
were 20% above 2019 with a 29.5% effective tax rate on underlying
earnings3 – in line with 2019. Taking exclusions into account, net
earnings of $9.8 billion were 22% higher than 2019, mainly reflecting
$1.1 billion3 of impairments, most of which were taken in the first half
of 2020 (five aluminium smelters and the Diavik diamond mine) and
$1.3 billion of exchange losses. This compared with $1.7 billion3 of
impairments in 2019 (primarily the Oyu Tolgoi underground copper/
gold project and the Yarwun alumina refinery).
72% payout builds on our five-year track record; $9.0 billion of dividends declared for 2020
Ordinary dividend
Interim ordinary dividend paid in September 2020
Final ordinary dividend to be paid in April 2021
Full-year ordinary dividend represents 60% payout
Additional returns
Special dividend to be paid in April 2021
Combined total is 72% of 2020 underlying earnings
US$ billion
US cents
per share
2.5
5.0
7.5
1.5
9.0
155
309
464
93
557
Annual Report 2020 | riotinto.com
31
Strategic Report Strategic Report
Financial Review
continued
Strong cash flow from operations enhances free cash flow
Net cash generated from operating activities
Capital expenditure1
Sales of property, plant and equipment
Lease principal payments
Free cash flow2
Disposals4
Dividends paid to equity shareholders
Share buy-backs
Non-cash impact from implementation of IFRS 16 “Leases” from 1 January 2019
Other
Decrease/(increase) in net debt2
Footnotes are set out on page 33.
– $15.9 billion in net cash generated from operating activities, 6%
higher than 2019, was driven primarily by higher underlying EBITDA
from higher iron ore prices, net of an increase in tax paid in line with
profits, a modest rise in working capital (primarily higher prices in
receivables), increased dividends paid to joint venture partners and
lower dividends received from equity accounted units.
– $6.2 billion capital expenditure1 comprised of $3.2 billion of
development capital, of which $2.1 billion is replacement capital, and
$3.0 billion of sustaining capital. In 2020, we funded our capital
Net debt movements
($ billion)
Net debt as at 31 December 2019
Operating cash flow
Capital expenditure
Dividends and share buy-backs
Lease payments
Other
Net debt as at 31 December 2020
2020
US$m
15,875
(6,189)
45
(324)
9,407
10
(6,132)
(208)
–
(90)
2,987
2019
US$m
14,912
(5,488)
49
(315)
9,158
(80)
(10,334)
(1,552)
(1,248)
150
(3,906)
expenditure from operating activities. We expect to continue funding
our capital programme from internal sources, except for the Oyu
Tolgoi underground development, which is project-financed.
– $6.1 billion of dividends paid in 2020 comprised the 2019 final paid in
April 2020 ($3.6 billion) and the 2020 interim paid in September
($2.5 billion).
– $0.2 billion of share buy-backs with 3.6 million Rio Tinto plc shares
repurchased.
– As a result of the above, net debt2 decreased by $3.0 billion in 2020,
ending the year at $0.7 billion.
-3.7
+15.9
-6.2
-6.3
-0.3
-0.1
-0.7
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
13
32
Annual Report 2020 | riotinto.com
Financial Review
Growth projects and development options gather
momentum
– We maintained our exploration and evaluation spend at $625 million
in 2020, as we progressed our greenfield programmes and advanced
our evaluation projects, in particular Resolution Copper in Arizona,
US, Jadar lithium-borates in Serbia and Winu copper-gold in
Western Australia.
– At Winu, we declared a maiden Inferred Mineral Resource of 503 Mt at
0.45% copper equivalent and announced the discovery of a new zone
of gold dominant mineralisation approximately two kilometres east of
Winu.5 We are now targeting first production in 2024, subject to
regulatory approvals, Traditional Owner and other consents, and
COVID-19 restrictions.
– At Jadar, we progressed to the feasibility study stage, following Board
approval of almost $200 million of funding, and declared a maiden
Ore Reserve. The studies are expected to be complete by the end of
2021. If the investment is approved, construction would take
approximately four years. The project could produce ~55 thousand
tonnes of battery-grade lithium carbonate, 160 thousand tonnes of
boric acid (B2O3 units) and 255 thousand tonnes of sodium sulphate
per year.6
– At Resolution Copper, the independently prepared Final
Environmental Impact Statement was published by the US Forest
Service. We have now entered the next phase of public comment in
the ongoing permitting process. We are committed to ongoing
stakeholder engagement in our effort to seek consent to progress the
project consistent with the International Council on Mining and Metals
(ICMM) Statement on Indigenous Peoples and Mining.
– At the Simandou iron ore project (Blocks 3 and 4) in Guinea, we
expect to complete the first phase of the technical optimisation work
on the infrastructure components in the first half of 2021. Activity at
the mine area has commenced and an update of the Social and
Environmental Impact Assessment is underway.
– The $2.6 billion Gudai-Darri (formerly known as Koodaideri)
replacement iron ore mine in Western Australia is progressing, with
production ramp-up on track for early 2022. This first phase of
Gudai-Darri will have a 43 Mt annual capacity, underpinning
production of the Pilbara Blend™.
– First ore from the other iron ore sustaining production projects – the
$0.8 billion (our share) Robe River Joint Venture (West Angelas C&D
and Mesa B, C and H at Robe Valley) and the $0.8 billion Western
Turner Syncline phase 2 mine – is on track for 2021.
– At the Oyu Tolgoi underground copper/gold project in Mongolia, we
confirmed development capital of $6.75 billion7 following completion
of the definitive estimate, with sustainable production for Panel 0
expected to commence in October 2022. We are in active discussions
with the government of Mongolia to address and close all outstanding
issues and increase the project’s benefits to all stakeholders.
– The $0.9 billion first phase of the south wall pushback at the
Kennecott copper mine in the US, which will extend mine life to 2026,
remains on track with gradually higher copper grades accessed from
2021. Stripping for the $1.5 billion second phase is also on track and
is expected to extend operations for a further six years.
– The Zulti South project at Richards Bay Minerals (RBM) in South
Africa, which will sustain current capacity and extend mine life,
remains on full suspension, pending normalisation of operations.
Underlying EBITDA and underlying earnings by product group
Year ended 31 December
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segment total
Other operations
Inter-segment transactions
Product group total
Central pension costs, share-based payments and insurance
Restructuring, project and one-off costs
Other central costs
Central exploration and evaluation
Net interest
Total
Underlying EBITDA
Underlying earnings
2020
US$m
18,837
2,152
2,172
1,646
24,807
–
(94)
2019
US$m
16,098
2,285
2,073
1,762
22,218
(77)
(9)
24,713
22,132
72
(133)
(500)
(250)
59
(183)
(496)
(315)
Change
%
17%
(6)%
5%
(7)%
12%
(100)%
944%
12%
22%
(27)%
1%
(21)%
2020
US$m
11,398
471
763
577
2019
US$m
9,638
599
554
611
13,209
11,402
(54)
(32)
(89)
(3)
13,123
11,310
81
(108)
(418)
(216)
(14)
60
(94)
(550)
(231)
(122)
23,902
21,197
13%
12,448
10,373
Change
%
18%
(21)%
38%
(6)%
16%
(39)%
967%
16%
35%
15%
(24)%
(6)%
(89)%
20%
Underlying EBITDA and underlying earnings are non-GAAP alternative performance measures (“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 329-333.
1. Capital expenditure is presented gross, before taking into account any cash received from disposals of property, plant and equipment (PP&E).
2. This financial performance indicator is a non-GAAP 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. APMs are reconciled to directly
comparable IFRS financial measures on pages 329-333.
3. Refer to page 229 for pre-tax analysis of impairment charge.
4. Net disposal proceeds in 2019 included a cash outflow representing Rössing Uranium’s cash balance at the date of sale.
5. Refer to the release to the Australian Securities Exchange (ASX) on 28 July 2020 “Rio Tinto reveals maiden Resource at Winu and new discovery”. The Competent Person responsible for the information
in that release that relates to Mineral Resources and Exploration Results is Dr Julian Verbeek. Rio Tinto confirms that it is not aware of any new information or data that materially affects the
information included in the market announcement, that all material assumptions and technical parameters underpinning the estimates in the market announcement continue to apply and have not
materially changed, and that the form and context in which the Competent Person’s findings are presented have not been materially modified.
6. These production targets were previously reported in a release to the ASX dated 10 December 2020, “Rio Tinto declares maiden Ore Reserve at Jadar”. All material assumptions underpinning the
production targets continue to apply and have not materially changed.
7. This estimate is at a “better than feasibility study” level of accuracy.
Annual Report 2020 | riotinto.com
33
Strategic Report Strategic Report
Financial Review
continued
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.
2019 underlying EBITDA
Prices
Exchange rates
Volumes and mix
General inflation
Energy
Operating cash unit costs
One-off items
Non-cash costs/other
2020 underlying EBITDA
US$m
21,197
3,407
(103)
(452)
(251)
461
(450)
153
(60)
23,902
Significant momentum from higher iron ore prices
Commodity price movements in 2020 increased underlying EBITDA by
$3,407 million compared with 2019. This was primarily driven by the
strength in pricing for iron ore (+$3,262 million) and copper
(+$405 million) and was partly offset by lower prices for aluminium,
alumina and bauxite (-$314 million). We have included a table of prices
and exchange rates on page 381.
The 2020 monthly average Platts index for 62% iron fines adjusted to an
FOB basis was 19% higher on average compared with 2019, driven by
continued supply disruptions in the seaborne market and strong demand
following record Chinese steel output.
The average London Metal Exchange (LME) price for copper was 3%
higher, while the LME aluminium price was 5% lower, compared with
2019. The gold price rose 27%.
The midwest premium for aluminium in the US averaged $313 per tonne,
2% lower than in 2019.
Exchange rates impacted by stronger A$ at year-end
Compared with 2019, on average, the US dollar was broadly flat against
the Australian and Canadian dollars but strengthened by 12% against the
South African rand. Currency movements, which lowered underlying
EBITDA by $103 million relative to 2019, mainly related to exchange rate
losses on receivables following the significant strengthening of the
Australian dollar at 2020 year-end.
Volumes and product mix
Underlying EBITDA was $452 million lower than 2019 from movements in
sales volumes and changes in product mix across the portfolio. Although
iron ore shipments from the Pilbara rose by 1%, the year-on-year gains
are mostly included in Other, reflecting recovery from the fire at Cape
Lambert A port in 2019. Other key variances included lower gold volumes
following a reduction in grades at Oyu Tolgoi and Kennecott, lower
titanium dioxide feedstock volumes and lower sales of value added
products in our aluminium business in line with market demand.
Energy prices substantially lower
Average movements in energy prices compared with 2019 improved
underlying EBITDA by $461 million, mainly due to lower diesel prices and
reduced coal prices for two of our Pacific Aluminium smelters.
Higher costs driven by lower volumes
The impact of higher cash operating costs, which we reflect on a unit cost
basis, reduced underlying EBITDA by $450 million compared with 2019.
There was continued respite on cost inflation for certain raw materials for
Aluminium, in particular caustic soda, pitch, petroleum coke and alloys.
However, this was outweighed by other cost pressures, notably fixed cost
inefficiencies at Kennecott, due to the lower grades and the extended
smelter maintenance, and higher unit cash costs at Oyu Tolgoi in line
with lower output.
Maintained our exploration spend
Our exploration and evaluation spend was largely unchanged at
$625 million. This went to our greenfield programmes and highest value
projects, particularly on evaluating the Resolution Copper project in
Arizona, advancing our Winu copper/gold deposit in Australia and
progressing our Jadar lithium-borate project in Serbia. In addition,
$82 million for iron ore feasibility studies in the Pilbara was recognised as
capital expenditure.
One-off items
One-off items aggregated to be $153 million less than in 2019. 2020
one-offs primarily reflected earlier than planned pot-lining replacement
at the Kitimat aluminium smelter ($51 million) and an increased impact
from curtailment of operations at RBM ($23 million). These were offset
by the non-recurrence of 2019 events, including the $199 million charge
at Escondida to reflect cancellation of existing coal powered energy
contracts following a switch to renewables and $68 million for challenges
faced at our ISAL and Kitimat aluminium smelters.
Non-cash costs/other
Movements in non-cash costs and other items, which lowered underlying
EBITDA by $60 million compared with 2019, mainly reflected additional
costs ($333 million) incurred from COVID-19 across the Group such as
screening, equipment hire, roster changes, temporary relocation and
hygiene. This was offset by recovery from the fire at the Cape Lambert A
port in the Pilbara in 2019 ($184 million) and lower provisions in respect
of legacy operations ($23 million).
34
Annual Report 2020 | riotinto.com
Financial Review
Net earnings, underlying earnings
and underlying EBITDA
In order to provide additional insight into the performance
of its business, Rio Tinto reports underlying EBITDA
and underlying earnings. The differences between underlying
earnings, underlying EBITDA, and net earnings are
set out in this table.
Net earnings
$9.8bn
22% increase
Net earnings
2019 net earnings
Total changes in underlying EBITDA
Decrease in depreciation and amortisation (pre-tax) in underlying earnings
Decrease in interest and finance items (pre-tax) in underlying earnings
Increase in tax on underlying earnings
Increase in underlying earnings attributable to outside interests
Total changes in underlying earnings
Changes in exclusions from underlying earnings:
Movement in net impairment charges
Movement in losses on consolidation and disposal of interests in businesses
Movement in exchange differences and gains/losses on debt
Movements in other exclusions
2020 net earnings
Depreciation and amortisation, net interest, tax and
non-controlling interests
The depreciation and amortisation charge was $275 million lower than
2019, mainly due to a lower asset base following impairments in 2019
and in the first half of 2020, together with accelerated depreciation in
2019 following the pot failures at Kitimat.
Lower interest and finance items (pre-tax) were reflective of a lower level
of net debt on average during the year, in part due to repayment of
$526 million of Euro Bonds, which matured in May 2020. It also reflected
more of our debt being at floating interest rates.
The 2020 effective corporate income tax rate on underlying earnings,
excluding equity accounted units, was 29.5%, in line with 2019. The
effective tax rate on underlying earnings in Australia was 32% in 2020
compared with 31% in 2019. We anticipate an effective tax rate on
underlying earnings of approximately 30% in 2021.
Items excluded from underlying earnings
Net impairment charges decreased by $543 million compared with 2019.
We recognised $1,115 million of impairment charges in 2020, comprised
of $472 million related to three of our Pacific Aluminium smelters (NZAS,
Bell Bay and Boyne), $131 million related to the ISAL smelter in Iceland,
$220 million for the Sohar smelter in Oman and $292 million related to
our interest in the Diavik diamond mine.
In 2019, we recognised impairment charges of $1,658 million, after tax
and non-controlling interests, primarily related to the Oyu Tolgoi copper/
gold underground project and the Yarwun alumina refinery. There is a
detailed explanation of the impairment process on pages 229-231.
US$m
8,010
2,705
275
143
(839)
(209)
2,075
543
291
(1,064)
(86)
9,769
The $291 million movement in losses on consolidation and disposals of
interests in businesses primarily relates to the disposal of our stake in
Rössing Uranium in 2019.
In 2020, we recognised non-cash exchange and derivative losses of
$1,264 million. This was mainly on US dollar debt in non-US dollar
functional currency Group companies, intragroup balances, and on the
revaluation of certain derivatives which do not qualify for hedge
accounting. These losses compared with a 2019 loss of $200 million,
giving rise to a negative year-on-year movement of $1,064 million.
The exchange losses are largely offset by currency translation gains
recognised in equity. The quantum of US dollar debt is largely unaffected
and we will repay it from US dollar sales receipts.
In 2020, we excluded net additional closure costs of $300 million from
underlying earnings principally relating to a non-operating site (Gove),
a fully impaired site (Argyle) and the net earnings impact in respect of
increases to closure provisions following a reduction to the closure
discount rate. These are included in Movements in other exclusions.
Further analysis can be found on page 226.
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 2020 was $9.8 billion (2019: $8.0 billion). We recorded a
profit after tax in 2020 of $10.4 billion (2019: $7.0 billion) of which a
profit of $0.6 billion (2019 loss: $1.0 billion) was attributable to
non-controlling interests.
Annual Report 2020 | riotinto.com
35
Strategic Report Strategic Report
Financial Review
continued
Net earnings and underlying earnings
The differences between underlying earnings and net earnings are set out in this table (all numbers are after tax and exclude non-controlling interests).
Underlying earnings
Items excluded from underlying earnings
Impairment charges
Net losses on consolidation and disposal of interests in businesses
Foreign exchange and derivative losses on net debt and intragroup balances and derivatives not qualifying for hedge accounting
Net losses from movements to closure estimates (non-operating and fully impaired sites)
Other exclusions
Net earnings
2020
US$m
12,448
(1,115)
–
(1,264)
(300)
–
9,769
2019
US$m
10,373
(1,658)
(291)
(200)
–
(214)
8,010
On page 226 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 329.
Balance sheet
Our net debt of $0.7 billion decreased by $3.0 billion in 2020, reflecting
dividend payments of $6.1 billion and $0.2 billion of share buy-backs,
more than offset by our strong free cash flow.
Our net gearing ratio (net debt to total capital) declined to 1% at
31 December 2020 (31 December 2019: 7%).
Our total financing liabilities at 31 December 2020 (see page 242) were
US$13.8 billion (31 December 2019: $14.3 billion) and the weighted
average maturity was around nine years. At 31 December 2020,
approximately 86% of these liabilities were at floating interest rates
(94% excluding leases). The maximum amount within non-current
borrowings maturing in any one calendar year was $1.8 billion, which
matures in 2025.
We had $12.9 billion in cash and cash equivalents plus other short-term
cash investments at 31 December 2020 (31 December 2019:
$10.6 billion) and we have $7.5 billion of fully committed Revolving Credit
Facilities, which remained undrawn throughout the period, and mature in
November 2023.
Provision for closure costs
This year we have enhanced our disclosure on Provisions for close-down
and restoration costs and environmental clean-up obligations, which at
31 December 2020, were $13.3 billion (31 December 2019: $11.1 billion).
The principal movements during the year were currency appreciation
($0.7 billion), reduction in discount rate ($1.0 billion), changes to existing
and new provisions ($0.6 billion) and drawdowns in the provision through
spend ($0.4 billion). Of the $13.3 billion in provisions, $10.7 billion relates
to operating sites and $2.6 billion is for legacy sites. Remaining lives of
operations and infrastructure range from one to over 50 years with an
average for all sites, weighted by present closure obligation, of around
17 years (2019: 18 years).
The provisions are based on risk-adjusted cash flows. In September 2020,
we completed a review of the discount rate used to reflect the obligations
at present value and updated it to a real-rate of 1.5% (previously 2.0%),
applied prospectively from that date.
In 2021, we expect to utilise around $0.6 billion of the provisions as we
advance our closure activities at Argyle, Energy Resources of Australia,
Gove alumina refinery and legacy sites.
We have disclosed further information, including the composition of the
provision by cost category and by geography, on pages 244-245.
36
Annual Report 2020 | riotinto.com
Financial Review
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 40-60% 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.
Our payout ratio has averaged 73% over the past
five years
2016
2017
2018
2019
2020
60%60% 10%10%
60%60%
23%23%
60%60%
11%11%
60%60%
10%10%
60%60%
12%12%
70%
83%83%
71%71%
70%70%
72%72%
Ordinary dividend
Additional return
Total payout ratio
Total cash returns declared: building on our five-year track record with a 72% payout for 2020
Ordinary dividend
Interim
Final
Full-year ordinary dividend
Additional returns
Special dividend announced in August 2019, paid in September 2019
Special dividend announced in February 2021, to be paid in April 2021
Total cash returns to shareholders declared for each year
Combined total as % of underlying earnings
Total cash returns paid: 2019 includes 2018 special dividend from divestment proceeds
Previous year’s final ordinary dividend paid in April of each year
Special dividend announced in February 2019, paid in April 2019
Interim ordinary dividend paid in September of each year
Special dividend announced in August 2019, paid in September 2019
Share buy-back programme, completed in February 2020
Total cash returns paid to shareholders
2020
US$ billion
2019
US$ billion
2.5
5.0
7.5
n/a
1.5
9.0
72%
2.5
3.7
6.2
1.0
n/a
7.2
70%
2020
US$ billion
2019
US$ billion
3.6
n/a
2.5
n/a
0.2
6.3
2.9
3.9
2.5
1.0
1.6
11.9
Annual Report 2020 | riotinto.com
37
Strategic Report Strategic Report
Financial Review
continued
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 2020 final dividend has been converted at exchange rates applicable on 16 February 2021 (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
2020 dividends
2019 dividends
Rio Tinto Group
Interim (US cents)
Final (US cents)
Full-year (US cents)
Rio Tinto plc
Interim (UK pence)
Final (UK pence)
Full-year (UK pence)
Rio Tinto Limited
Interim (Australian cents)
Final (Australian cents)
Full-year (Australian cents)
Special dividend per share declared
Rio Tinto Group
Declared with 2019 interim results (US cents)
Declared with 2020 full year results (US cents)
Rio Tinto plc
Declared with 2019 interim results (UK pence)
Declared with 2020 full year results (UK pence)
Rio Tinto Limited
Declared with 2019 interim results (Australian cents)
Declared with 2020 full year results (Australian cents)
155.00
309.00
464.00
119.74
221.86
341.60
216.47
397.48
613.95
151.00
231.00
382.00
123.32
177.47
300.79
219.08
349.74
568.82
2020 dividends
2019 dividends
n/a
93.00
n/a
66.77
n/a
119.63
61.00
n/a
49.82
n/a
88.50
n/a
The 2020 final dividend and the special 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 15 April 2021, we will pay the 2020 final dividend and the special
dividend to holders of ordinary shares and holders of ADRs on the
register at the close of business on 5 March 2021 (record date).
The ex-dividend date is 4 March 2021.
Rio Tinto plc shareholders may choose to receive their dividend in
Australian dollars, and Rio Tinto Limited shareholders may choose to
receive theirs in pounds sterling. Currency conversions will be based on
the pound sterling and Australian 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
23 March 2021.
We will operate our Dividend Reinvestment Plans for the 2020 final
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 23 March 2021. 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.
In line with market practice, we will be introducing a dividend fee on cash
dividends paid on the ADR. The fee revenue will cover costs associated
with the management of the ADR programme. The fee of $0.005 per
ADR, per cash dividend, will be introduced with the 2021 interim dividend
which is payable on 23 September 2021. The fee will be deducted by
the depositary.
38
Annual Report 2020 | riotinto.com
Portfolio Management
Portfolio Management
Projects
(Rio Tinto 100%
owned unless
otherwise stated)
Ongoing and approved
Iron Ore
Investment in the Robe River Joint Venture (West Angelas C and D
and Mesa B, C and H at Robe Valley) in the Pilbara region of Western
Australia to sustain production capacity.
Investment in Gudai-Darri (formerly Koodaideri), a new production
hub in the Pilbara region of Western Australia, to sustain existing
production in our iron ore system.
Investment in the Greater Tom Price operations (Western Turner
Syncline phase 2) to sustain production capacity.
Aluminium
Investment in a second tunnel at the 1000MW Kemano hydropower
facility at Kitimat, British Columbia, Canada, which will ensure the
long-term reliability of the power supply to the Kitimat smelter.
Copper & Diamonds
Investment in the south wall pushback, to extend mine life at
Kennecott, Utah, US, from 2019 to 2026.
Phase two of the south wall pushback to extend mine life at Kennecott
by a further six years.
Development of the Oyu Tolgoi underground copper/gold mine in
Mongolia (Rio Tinto 34%), which is expected to produce 480,000
tonnes1 of copper per year on average from 2028 to 2036 (open pit and
underground), compared with 149,600 tonnes in 2020 (open pit).
Energy & Minerals
Total approved
capital cost
(100% unless
otherwise stated)
Status/Milestones
$0.8bn
(RT share)
$2.6bn
Approved in October 2018, the investments will enable us to sustain production of
our Pilbara Blend™ and Robe Valley products. All approvals have been received.
Construction activities are progressing to plan with first ore expected in 2021.
Approved in November 2018, the investment incorporates a processing plant
and infrastructure including a 166-kilometre rail line connecting the mine to
our existing network. Key construction activities are on schedule and we expect
production to ramp up in 2022. Once complete, the mine will have an initial
annual capacity of 43 million tonnes.
$0.8bn
Approved in November 2019, the investment will facilitate mining of existing
and new deposits. It includes construction of a new crusher and a 13-kilometre
conveyor. First ore from the crusher is expected in 2021.
$0.6bn
The project was approved in 2017, with $155 million of additional capital approved
in 2020. It was impacted by the departure of the main contractor in the first
half of 2020. Tunnel excavation works restarted in September. However, due to
the escalation of COVID-19 in the province, tunnel excavation works have been
interrupted. We expect to restart late in the first quarter of 2021.
$0.9bn
$1.5bn
$6.75bn2
Funding for the continuation of open pit mining via the push back of the south
wall: the project largely consists of simple mine stripping activities.
Approved in December 2019, the investment will further extend strip waste rock
mining and support additional infrastructure development. This will allow mining
to continue into a new area of the orebody between 2026 and 2032.
The project was originally approved in May 2016 for $5.3bn, with an additional
$1.45 billion approval by the Rio Tinto Board in December 2020, following
completion of the definitive estimate. Sustainable production for Panel 0 is
expected to be achieved by October 2022.2
Development of the Zulti South project at Richards Bay Minerals (RBM)
in South Africa (Rio Tinto 74%), to sustain current capacity and extend
mine life.
$0.5bn
Approved in April 2019, the investment will underpin RBM’s supply of zircon
and ilmenite over the life of the mine. Construction remains on full suspension,
pending normalisation of operations.
1. This target (stated as recovered metal) for the Oyu Tolgoi underground and open pit mines was previously reported in a release to the market on 16 December 2020 (market release). All material
assumptions underpinning the production target continue to apply and have not materially changed.
2. These estimates include the known impacts of COVID-19. The definitive estimate assumes restrictions in 2021 that are no more stringent than those experienced in September 2020. Mongolia
implemented further restrictions at the end of 2020 in response to a re-emergence of COVID-19. Should COVID-19 constraints be maintained at December 2020 levels, escalate further in 2021 leading
to tougher restrictions, or continue beyond 2021, additional costs and schedule impacts will arise.
Material acquisitions and divestments
Asset
Divested in 2019
Rössing Uranium
Divested in 2018
Hail Creek
Kestrel
Aluminium Dunkerque
Grasberg
Consideration
$m
Status
6.5(b)
Sold to China National Uranium
Corporation Limited
1,550(a)(c) Sold to Glencore
2,250(a)
Sold to a consortium consisting of EMR
Capital and PT Adaro Energy TbK
500(a)
Sold to Liberty House
3,500(a)(d) Sold to PT Indonesia Asahan Aluminium
(Persero) (Inalum)
(a) Before working capital and completion adjustments.
(b) Gross cash sales proceeds, excluding cash held by Rössing included within the transaction and transaction costs. Excludes the contingent payment of up to US$100 million linked to uranium spot
prices and Rössing’s net income during the next seven calendar years.
(c) Excluding proceeds related to sale of Valeria coal development project of $150 million (before working capital adjustments).
(d) Including a payment received of $107 million in respect of our share of Grasberg’s copper and gold revenues, net of our capital contribution for the year.
There were no disposals in 2020. Over the last three years, we have made no material acquisitions.
Further information on acquisitions and divestments is included in note 36 to the financial statements on page 268.
Annual Report 2020 | riotinto.com
39
Strategic Report Strategic Report
Business Development
In 2020, we continued to progress important growth opportunities
and projects, to bring to market materials critical to the transition to
a low-carbon economy: copper, lithium and iron ore, among others.
The Oyu Tolgoi mine in Mongolia, set to be the world’s fourth largest copper mine.
Oyu Tolgoi underground project: Mongolia, Copper
In 2020, we progressed the underground project despite restrictions
from COVID-19 controls and ongoing international travel restrictions.
In December 2020, we confirmed the definitive estimate of cost and
schedule for Panel 0 with sustainable production expected to commence
in October 2022 and development capital of $6.75 billion1, in line with
the ranges first announced in July 2019. These estimates include
the known impacts of COVID-192. Oyu Tolgoi is expected to produce
480,000 tonnes3 of copper per year on average, from 2028-36, from the
open pit and underground.
We consider that additional milestones need to be met in order to ensure
that the project can commence caving operations in 2021: outstanding
government approvals – including registering the updated Resources
and Reserves submitted in February 2020 and accepting the updated
feasibility study completed in July 2020 in accordance with the 2009
Investment Agreement and Mongolian regulation; funding as agreed
with Turquoise Hill Resources (TRQ) in a Memorandum of Understanding
in September 2020; and achieving the power milestones agreed with
the Government of Mongolia in June 2020. We continue to work
closely with our partners, the government of Mongolia and TRQ,
in the coming months to finalise these milestones, as outlined in our
16 December announcement.
On 22 December, Oyu Tolgoi received a tax assessment for
approximately $228 million from the Mongolian Tax Authority, relating to
an audit of taxes paid between 2016 and 2018. This assessment is in
addition to $752 million of taxes and royalties paid in the same period.
Oyu Tolgoi’s application to include these matters in the pending
international arbitration related to 2013 to 2015 has been accepted.
On 4 January 2021, the government of Mongolia advised Rio Tinto that
they were dissatisfied with the results of the definitive estimate and the
funding implications for the sharing of economic benefits between the
shareholders of Oyu Tolgoi. We are engaging with the government of
Mongolia in relation to the definitive estimate.
We are in active discussions with the government of Mongolia to address
and close all outstanding issues and increase the project’s benefits to
all stakeholders.
1. This estimate is at a `better than feasibility study’ level of accuracy.
2. The definitive estimate assumes restrictions in 2021 that are no more stringent than those experienced in September 2020. Mongolia implemented further restrictions at the end of 2020 in response to
a re-emergence of COVID-19. Should COVID-19 constraints be maintained at December 2020 levels, escalate further in 2021 leading to tougher restrictions, or continue beyond 2021, additional costs
and schedule impacts will arise.
3. This production target (stated as recovered metal) for the Oyu Tolgoi underground and open pit mines was previously reported in a release to the market on 16 December 2020 (market release). All
material assumptions underpinning the production target continue to apply and have not materially changed.
40
Annual Report 2020 | riotinto.com
Business Development
Resolution Copper Project: Arizona, Copper
At our Resolution Copper project, in Arizona, US, we
recognise the historical connection that each of the
11 consulting Native American Tribes has with the land.
We acknowledge the significance of these connections,
which have endured over centuries. We strive to build
constructive relationships with each Tribe based on
mutual respect, meaningful engagement, trust, mutual
understanding and mutual benefit. We will continue to
listen to the perspectives and concerns of each Tribe
throughout the life of the project.
Over the last two decades, archaeological reports,
ethnographic and ethnohistoric studies and tribal
perspective reports have been produced in partnership
with Tribes and the US Forest Service to identify places,
areas, artefacts and natural features of importance. We
have also produced more than 150 cultural baseline
reports, incorporating all elements of the landscape and
conducted with tribal members trained under the Tribal
Monitoring Program. The Tribal Monitoring Program is a
first-of-its-kind program for the US Forest Service,
employing more than 30 members from seven consulting
Tribes working alongside archeologists.
In January 2021, the US Forest Service published the Final
Environmental Impact Statement (FEIS) for Resolution
Copper. The publication reflects a delay from the July
2020 target date, set by the Obama Administration, and
comes after more than seven years of public and 11 years
of tribal consultation. Resolution Copper has not applied
or taken advantage of programmes to expedite or
‘fast-track’ the permitting process.
There are multiple moments in the formulation of a
project and during its operation in which innovation and
adjustments are possible. Opportunities to reduce
impacts, where possible, will be an objective of future
studies. We are committed to ongoing stakeholder
engagement in our effort to seek consent to progress the
project, consistent with the International Council on
Mining and Metals (ICMM) Statement on Indigenous
Peoples and Mining.
Gudai-Darri: Western Australia, Iron Ore
At Gudai-Darri (formerly Koodaideri), set to be our most
technologically advanced mine, construction is
progressing on track with the expected production
ramp-up in early 2022.
This year, we announced the opening of a new airport,
which is expected to handle more than 600 workers a day
at peak operating times. The airport will help strengthen
site safety by minimising mine employees’ exposure to
driving and vehicle transport while also reducing the
hours they are required to travel from an alternate airport,
reducing fatigue. The airport will also provide a safer
landing option for the Royal Flying Doctor Service, our
longstanding partner.
We built Western Australia’s largest steel beam bridge
to carry Great Northern Highway traffic over Gudai-Darri’s
train line. Rail formation works are on target and
track-laying also began in the fourth quarter of 2020.
We completed the studies for the 34MW solar plant
at Gudai-Darri and commence construction in 2021.
This will consist of about 100,000 solar panels made
up of photovoltaic cells to convert sunlight into electricity.
On average, the solar plant is expected to supply all of
Gudai-Darri’s electricity demand during peak solar power
generation times and approximately 65% of the mine’s
average electricity demand. With a new lithium-ion
battery energy storage system, the solar plant could
reduce our annual carbon dioxide emissions by an
estimated 90,000 tonnes compared to conventional
gas-powered generation. This is the equivalent of taking
about 28,000 cars off the road.
Importantly, growth at Gudai-Darri progresses with the
community in mind: to date, the project has awarded local
businesses – including Pilbara, Pilbara Aboriginal and
Western Australia-based businesses – contracts valued at
more than A$1.1 billion, supporting approximately 2,000
jobs in the construction phase.
Simandou: Guinea, Iron Ore
Simandou contains one of the world’s largest and richest
high-grade iron ore deposits, demand for which is increasing
as steelmakers look to reduce carbon emissions.
Simandou broadens our global portfolio of iron ore
products and complements the long-term attractiveness
of our Pilbara Blend™. We remain committed to Simandou
and to delivering its benefits to our partners as well as to
local communities and the people of Guinea.
In 2020, work continued on the technical optimisation of
the Simandou project with the support of China-based
institutions and business partners, as well as preparatory
work and activities related to the project’s Social and
Environmental Impact Assessment. Engagement continued
with the government of Guinea about potential mechanisms
for collaboration on infrastructure development.
Winu: Western Australia, Copper
At our Winu project in Western Australia, we are
actively engaging with Traditional Owners through
on-Country heritage surveys, monitoring and agreement
making, which is expected to continue into 2021,
with first ore expected in 2024, subject to regulatory
approvals, Traditional Owner and other consents and
COVID-19 restrictions.
Drilling results at Ngapakarra, about two kilometres east
of Winu, provide further encouragement about the potential
to develop multiple orebodies in the district. We have
explored only a small percentage of our tenements in the
Paterson region of Western Australia so far, which includes
both our 100% owned tenements and joint ventures.
Jadar: Serbia, Lithium
This year, we approved an additional investment of almost
$200 million to continue to progress the lithium-borate
Jadar project. The investment will fund the feasibility
study and associated engineering, as well as permitting
and land acquisition by the end of 2021, in line with the
initial project schedule.
The Jadar deposit contains high-grade mineralisation
of boron and lithium (Jadarite) and has the potential
to produce both battery-grade lithium carbonate and
boric acid. The deposit is located on the doorstep of the
European Union, one of the fastest growing electric vehicle
markets in the world. Jadarite was discovered in 2004 by
Rio Tinto geologists near the city of Loznica, Serbia.
For further information on litigation and
investigations related to Simandou and other
matters, please refer to the “Contingent Liabilities”
note on page 261 for further information.
Annual Report 2020 | riotinto.com
41
Strategic Report The world – from bridges and skyscrapers
to cars and planes – is built on steel,
and steel is made from iron ore.
42
Annual Report 2020 | riotinto.com
Strategic Report
Iron Ore
Overview
In the Pilbara region of Western Australia, we operate an
integrated portfolio of iron ore assets: a network of 16 iron ore
mines, four port terminals, a 1,700-kilometre rail network and
related infrastructure. We are one of the world’s leading
producers of iron ore.
Our Iron Ore product group includes Dampier Salt, also in Western
Australia – the world’s largest exporter of seaborne salt. Our fully
integrated portfolio of quality assets, highly valued product suite and
committed people and partners are key pillars of our value over volume
strategy. Together, these allow us to export our products, including our
flagship Pilbara Blend™, to our customers safely, reliably and efficiently.
This is the equivalent of taking about 28,000 cars off the road.
Importantly, growth at Gudai-Darri progresses with the community
in mind: to date, the project has awarded local businesses – including
Pilbara, Pilbara Aboriginal and Western Australia-based businesses –
contracts valued at more than A$2.3 billion, supporting approximately
2,000 jobs in the construction phase.
We completed the studies for the 34MW solar plant at Gudai-Darri and
commence construction in 2021. This will consist of about 100,000 solar
panels made up of photovoltaic cells to convert sunlight into electricity.
On average, the solar plant is expected to supply all of Gudai-Darri’s
electricity demand during peak solar power generation times and
approximately 65% of the mine’s average electricity demand. With a new
lithium-ion battery energy storage system, the solar plant is estimated to
reduce our annual carbon dioxide emissions by about 90,000 tonnes
compared to conventional gas-powered generation.
We deeply regret the events at Juukan Gorge, near our Brockman mine in
Western Australia, and have unreservedly apologised to the Puutu Kunti
Kurrama and Pinikura (PKKP) people. The destruction of the rock
shelters should not have happened, and we are absolutely committed to
listening, learning and changing. Please refer to pages 10-11 to learn
more about what we are doing to rebuild trust with our Indigenous
partners and Traditional Owners.
Snapshot of the year
0.53
AIFR
$27.5bn
gross product sales
74%
Pilbara underlying
FOB EBITDA
margin
$13.2bn
net cash generated
from operating
activities
(2019: 0.66)
(2019: $24.1bn)
(2019: 72%)
(2019: $11.4bn)
Pilbara Iron Ore in figures
16
integrated mines in
Western Australia
5
mainstream iron ore
products
4
port terminals
3
solar salt operations
12%
of our residential
workforce is Pilbara
Aboriginal People*
13,600
employees (includes
temporary employees
and 100% of joint
venture operations)
1,700km
automated rail
network, including
AutoHaulTM
330.6
million tonnes of iron
ore shipped
*
Includes all Indigenous employees who live in the Pilbara and any other Indigenous employees, regardless of where they live, who are members of Traditional Owner groups that have opted in to Rio Tinto’s
Regional Framework Deed.
Annual Report 2020 | riotinto.com
43
Strategic Report
Strategic Report
Iron Ore
continued
2020 year end results
Pilbara production (million tonnes - 100%)
Pilbara shipments (million tonnes - 100%)
Salt production (million tonnes - Rio Tinto share)1
Gross product sales (US$ millions)
Average realised price (US$ per dry metric tonne)
Underlying EBITDA (US$ millions)
Pilbara underlying FOB EBITDA margin2
Underlying earnings (US$ millions)
Net cash generated from operating activities (US$ millions)
Capital expenditure (US$ millions)3
Free cash flow (US$ millions)
Return on capital employed4
2020
333.4
330.6
4.9
27,508
98.9
18,837
74%
11,398
13,218
(2,941)
10,233
74%
2019
326.7
327.4
5.4
24,075
85.9
16,098
72%
9,638
11,420
(1,741)
9,601
67%
Change
2%
1%
(10)%
14%
15%
17%
18%
16%
69%
7%
1. Dampier Salt is reported within Iron Ore, reflecting management responsibility. Iron Ore Company of Canada and the Simandou iron ore project in Guinea continue to be reported within Energy &
Minerals.
2. The Pilbara underlying free on board (FOB) EBITDA margin is defined as Pilbara underlying EBITDA divided by Pilbara revenues, 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. Return on capital employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets).
Safety
In 2020, our Iron Ore operations continued to improve our safety culture
as evidenced by the strong performance. We marked more than two
years without a fatality and achieved a step change in safety performance
with the injury rate and severity rate decreasing by 20% and 13%,
respectively. The number of potentially fatal incidents continued to
decline – approximately 29% lower, year on year.
Financial performance
Our strong operational performance in the Pilbara in 2020 enabled us to
take advantage of the rising price environment for our high-quality
products. This price strength was driven by buoyant demand from China
and constraints in global seaborne supply. We increased our iron ore
shipments by 1% and production by 2% compared with 2019, whilst
implementing strict measures to manage COVID-19.
We continue to remove or reduce our material risk exposure to
eliminate fatalities at our operations. We have detailed improvement
plans built against our safety maturity model. These focus on being
a learning organisation, our leadership and engagement approach,
risk management and our work planning. The delivery of these plans
will support a sustained improvement towards our goal of zero harm.
During 2020, we responded to COVID-19 with a clear, nimble strategy,
using our hierarchy of controls to manage the risks associated with the
virus and keep people safe.
We took extensive measures to reduce virus transmission pathways,
including travel restrictions, self-isolation, quarantine and physical
distancing. We changed our rosters to minimise movement across
operations and implemented additional cleaning and sanitisation. Rapid
screening clinics were introduced at Perth and regional airports and our
regional towns to reduce the risk of transmission.
Together, our employees and contractors, partners and host
communities demonstrated commitment, resilience, innovation and
collaboration in helping us to keep our operations strong and safe.
Despite the pandemic we improved our overall safety performance.
In 2020, we also conducted a safety culture diagnostic to further mature
our safety culture, with a focus on mindsets and behaviours through a
leadership lens. Insights from the diagnostic and other assessments,
combined with lessons from incidents, will continue to drive a targeted,
problem-solving-based approach to ensure the health, safety, and
wellbeing of our employees.
Underlying EBITDA of $18.8 billion was 17% higher than 2019, primarily
reflective of higher prices, partially offset by rising unit costs. The
monthly average Platts index for 62% iron fines adjusted to an FOB basis
was 19% higher than 2019. Higher realised prices increased underlying
EBITDA by $3.2 billion, while a stronger Australian dollar reduced
underlying EBITDA by $0.3 billion.
2020 Pilbara unit cash costs, which were $15.4 per tonne (2019: $14.4
per tonne), include $0.6 per tonne of COVID-19 costs, which relate to the
controls we have put in place to keep our people safe such as additional
cleaning and flights, screening and roster changes. We experienced a
higher monthly volatility in the iron ore price and an appreciation in the
Australian dollar at year end. This triggered exchange and related effects,
including losses on receivables, which added a net $0.4 per tonne to unit
cash costs in 2020. A significant majority of our Pilbara operating costs
(excluding freight and royalties) are denominated in Australian dollars.
We also experienced a higher mining work effort from longer haul
distances, below water table mining and increased maintenance activity
which we offset through productivity gains from increased automation
and lower fuel prices. Overall, underlying unit cash costs were stable year
on year, excluding the impact of foreign exchange and COVID-19 costs.
We have continued investing in productivity and automation and are now
seeing an improved effectiveness of our integrated system: around 60%
of our truck fleet in the Pilbara is now fully autonomous. We have a
pathway that will see around two thirds of the fleet being automated by
the end of 2021.
Our Pilbara operations delivered an underlying FOB EBITDA margin of
74%, compared with 72% in 2019.
44
Annual Report 2020 | riotinto.com
Iron Ore
We price the majority of our iron ore sales (77%) by reference to the
average index price for the month of shipment. In 2020, we priced
approximately 13% of sales by 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 70% of sales including freight and 30% on an FOB basis.
We achieved an average iron ore price of $91.0 per wet metric tonne on
an FOB basis (2019: $79.0 per wet metric tonne) across our product
suite. This equates to $98.9 per dry metric tonne, assuming 8% moisture
(2019: $85.9 per dry metric tonne), which compares with the monthly
average Platts index for 62% iron fines converted to an FOB basis of
$101.3 per dry metric tonne (2019: $84.9 per dry metric tonne). The
slightly lower realised price compared to the Platts index was due to
lower market premiums for lump and the effect of the sales priced by
reference to the prior quarter’s average index lagged by one month in a
rising price environment throughout 2020.
Gross product sales for our Pilbara operations included freight revenue of
$1.5 billion (2019: $1.7 billion).
Net cash generated from operating activities of $13.2 billion was 16%
higher than 2019, in line with the increase in underlying EBITDA.
The $10.2 billion of free cash flow was 7% higher than 2019, reflecting a
69% increase in capital spend, mainly related to the ramp-up of
construction activity at the new Gudai-Darri hub.
Review of operations
We achieved a strong operating performance across the network in 2020,
managing the challenges of weather disruptions and the implementation
of strict measures to manage COVID-19. Our Pilbara operations produced
333.4 million tonnes (our share 275.5 million tonnes), 2% higher than
2019, underpinned by record total material moved for the year, 7%
higher than the previous record set in 2019, highlighting the
improvements to mine and asset health.
2020 shipments of 330.6 million tonnes (our share 273.1 million tonnes),
which were 1% higher than 2019, were impacted by Cyclone Damien in
the first quarter and by COVID-19, which also resulted in the deferral of
maintenance at the port to the third quarter. We continue to ramp up our
port sales in China, with 5.5 million tonnes of sales in 2020. Our portside
operation handles product from our operations in the Pilbara and in
Canada, as well as third-party product, and provides blending and
screening capabilities.
Following the events at Juukan Gorge, we continue to reassess all
activities which have the potential to impact heritage sites. We will
continue to review mine plans to ensure the protection of sites of
exceptional cultural value and have increased monitoring of operating
activities that have the potential to impact heritage sites. We have also
integrated heritage management into our mining operations – our Iron
Ore business now has primary responsibility for our Communities and
Social Performance partnerships and engagement.
Pilbara shipments
(million tonnes – 100% basis)
2016
2017
2018
2019
2020
327.6
327.6
330.1
338.2
338.2
327.4
327.4
330.6
New projects and growth options
We are progressing our $2.6 billion Gudai-Darri iron ore mine, with key
construction activities on schedule. This new production hub will be our
most technologically advanced, incorporating a processing plant and
infrastructure including an airport, camp and a 166-kilometre rail line
connecting the mine to our existing network. We continue to anticipate
production to ramp up in early 2022. Once fully commissioned, the initial
mine development will have an annual capacity of 43 million tonnes. This
will increase the lump to fines ratio in our Pilbara Blend shipments to
38%.
We have multiple project scopes under study for Gudai-Darri Phase 2,
following Board approval for a $44 million pre-feasibility study.
Ultimately, the capacity of the hub could be up to 70 million tonnes per
year, depending on market conditions.
We are also investing $1.55 billion with our joint venture partners, Mitsui
and Nippon Steel, (our 53% share is $820 million) at the Robe Valley and
West Angelas operations. We have received all required approvals, and
procurement and construction activities are progressing well. We
anticipate first ore from these projects in 2021.
Our $749 million investment in the Western Turner Syncline phase
2 mine, part of Greater Tom Price operations, will facilitate mining of new
deposits and includes construction of a new crusher and a 13-kilometre
conveyor. First ore is expected in 2021.
Greenhouse gas emissions
In 2020, Iron Ore’s absolute greenhouse gas emissions were 3Mt CO2-e
(on an equity basis), an increase of 0.3Mt CO2-e compared to the 2018
emissions baseline, driven by an increase in diesel emissions due to
increased haul distances and material movement.
In the short to medium term, abatement opportunities relate to the
deployment of renewable power projects. A range of renewable energy
studies are underway to support a transition from using natural gas to
power our operations, while longer-term works natural transitioning the
mobile mining fleet from diesel to alternative energies. The transition
from traditional fuels in mining will require technical and economic
developments in renewable energy, alternative fuels and energy
transfer systems.
Construction of the company’s first 34 MW solar PV plant at the
Gudai-Darri mine is anticipated to be completed by the end of 2021. In
addition, we expect to commission a 12MW/h battery energy storage
system to strengthen the security and reliability of our Pilbara power
network. The solar plant and battery systems are estimated to reduce
carbon dioxide emissions by approximately 90,000 tonnes per year.
Rio Tinto also committed $10 million over the next two years with the
world’s largest steel producer, China Baowu Steel Group, to support
low-carbon steelmaking projects and research. This investment is the
next step in advancing our partnership with China Baowu and Tsinghua
University, announced in 2019, and will fund the establishment of a Low
Carbon Raw Materials Preparation R&D Centre, which will initially
prioritise the development of lower carbon ore preparation processes.
Rio Tinto also strengthened our partnership with Tsinghua University,
committing a further $4.5 million over the next five years to support
research projects at the Tsinghua-Rio Tinto Joint Research Centre for
Resources, Energy and Sustainable Development. We also signed a
Memorandum of Understanding with Nippon Steel Corporation, Japan’s
largest steel producer, to jointly explore, develop and demonstrate
technologies to transition to a low-carbon emissions steel value chain.
Annual Report 2020 | riotinto.com
45
Strategic Report
Beverage cans are just one place you
can find our infinitely recyclable,
low-carbon Canadian aluminium.
46
Annual Report 2020 | riotinto.com
Strategic Report
Aluminium
Overview
We are a global leader in aluminium, with a large-scale, vertically-integrated
business: bauxite mines and alumina refineries as well as smelters producing
aluminium certified as responsible. Managing the process from start to finish
allows us to deliver high-quality products to our customers, reliably and
efficiently: from high-grade bauxite for the global seaborne trade to sustainably
sourced aluminium for beverage packaging to new, lighter alloys for the
automotive industry.
Our Canadian operations average in the first decile of the industry
cost-curve and produce primary metal using clean, renewable hydropower.
In 2018, we became the first company to offer aluminium certified as
responsible by the Aluminium Stewardship Initiative (ASI), meaning it
meets the highest environmental, social and governance standards.
In 2020, we announced a global partnership with AB InBev, the world’s
largest beer brewer. Initially focused on North America, the partnership
will see us provide low-carbon aluminium for AB InBev’s beer cans.
We also announced an investment in a new remelt furnace at our
Laterrière casting centre, and a partnership with Shawinigan Aluminium
Inc., both in Canada, to offer our US and Canadian customers high-quality
alloys made with recycled scrap, starting in 2021.
ELYSIS – our partnership with Alcoa, supported by Apple and the
governments of Canada and Quebec – completed its Research &
Development Centre in the Saguenay, in Quebec, Canada, where it will
continue to develop smelting technology free of direct carbon emissions.
In 2021, we launched StaRT™, the first sustainability label for aluminium,
which will be delivered to customers using blockchain technology. This
‘nutrition label’ for aluminium will provide key information about where
and how the aluminium was produced, covering ten criteria: carbon
footprint, water management, renewable energy, recycled content, waste
management, safety performance, contribution to communities, supplier
due diligence, governance systems and diversity. The blockchain
technology will enable traceability, helping customers and consumers
make informed choices about the products they buy.
Snapshot of the year
0.36
AIFR
$9.3bn
gross product sales
26%
underlying EBITDA
margin from
integrated operations
$1.9bn
net cash generated
from operating
activities
(2019: 0.46)
(2019: $10.3bn)
(2019: 26%)
(2019: $2.2bn)
Aluminium in figures
4
bauxite mines
in Australia, Brazil and
Guinea
4
alumina refineries
in Australia, Brazil and
Canada
3
research and
development centres
in Canada, France and
Australia
22
sites certified
responsible by
the Aluminium
Stewardship Initiative
(ASI)
14
aluminium smelters
in Canada, Australia,
New Zealand, Iceland
and Oman
7
hydropower plants
supplying 100% of
the electricity we use
in Canada
14,000
employees
Annual Report 2020 | riotinto.com
47
Strategic Report
Strategic Report
Aluminium
continued
2020 year end results
Bauxite production (000 tonnes - Rio Tinto share)
Alumina production (000 tonnes - Rio Tinto share)
Aluminium production (000 tonnes - Rio Tinto share)
Gross product sales (US$ millions)
Average realised aluminium price (US$ per tonne)
Underlying EBITDA (US$ millions)
Underlying EBITDA margin (integrated operations)
Underlying earnings (US$ millions)1
Net cash generated from operating activities (US$ millions)
Capital expenditure - excluding EAUs (US$ millions)2
Free cash flow (US$ millions)
Return on capital employed3
2020
56,131
8,039
3,180
9,314
1,946
2,152
26%
471
1,930
(1,009)
892
3%
2019
55,105
7,744
3,171
10,340
2,132
2,285
26%
599
2,183
(1,316)
821
4%
Change
2%
4%
–%
(10)%
(9)%
(6)%
(21)%
(12)%
(23)%
9%
1. Underlying earnings includes a $0.2 billion charge in 2020 for the partial de-recognition of deferred tax assets in Australia.
2. Capital expenditure is the net cash outflow on purchases less sales of property, plant and equipment, capitalised evaluation costs and purchases less sales of other intangible assets. It excludes equity
accounted units (EAUs).
3. Return on capital employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets).
Safety
2020 marked the sixth consecutive fatality-free year for our Aluminium
product group, and we finished the year with an AIFR of 0.36, a significant
improvement compared to 2019 (0.46).
We continued improving the safety maturity of our sites with a strong
emphasis on leadership coaching and critical risk management. In 2020,
we completed over 257,000 verifications on critical controls including
more than 40,000 verifications specific to COVID-19. We also progressed
a programme to reduce vehicle-pedestrian risks, including the
implementation of a pedestrian proximity detection system in
our smelters.
We further enhanced our management of major hazards by improving the
way we report and learn from process safety incidents. We also
strengthened governance of critical controls across process safety,
tailings and water dams.
We are progressing our five-year plan to reduce health risk exposures by
improving monitoring and implementing engineering controls, such as
ventilation.
During the year, we increased our focus on mental health and raised
awareness of our employee assistance programme to better support our
employees and their families during COVID-19, and supported local
communities in their implementation of COVID-19 safety measures.
Financial performance
Our aluminium business was resilient in 2020, despite significantly lower
sales prices and reduced demand for value-added product (VAP), driven
by market conditions from the impact of COVID-19. Markets were
particularly challenging for aluminium metal where global demand for
primary aluminium declined by approximately 3% and global supply was
largely unchanged. However, our focus on operational stability, resilience
through COVID-19 and cash flow generation, enabled us to deliver solid
underlying EBITDA and strong cash flows.
Underlying EBITDA of $2.2 billion declined by just $0.1 billion, 6% lower
than 2019, despite the weaker pricing environment, which impacted
underlying EBITDA by $0.3 billion. We were able to offset most of the
pricing impact through operational improvements and productivity gains,
along with lower prices for our inputs, which totalled $0.3 billion. These
included raw material efficiencies, reduced energy costs and lower input
prices, primarily for caustic soda and petroleum coke. This enabled us to
maintain our industry-leading underlying EBITDA margin at 26%, in line
with 2019.
We achieved an average realised aluminium price of $1,946 per tonne,
9% lower than 2019 ($2,132 per tonne). This comprised the LME price, a
market premium and a product (VAP) premium. The cash LME price
averaged $1,702 per tonne, 5% lower than 2019, even after a sharp
recovery in the second half of 2020. In our key US market, the midwest
premium dropped 2% to $313 per tonne on average in 2020. VAP
represented 43% of the primary metal we sold, in line with market
demand (2019: 51%), and generated product premiums averaging $213
per tonne of VAP sold (2019: $234 per tonne). Market demand for VAP
rebounded in the fourth quarter of 2020, returning to normal levels.
Although we are broadly balanced in alumina, approximately 2.2 million
tonnes of our legacy alumina sales contracts are exposed to a fixed
linkage to the LME price. These contracts date back to 2005 or earlier,
and the majority expire between 2023 and 2030. In 2020, the opportunity
loss was $0.1 billion, compared with $0.2 billion in 2019.
Despite the significantly weaker market environment, we generated
$1.9 billion in net cash from operating activities with free cash flow
increasing by 9% to $0.9 billion. This was underpinned by productivity
improvements, lower costs, reductions in working capital in the year and
lower capital expenditure.
Review of operations
Bauxite production of 56.1 million tonnes was 2% higher than 2019
supported by the ramp-up of the expansion at the CBG mine in Guinea,
and steady performance at the Pacific mines, including additional
volumes from the start-up of the Amrun mine in 2019.
We shipped 39.4 million tonnes of bauxite to third parties, 1% lower than
in 2019. Shipments were prioritised throughout the year to align with
customer needs, with a higher proportion of internal shipments to our
Pacific refineries.
48
Annual Report 2020 | riotinto.com
Aluminium
In 2020, gross product sales for bauxite declined 8% to $2.3 billion – this
includes freight revenue of $423 million (2019: $464 million).
Alumina production of 8.0 million tonnes was 4% higher than 2019, as a
result of strong production at both our Pacific refineries.
Aluminium production of 3.2 million tonnes was in line with 2019, with
lower volumes from the curtailment of Line 4 at the Tiwai Point smelter in
New Zealand and from the Kitimat smelter pot relining campaign, offset
by the ramp-up of the Becancour smelter in Quebec following its restart
after a lockout at the end of 2019.
In January 2021, we reached agreement on a new electricity supply with
Meridian Energy that allows New Zealand Aluminium Smelter (NZAS) to
continue operating the Tiwai Point smelter until December 2024. This
extension of operations provides certainty to employees, the local
community and customers while providing more time for all stakeholders
to plan for the future.
On 15 February 2021, we reached agreement on an amended power
contract with the energy supplier, Landsvirkjun, that will allow the ISAL
aluminium smelter in Iceland to continue operating with an improved
competitive position. We have withdrawn our complaint filed with the
Icelandic Competition Authority.
New projects and growth options
At the Kemano project in Kitimat, British Columbia, we are constructing a
second tunnel to de-risk our 100% owned hydropower facility. The
project was originally approved in 2017, with $155 million of additional
capital approved in 2020, bringing the total to $630 million. It was
impacted by the departure of the main contractor in the first half of 2020.
Tunnel excavation works restarted in September. However, due to the
escalation of COVID-19 in the province, tunnel excavation works have
been interrupted. We expect to restart late in the first quarter of 2021.
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
traditional aluminium smelting process. In December 2020, we
Third-party bauxite shipments
(million tonnes – Rio Tinto share)
2016
2017
2018
2019
2020
Aluminium production
(thousand tonnes – Rio Tinto share)
2016
2017
2018
2019
2020
29.329.3
32.332.3
32.832.8
39.639.6
39.439.4
3,366
3,366
3,267
3,267
3,231
3,231
3,171
3,171
3,180
3,180
announced that construction of the ELYSIS Industrial Research and
Development (R&D) Centre at our Complexe Jonquière in the Saguenay,
Quebec was complete. This new centre will produce metal at a similar
scale to smaller, industrial-sized smelting cells that are in operation by
some producers today. Commissioning of the Industrial R&D Centre is
underway.
Greenhouse gas emissions
In 2020, our Aluminium product group’s absolute greenhouse gas
emissions (21.8 MtCO2e) were 1.3% lower than the 2018 equity baseline
(22.1 MtCO2e). Contributions to this improvement included smelting
process changes and the increased use of hydroelectric boilers in
refining. These improvements were delivered while increasing bauxite
production by 12%, maintaining alumina production and reducing
production slightly across the smelting portfolio compared to the
2018 baseline.
The 2020 emissions intensity of our managed Atlantic Operations
smelters, powered by hydroelectricity, was 2.13 tCO2eq per tonne of
aluminium – less than one-fifth of the industry average – while our
Vaudreuil alumina refinery has the lowest carbon footprint in the
world today.
Annual Report 2020 | riotinto.com
49
Strategic Report Copper helps renewable technology
generate electrical power.
50
Annual Report 2020 | riotinto.com
Strategic Report
Copper & Diamonds
Overview
Our copper and diamond businesses share a rich expertise in
underground mining processes and technology. Combined with
our strong people focus, this allows us to relentlessly prioritise
safety and continue to be a profitable, future-ready,
sustainability-driven product group.
Copper
Global demand for copper is set to grow, driven by urbanisation,
industrialisation and increasing use of renewable energy. Alongside
copper, we also produce gold, silver, molybdenum and other materials
such as rhenium, supplying customers in China, Japan and the US.
Our Resolution Copper project in Arizona, US, is one of the world’s largest
undeveloped copper deposits with the potential to supply up to one
quarter of American copper demand annually.
Through consultation, collaboration and coordination with regulatory
agencies, communities and the region’s Native American Tribes, we have
made significant changes to the project design: we created the Emory
Oak Restoration & Conservation Program, a partnership led by the
Western Apache with the US Forest Service (USFS), Northern Arizona
University, and Resolution Copper to reinvigorate Emory Oak trees across
Arizona. We will also protect Apache Leap, a site sacred to Apache Tribes,
through the Apache Leap Special Management Area.
Snapshot of the year
0.30
AIFR
$5.4bn
gross product sales
(2019: 0.29)
(2019: $5.8bn)
Copper & Diamonds in figures
Resolution Copper also has benefits for the wider community: today, we
directly employ roughly 600 employees and contractors, more than half
of whom live less than 40 miles away. At full production, it will support
approximately 3,700 direct and indirect jobs. Following completion of a
land exchange, agreements with the federal government and others will
increase the amount of land under public ownership and management
across Arizona, including areas of high cultural significance as well as
areas important to regional biodiversity and recreation.
Diamonds
In November 2020, after 37 years, our Argyle diamond mine ceased
production. We are committed to closing the mine responsibly,
continuing to manage our Diavik operation and remaining active in
diamond exploration with Canada as our target geography.
47%
underlying EBITDA
margin (product
group operations)
(2019: 41%)
$1.1bn
net cash generated
from operating
activities
(2019: $1.5bn)
3
copper operations
in the US, Mongolia
and Chile
3
copper growth
projects in the US,
Australia and Mongolia
2
diamond operations
in Canada and
Australia
7,800
employees
1st
mining company to
be certified by
the Responsible
Jewellery Council
2
operations awarded
the Copper Mark,
verifying copper
from Kennecott
and Oyu Tolgoi is
responsibly produced
6,200,0001
pounds of copper
scrap recycled at our
Kennecott copper
mine in the US
1. The furnace challenges at Kennecott increased capacity downstream in the smelter to re-process scrap into anodes and then cathode, and we took advantage of this by purchasing and reprocessing
6.2mn lbs of recycled metal within the year.
Annual Report 2020 | riotinto.com
51
Strategic Report
Strategic Report
Copper & Diamonds
continued
2020 year end results
Mined copper production (000 tonnes - Rio Tinto share)
Refined copper production (000 tonnes - Rio Tinto share)
Diamonds production (000 carats - Rio Tinto share)
Gross product sales (US$ millions)
Average realised copper price (US cents per pound)
Underlying EBITDA (US$ millions)
Underlying EBITDA margin (product group operations)
Underlying earnings (US$ millions)
Net cash generated from operating activities (US$ millions)1
Capital expenditure - excluding EAUs2 (US$ millions)
Free cash flow (US$ millions)
Return on capital employed3
2020
527.9
155.0
14,676
5,428
283
2,172
47%
763
1,064
(1,686)
(637)
6%
2019
577.4
259.6
17,030
5,815
275
2,073
41%
554
1,505
(1,772)
(284)
5%
Change
(9)%
(40)%
(14)%
(7)%
3%
5%
38%
(29)%
(5)%
(124)%
1. Net cash generated from operating activities excludes the operating cash flows of equity accounted units (EAUs) but includes dividends from EAUs (Escondida).
2. Capital expenditure is the net cash outflow on purchases less sales of property, plant and equipment, capitalised evaluation costs and purchases less sales of other intangible assets. It excludes EAUs.
3. Return on capital employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets).
Safety
This year, our Copper & Diamonds operations achieved a 39% year-on-year
reduction in the number of potentially fatal incidents. However, we did
have a permanent disabling injury at the Diavik Diamond Mine, in Canada.
We recorded an all-injury frequency rate of 0.30, which is a leading
safety performance.
This year, we also continued our focus on supporting the health and
wellbeing of our employees, driving stronger risk and incident
management, and sustaining improvements in safety. We recorded and
shared nearly 300 improvement initiatives between our assets.
Our overall approach to the COVID-19 pandemic has been centred on
protecting our employees and contractors from the virus, supporting
mental wellbeing, and working together with local communities. The
response measures implemented at each of our operations were based
on risks specific to the asset and its employees, ensuring alignment with
guidance from the relevant authorities at local and national levels.
Our Diavik Diamond Mine was the first operation within Rio Tinto to set up
an on-site COVID-19 testing facility. Our Kennecott operation is conducting
an average of 8,000 tests per month. Both contribute to the approximately
40,000 tests completed across our Copper & Diamonds operations in 2020.
In addition to ensuring preparedness to various COVID-19 scenarios, we
have taken a wide range of preventative measures, including rapid
screening for employees and contractors, improved hygiene processes at
sites and in offices, and adjusted roster arrangements, which has mitigated
risks for our employees, contractors and communities.
Financial performance
In 2020, we increased underlying EBITDA despite lower revenues amidst
a challenging year. It was a year of transition for our operational mine
plans at Kennecott and Oyu Tolgoi, with a temporary reduction in copper
and gold grades. Weak market conditions in the first half, COVID-19
restrictions and a 5.7 magnitude earthquake in Utah in March, were the
principal external challenges. In addition, we incurred a delay in restarting
the Kennecott smelter, following a planned shutdown.
A strong recovery in the copper price and fully operational Kennecott
smelter by October, coupled with strong actions to address the
headwinds, namely tight cost control and acceleration of access to higher
gold grades at Oyu Tolgoi, led to a 5% increase in underlying EBITDA to
$2.2 billion, with margins rising to 47%.
Price movements for all products benefited underlying EBITDA by
$0.5 billion for the full year. Our average realised copper price increased by
3% to 283 US cents per pound. Other prices were mixed, with gold rising
27% to $1,770 per ounce while our realised diamond prices declined
by 21% on a weighted average basis. An unplanned flash converting
furnace rebuild at Kennecott following the earthquake and delays in
restarting the smelter following planned major maintenance after the
52
Annual Report 2020 | riotinto.com
shutdown also impacted underlying EBITDA through reduced volumes,
leading to fixed cost inefficiencies. This was partially offset by 82% higher
molybdenum concentrate volumes at Kennecott, where we also realised
some exports of copper concentrate into a strengthening market.
Our copper unit costs, at 111 cents per pound in 2020, were 20% higher
than in 2019, due to lower copper grades at Kennecott and Escondida
and delays in restarting the Kennecott smelter, driving lower volumes.
This was partly offset by cost reduction programmes and higher
by-product credits, with higher prices for gold and higher molybdenum
volumes, due to improved grades, albeit at lower prices.
We continued to advance our future copper evaluation projects, in particular
at Resolution Copper in Arizona and at Winu in Western Australia.
We generated $1.1 billion in cash from our operating activities, a 29%
decline on 2019, primarily driven by anticipated lower copper and gold
grades, combined with the operational challenges at Kennecott. We also
received $0.1 billion lower dividends from our 30% equity holding in
Escondida. Free cash flow was an outflow of $0.6 billion reflecting the
lower operating cash flow and a sustained level of capital investment
($1.7 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, at 527.9 thousand tonnes, was 9% lower than 2019,
primarily due to lower grades at Kennecott, as a result of planned pit
sequencing, and lower grades and lower material moved at Escondida.
Kennecott
Mined copper production at Kennecott was 25% lower than 2019, due to
a 28% reduction in grade and the optimisation of molybdenum ore during
the extended shutdown of the smelter, which, in combination with higher
molybdenum grades, led to an 82% increase in the production of
molybdenum concentrate. Development in the pit progressed despite
COVID-19 disruptions. We expect grades to gradually increase from
2021, as mining transitions from the east to the south wall.
Refined copper production was 54% lower than 2019 due to the rebuild
of the flash converting furnace, required following the earthquake, and
delays in restarting the smelter following planned major maintenance in
mid-2020. The smelter was safely restarted and became fully operational
in October.
Escondida
Escondida’s mined copper production was 1% lower than 2019, mainly
due to 15% lower material stacked onto the leaching pads. This was a
result of preventive measures in response to COVID-19, which were
mostly offset by 5% higher concentrator throughput in 2020. Refined
copper was also impacted by lower material stacked onto the leach pads.
Copper & Diamonds
Oyu Tolgoi
Mined copper production from the open pit at Oyu Tolgoi was 2% higher
than 2019, reflecting the anticipated move to higher grade areas,
primarily due to accelerated mine development and production phasing.
Access to higher copper and gold grades is expected to continue in 2021.
We maintained shipments across the Chinese border despite
COVID-19 measures in Mongolia and continue to work closely with the
authorities to manage the risk of supply chain disruptions.
Diamonds
Diamond production was 14% lower than 2019, attributable to lower
carats recovered at Diavik, where a 10% reduction in grade was partially
offset by an increase in tonnes processed, and the closure of Argyle, as
planned, on 3 November. We expect to take five years to decommission
the Argyle mine and rehabilitate the area, followed by a further period of
monitoring.
New projects and growth options – Oyu Tolgoi
underground project
In 2020, we progressed the underground project despite restrictions from
COVID-19 controls and ongoing international travel restrictions. The
project has deployed mitigations that include extended on-site rosters,
securing commitments from critical vendors to remain on site for
extended periods and layered screening of personnel.
Overall underground lateral development has now reached 53,000
equivalent metres (eqm), with development for first drawbell
substantially complete.
The project has now exceeded one million tonnes of material moved
through shaft 2 since commissioning and the scheduled annual
maintenance of the shaft was successfully completed in October 2020
using remote technology.
On 16 December, we confirmed the definitive estimate of cost and
schedule for Panel 0 with sustainable production expected to commence
in October 2022 and development capital of $6.75 billion1, in line with the
ranges first announced in July 2019. These estimates include the known
impacts of COVID-19.2 Oyu Tolgoi is expected to produce 480,000
tonnes3 of copper per year on average, from 2028 to 2036, from the open
pit and underground. The underground Ore Reserve has an average
copper grade of 1.52%, which is more than three times higher than the
open pit Ore Reserve, and contains 0.31 grammes of gold per tonne.4
Mined copper production
(000 tonnes – Rio Tinto share)
2016
2017
2018
2019
2020
523.3
523.3
472.4
472.4
607.6
607.6
577.4
577.4
527.9
527.9
Other new projects and growth options
The $0.9 billion investment in phase one of the south wall pushback
project at Kennecott, which will extend mine life to 2026, remains on
track. We expect to gradually access higher grades made available from
this project from 2021. The $1.5 billion investment in phase two
(stripping and additional infrastructure development), which is also on
track, will allow mining to move into a new area of the ore body for a
further six years. Both phases will continue to generate attractive returns
for Kennecott.
At our Resolution Copper project in Arizona, the shaft 9 remediation
and sinking project was completed in November, four months ahead
of schedule and within budget. On 15 January 2021, we entered the
next phase of public comment in the ongoing permitting process, led by
the US Forest Service, with the release of its independently prepared
Final Environmental Impact Statement (EIS).
At the 100% owned Winu copper-gold project in the Paterson Province
of Western Australia, we disclosed the maiden Inferred Mineral Resource
in July and revealed the discovery of a new zone of gold-dominant
mineralisation approximately two kilometres east of the Winu deposit.
The Inferred Mineral Resource, reported at a 0.2% copper equivalent
cut-off, is 503 million tonnes at 0.45% copper equivalent (CuEq).
This includes a higher grade component of 188 million tonnes at 0.68%
CuEq at a cut-off grade of 0.45% CuEq.5 Drilling and fieldwork activities
continue, with 90 kilometres of drilling completed in 2020. We are
actively engaging with the Traditional Owners through on-country
heritage surveys, monitoring and agreement making, which is expected
to continue into 2021, with first ore now expected in 2024, subject to
regulatory approvals, Traditional Owner and other consents and
COVID-19 restrictions.
Greenhouse gas emissions
In 2020, our Copper & Diamonds product group’s greenhouse gas
emissions were 2.7Mt CO2e (on an equity basis), a reduction of
0.9Mt CO2e compared to our 2018 emissions baseline.
After discontinuing the use of a coal-fired power plant at Kennecott in
2019, all of the electricity purchased by Kennecott and our Resolution
Copper project in 2020 was covered by the renewable energy certificates
supplied by Rocky Mountain Power. These certificates offset the carbon
emissions from all of the Scope 2 purchased electricity emissions in 2020
for both assets. The renewable energy certificate programme is Green-e
Energy certified, and meets the environmental and consumer protection
standards set by the Center for Resource Solutions.
Our diamond operations have reduced diesel usage through wind power
at the Diavik Diamond Mine in northern Canada and hydropower at the
Argyle mine in Western Australia. As part of our product group
sustainability strategy, we continue to advance abatement options and
technology to work towards ongoing emissions reductions.
1. This estimate is at a “better than feasibility study” level of accuracy.
2. The definitive estimate assumes restrictions in 2021 that are no more stringent than those experienced in September 2020. Mongolia implemented further restrictions at the end of 2020 in response to
a re-emergence of COVID-19. Should COVID-19 constraints be maintained at December 2020 levels, escalate further in 2021 leading to tougher restrictions, or continue beyond 2021, additional costs
and schedule impacts will arise.
3. This production target (stated as recovered metal) for the Oyu Tolgoi underground and open pit mines was previously reported in a release to the market on 16 December 2020 (market release). All
material assumptions underpinning the production target continue to apply and have not materially changed.
4. This Ore Reserve estimate was set out in the Market release dated 16 December 2020. The Competent Persons responsible for the information in the Market release that relates to Ore Reserves were
Mr Ferrin Prince and Mr Mark Bixley who are a Member and Fellow respectively of The Australasian Institute of Mining and Metallurgy. Rio Tinto confirms that it is not aware of any new information or
data that materially affects the information included in the Market release, that all material assumptions and technical parameters underpinning the estimates in the Market release continue to apply
and have not materially changed, and that the form and context in which the Competent Persons’ findings are presented have not been materially modified.
5. Refer to the release to the ASX on 28 July 2020 “Rio Tinto reveals maiden Resource at Winu and new discovery”. The Competent Person responsible for the information in that release that relates to
Mineral Resources and Exploration Results is Dr Julian Verbeek. Rio Tinto confirms that it is not aware of any new information or data that materially affects the information included in the market
announcement, that all material assumptions and technical parameters underpinning the estimates in the market announcement continue to apply and have not materially changed, and that the form
and context in which the Competent Person’s findings are presented have not been materially modified.
Annual Report 2020 | riotinto.com
53
Strategic Report Borates, produced by our E&M product
group, are used in space travel.
54
Annual Report 2020 | riotinto.com
Strategic Report
Energy & Minerals
Overview
Our Energy & Minerals portfolio includes a suite of global businesses –
producing high-grade iron ore concentrate and pellets; titanium dioxide,
rutile and zircon; borates and lithium; and uranium – that are each leaders
in their respective industries, operating with innovation at their core and
delivering to stakeholders and our shareholders.
High-grade iron ore
At the Iron Ore Company of Canada (IOC), we produce premium iron ore
pellets and high-grade concentrate with low levels of impurities, enabling
our customers to operate more productively, reduce emissions and
produce higher-quality steel for the modern world. Located in north east
Canada, IOC is a fully integrated business with mine, processing, railway,
and port facilities able to optimise and deliver value. In 2020, we
introduced autonomous electric drills, controlled remotely by operators
at IOC’s Integrated Operations Centre, after a successful initial pilot in
2019. These are some of the first of their kind to be used autonomously
in North America.
Our Simandou iron ore joint-venture project in Guinea is one of the
world’s largest untapped and richest high-grade iron ore deposits, and
complements our existing world-class iron ore portfolio. With an
increasing focus on emissions and decarbonisation across the global
steel industry, demand for high-grade ores is expected to continue to
grow – and Simandou can be a key pillar for Rio Tinto’s role in this
transition. Work continues on the technical optimisation of the project,
with preparatory activity for an update of the project’s Environmental and
Social Impact Assessment underway. We continue to engage with the
government of Guinea about potential mechanisms for collaboration on
infrastructure development.
TiO2 & critical minerals
Our iron and titanium business is a major global producer of high-grade
titanium dioxide with operations in Canada, Madagascar and South Africa.
The nature of the orebodies allows us to produce by-products such as
scandium and monazite. Monazite is a combination of rare earth
elements such as neodymium used in powerful permanent magnets
found in electric vehicle motors and wind turbine generators.
Snapshot of the year
0.41
AIFR
$5.0bn
gross product sales
We have developed an innovative process to extract high-purity
scandium oxide from waste generated by titanium dioxide production in
Quebec, Canada. Scandium oxide is used to improve the performance of
solid oxide fuel cells, a new clean energy technology used as a power
source for data centres and hospitals. It is also used to produce
high-performance aluminium-scandium master alloys for the aerospace,
defence and 3-D printing industries.
Borates & lithium
Our borates business – U.S. Borax – supplies approximately 30% of the
global demand for borates, used in everything from agriculture to
fibreglass insulation and sanitation and is a input into personal care
products, laundry detergents and industrial cleaning agents. At our
Boron operations in California, US, we have built a demonstration plant
to extract lithium as a by-product. This plant has the capacity to produce
10 tonnes per year of battery grade lithium-carbonate, used in
rechargeable batteries for electric vehicles and consumer electronics.
In Serbia, we continue to progress Jadar, a unique, world-class lithium-
borate deposit, with the project moving to the feasibility study stage in
2020. The project has the potential to supply the electric vehicle value
chain for decades. An investment decision is due at the end of 2021.
Uranium
We also own interests in a uranium business – Energy Resources of
Australia (ERA, 86.3%) – and a uranium project in Canada. ERA’s
processing operations ceased on 8 January 2021. A structured
programme of progressive rehabilitation will be completed by 2026.
35%
underlying EBITDA
margin (product
group operations)
$1.1bn
net cash generated
from operating
activities
(2019: 0.43)
(2019: $5.2bn)
(2019: 37%)
(2019: $1.4bn)
Energy & Minerals in figures
6
mining sites
7
processing plants
Operations in
6 countries
3 products
products from mining
by-products
8,000 employees
Annual Report 2020 | riotinto.com
55
Strategic Report
Strategic Report
Energy & Minerals
continued
2020 year end results
Iron ore pellets and concentrates production1 (million tonnes - Rio Tinto share)
Titanium dioxide slag production (000 tonnes - Rio Tinto share)
Borates production (000 tonnes - Rio Tinto share)
Uranium production (000 lbs - Rio Tinto share)2
Gross product sales (US$ millions)
Underlying EBITDA (US$ millions)
Underlying EBITDA margin (product group operations)
Underlying earnings (US$ millions)
Net cash generated from operating activities (US$ millions)
Capital expenditure (US$ millions)3
Free cash flow (US$ millions)
Return on capital employed4
2020
10.4
1,120
480
2,870
5,014
1,646
35%
577
1,053
(428)
604
12%
2019
10.5
1,206
520
2,640
5,150
1,762
37%
611
1,387
(551)
817
15%
Change
(1)%
(7)%
(8)%
9%
(3)%
(7)%
(6)%
(24)%
(22)%
(26)%
Iron Ore Company of Canada and the Simandou iron ore project in Guinea continue to be reported within Energy & Minerals.
1.
2. To allow production numbers to be compared on a like-for-like basis, we have excluded production from asset divestments completed in 2019 from our share of prior year production data. The financial
data above includes the results of divested assets up to the date of sale. In February 2020, our interest in Energy Resources of Australia (ERA) increased from 68.4% to 86.3% as a result of new ERA
shares issued to Rio Tinto under the Entitlement Offer and Underwriting Agreement to raise funds for the rehabilitation of the Ranger Project Area. Production is reported including this change from 1
March 2020.
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. Return on capital employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets).
In Canada, we made alternative housing available for victims of domestic
violence and we donated hand sanitiser produced at site. We donated
funds to offer food assistance and distanced learning support to families
in the communities near our Boron operations in California, US. In Guinea
and South Africa, we partnered with local sewing businesses to
manufacture cloth masks. In Madagascar, we transformed one of our
building into a fully equipped medical treatment centre to assist local
health authorities.
Financial performance
The business was flexible and resilient from an operational perspective,
while fully complying with significant government-imposed COVID-19
restrictions, notably in Canada, the US and South Africa. At Iron Ore
Company of Canada (IOC), we took advantage of stronger market
conditions in Asia in the first half of the year and switched our product
mix, prioritising concentrate over pellets, and then returned to higher
pellet production as European demand recovered.
Underlying EBITDA of $1.6 billion was 7% lower than 2019 with IOC
shipping 8% higher volumes and benefiting from stronger pricing, while
Minerals (titanium dioxide feedstocks and borates) were impacted by
COVID-19 restrictions and weaker market conditions.
We progressed our evaluation studies with funding approved for the
Jadar lithium-borate feasibility study and activity starting at the mine
area of the Simandou iron ore project.
We generated net cash of $1.1 billion from our operating activities, a 24%
decline on 2019, driven by the same trends as underlying EBITDA and
the timing of tax payments from higher profits at IOC in 2019, with the
final payments made in 2020. Free cash flow of $0.6 billion reflected tight
control of capital expenditure, down 22% on 2019.
Safety
Our E&M operations recorded progress across key safety metrics this
year. The all-injury frequency rate decreased to 0.41 (down from 0.43 in
2019), the result of continued safety coaching and emphasis on
leadership on the ground.
We were pleased to record, in 2020, another year with zero fatalities.
However, in October 2020, one of our Richards Bay Minerals employees,
in South Africa, sustained a permanent disabling injury. The employee’s
rehabilitation is progressing well and we will continue to support him and
his family. As we always do in such instances, we have shared the
analysis and lessons learned across the Group to help prevent such
incidents in the future.
Our ongoing commitment to reduce significant process safety incidents
resulted in five process safety incidents in 2020, down from eight in 2019.
Our QMM operations in Madagascar delivered one of the best safety
performances across the Group, with no recordable injuries and an
all-injury frequency rate of 0.00. Three other E&M sites, Jadar, Simandou
and Suzhou, also ended the year with no recordable injuries.
In 2021, we will continue to implement the safety maturity model across
our sites with a focus on leadership coaching and impactful leadership
interactions. Our programmes to eliminate fatalities and decrease risks
related to major hazards remain at the core of our 2021 strategy.
COVID-19 response
With operations across Australia, Asia, Europe, Africa and North America
we saw a significant spread of COVID-19 related impacts over the course
of the year.
We have put in place a range of COVID-19 specific measures across the
business to align with directives from governments and health authorities
in our jurisdictions. As a result, we have secured the confidence of our
local governments allowing us to continue to operate as essential
businesses. We mobilised significant resources across our business to
keep our employees safe and provide critical support to our communities
– ranging from food and water security to PPE and equipment
provisioning for health facilities.
56
Annual Report 2020 | riotinto.com
Energy & Minerals
Review of operations
Uranium
Our share of uranium production was 9% higher than 2019, primarily due
to the change in our shareholding (from 68.4% to 86.3%) following
completion of ERA’s entitlement offer in February 2020. ERA’s Ranger
operation continued to process existing stockpiles uninterrupted in 2020,
with production ceasing on 8 January 2021.
Iron Ore Company of Canada (IOC)
Production of pellets and concentrate at IOC was 1% lower than 2019
due to unplanned maintenance at the processing facilities in the third and
fourth quarters.
Minerals
Titanium dioxide slag production of 1.1 million tonnes was 7% lower than
2019 due to COVID-19 restrictions in Quebec and South Africa, lower
market demand and operational disruptions at Richards Bay Minerals
(RBM). With the COVID-19 resurgence in Quebec and South Africa, we
continue to operate our assets with extensive measures in place to
ensure the safety of our employees and communities.
Borates production was 8% lower than 2019 due to a period of lower
demand related to COVID-19 uncertainty resulting in an adjustment to
refinery operating rates. The extension of a planned shutdown impacted
fourth quarter production.
New projects and growth options
The $463 million Zulti South construction project at RBM remains on full
suspension. We will assess a restart after normalisation of operations.
At the 100%-owned Jadar lithium-borate project in western Serbia, we
progressed to the feasibility study stage, following Board approval of
almost $200 million, with the studies expected to be complete by the end
of 2021. If the investment is approved, construction would take
approximately four years. In December, we disclosed a maiden Ore
Reserve and updated Mineral Resource. The Ore Reserve is 16.6 million
tonnes at 1.81% Li2O and 13.4% B2O3.1 Jadar would be capable of
producing approximately 55 thousand tonnes of battery-grade lithium
carbonate, as well as 160 thousand tonnes of boric acid (B2O3 units) and
255 thousand tonnes of sodium sulphate as by-products per annum.2
Due to the different reporting system used in Serbia, Jadar also
submitted its “Elaborate of Resources and Reserves” to the Serbian
Mining Ministry in the fourth quarter of 2020. This document was
approved, and the respective Certificate was received on 6 January 2021.
The adoption of “Elaborate of Resources and Reserves” allowed the
project to then immediately submit the application for exploitation field
licence which provides tenure for the deposit. In accordance with Serbian
regulations, this permit is expected within the coming months.
At the Simandou iron ore project3 in Guinea, we expect to complete the
first phase of the technical optimisation work on the infrastructure
components in the first half of 2021. Activity in the mine area is starting
including roadworks. We are making progress with implementation of the
project’s Social and Environmental Impact Assessment.
Greenhouse gas emissions
In 2020, Energy & Minerals’ absolute greenhouse emissions were 3.6Mt
CO2e, a reduction of 0.1Mt CO2e from 2018 levels. The decrease in
emissions was driven by reductions in production and energy
consumption mainly due to the response to COVID-19.
Iron ore pellets and concentrate production
(million tonnes – Rio Tinto share)
Titanium dioxide slag production
(thousand tonnes – Rio Tinto share)
2016
2017
2018
2019
2020
10.710.7
11.211.2
9.09.0
10.510.5
10.4
2016
2017
2018
2019
2020
1,048
1,048
1,315
1,315
1,116
1,116
1,206
1,206
1,120
1. This Ore Reserve estimate was set out in a release to the ASX dated 10 December 2020 “Rio Tinto declares maiden Ore Reserve at Jadar” (ASX release). The Competent Person responsible for the
information in the ASX release that relates to Ore Reserves is Mr Allan Earl who is a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM). Mr Earl’s assessment is supported from a
metallurgical perspective by Mr Gary Davis who is a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM). Rio Tinto confirms that it is not aware of any new information or data
that materially affects the information included in the ASX release, that all material assumptions and technical parameters underpinning the estimates in the ASX release continue to apply and have
not materially changed, and that the form and context in which the Competent Persons’ findings are presented have not been materially modified.
2. These production targets were previously reported in the ASX release on 10 December 2020. All material assumptions underpinning the production targets continue to apply and have not materially
changed.
3. 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.
Annual Report 2020 | riotinto.com
57
Strategic Report Strategic Report
Innovation
The innovation we brought to market this year included everything from
creating products from waste to site teams manufacturing hand sanitiser and
building COVID-19-resistant, hands-free door openers. While some of these
initiatives were small, they are nevertheless a clear demonstration of the
ingenuity and pioneering spirit for which our company is known.
An employee operating a drone in the loadout area at our Iron Ore Company
of Canada Operations in Labrador City, Canada.
Working safer and smarter
Technology played an essential role in helping us keep our operations
running, smoothly and safely, during the COVID-19 pandemic. For
example, we partnered with a data analytics specialist and used artificial
intelligence (AI) to help us anticipate emerging COVID-19 risks across
geographies so we could adjust resources and controls – such as office
access – in higher-risk regions.
Our iron ore business in the Pilbara, Western Australia, introduced
antibody testing to supplement screening tests at domestic airports for
our fly-in, fly-out workforce, enabling our business to continue operating
while minimising the risk of COVID-19 transmission.
We increased our use of drones and mine pit cameras and introduced
video headsets, so we could continue to conduct visual inspections of
tailings facilities and equipment while complying with travel restrictions
and physical distancing requirements. At the Oyu Tolgoi underground
project, we used Vuzix smart glasses – based on augmented reality –
letting technical experts from all over the world work with local teams.
We also continued to innovate as part of our broader health and safety
programme: for example, our Weipa bauxite team in Queensland,
Australia, designed a custom-made mechanical arm to open and close
tailings valves, reducing the risk of injuries.
Product innovation
This year we launched three new products by either extracting valuable
metals from waste – or by creating a new product from the waste itself.
All three reduced the amount of waste sent to landfills, created useful
products and helped customers meet their sustainability goals.
At our Boron operations in California, US, we engineered a way to extract
lithium – a critical mineral used in clean technologies – from waste rock.
In December, we commissioned a demonstration plant capable of
producing 10 metric tonnes per year of battery grade lithium-carbonate,
allowing us to assess the technical, economic and commercial feasibility
of progressing to a production scale plant.
In our Aluminium business, approximately 85% of the 400,000 tonnes
of waste (excluding bauxite residue) created by our Saguenay –
Lac-Saint-Jean operations is used to make new products. In 2020,
we partnered with leading sustainable construction materials
company Lafarge Canada to launch Alextra, a new product made from
treated spent pot lining used to produce cement. Lafarge Canada will
make around one million tonnes a year of cement using Alextra.
And we continue to improve our anhydrite fertiliser product, made from
aluminium process waste, via funding research by Université Laval and
Université du Québec à Chicoutimi, with the governments of Canada and
Quebec, providing data that helps farmers optimise anhydrite application.
We also partnered with Quebec’s Resolute Forest Products to explore the
use of anhydrite with by-products from their paper mills – which, when
combined, could become an even more efficient ‘super fertiliser’.
58
Annual Report 2020 | riotinto.com
Innovation
Also in 2020, we continued to digitise our commercial
activities to enhance our customer experience including:
– Completing the first end-to-end blockchain transaction
in Renminbi with the China Baowu Steel Group;
– Launching the ‘Rio Portside’ WeChat app enabling
customers to buy iron ore on their phones – a first for
the industry;
– Introducing a ‘Track-and-Trace’ tool, enabling
Aluminium customers to track their cargo in real time.
Smart partnerships
In 2020 our ELYSIS partnership completed the
construction of the Research & Development Centre
to scale up breakthrough technology that eliminates
all direct greenhouse gases from the aluminium
smelting process.
Our partnership to develop Australia’s first nationally
recognised vocational qualification in automation with
South Metropolitan TAFE and the Western Australian
government was globally recognised, winning a Gold
Award in the “Partnership with Industry” category at the
World Federation of Colleges and Polytechnics 2020
Awards of Excellence.
In 2020, we also formed new partnerships – and extended
existing ones – to explore ways to reduce emissions
across the steel value chain. This included:
– Committing $10 million to advance our climate
partnership, announced in 2019, with China Baowu
Steel Group and Tsinghua University. This will fund the
joint establishment of a Low Carbon Raw Materials
Preparation Research and Development Centre
– Committing $4.5 million to support research projects
at the Tsinghua-Rio Tinto Joint Research Centre for
Resources, Energy and Sustainable Development over
the next five years
– Signing a Memorandum of Understanding with
Nippon Steel Corporation to jointly explore, develop
and demonstrate technologies to transition to a
low-carbon emission steel value chain.
This year marked our third year as the industry partner of
the Foundation for Australia-Japan Studies, a not-for-profit
organisation that encourages collaboration between
academic institutions, government and industry in
Australia and Japan. Since 2018, we have funded ten
research projects ranging from low-carbon desalination
technology to robotics.
And through our Pioneer Portal, which crowd-sources
innovation from outside the company, we received more
than 370 submissions from entrepreneurs, start-ups and
businesses, helping us source new ideas to address
business challenges. These range from designing robots
to minimising risks associated with cleaning large storage
tanks to finding ways to reuse rail sleepers.
Driving efficiency
We continued to use machine learning and predictive
analytics to increase productivity at our operations as well
as support our exploration efforts globally.
At Gudai-Darri (Koodaideri) we are shaping new ways of
working – some never seen in our business or industry.
Set to be one of the world’s most automated mines,
Gudai-Darri’s autonomous fleet will include the world’s
first autonomous water carts, to be launched in 2021.
Delivered through a partnership with equipment
manufacturer Caterpillar, the water carts will join our
autonomous heavy mobile equipment fleet including haul
trucks and autonomous drills.
We also piloted two autonomous electric drills at the Iron
Ore Company of Canada (IOC). Among the first of their
kind, the trial showed the system delivered increased
safety and productivity benefits compared with standard
rigs. By allowing a single operator to monitor multiple
drills from IOC’s Integrated Operations Centre in Labrador
City, drilling can continue safely in conditions unfit for
teams on the ground, such as blizzards, freezing
temperatures and electrical storms.
2020 marked one year since we established our
Operations Centre in Brisbane, which now provides an
end-to-end view of our Weipa and Gove bauxite mines.
Among other benefits, the Centre has helped us better
plan bauxite grades for our local refineries, optimise
shipping schedules from the mines and deliver savings
through lower processing costs.
Predicta, our data science and advanced analytics service,
combines specialist engineering knowledge with data
science tools and processes to help prevent critical asset
failure. Predicta enables consistent equipment
performance, minimises down time and reduces
maintenance costs. For example, at our Pilbara iron ore
operations in Western Australia, Predicta helped our ore
crushers reduce lost production time by 94%. We have
deployed Predicta at 19 operating sites, and we plan to
expand it to more in the future.
At our Pilbara iron ore operations, we implemented a
predictive model to inform ore blending strategies and
help minimise blockages and unscheduled downtime at
our processing plants. A pilot deployed at our Hope
Downs 1 mine in 2019 confirmed the model helped
reduce downtime in the plant by 40%. We have rolled out
models at a further five Pilbara mines, and we continue to
improve the accuracy of those deployed.
Annual Report 2020 | riotinto.com
59
Strategic Report Strategic Report
Strategic Report
Commercial
Our Commercial group encompasses our global sales and marketing, procurement,
and marine and logistics operations. By harnessing the skills, knowledge and insights
we acquire from everything we buy, sell and move around the world, we focus on
deepening customer and market insights, improving connections and accelerating
decisions between our markets and assets and partnering with customers and suppliers
to generate additional value.
Our fleet of 230 contracted and owned ships transport millions of tonnes of product across multiple continents.
In 2020, while trade flows were disrupted due to COVID-19 restrictions,
we continued to fulfil our customer and supplier orders and ensured our
operations had the materials they needed to continue operating safely.
– We announced a partnership with AB InBev, the world’s largest
brewer, to produce beverage cans made from low-carbon aluminium
that meets industry-leading sustainability standards.
This year, we continued to expand our commercial activities into new
areas to meet customer needs and maximise the value of our physical
flows. In Iron Ore, for example, we grew our portside sales presence in
China to nine ports, adding more than 80 new customers to our business.
In Aluminium, we established bonded warehouses for alumina in
Qingdao, Lianyungang, and Bayuquan in China to enable just-in-time
deliveries, greater flexibility through inventory management, and access
to new customers. In addition, by providing strong ‘virtual’ technical and
customer support, we were able to successfully deliver bauxite to a new
customer facing COVID-19-related supply disruptions.
We also used the challenges presented by COVID-19 – such as the inability
to exchange physical documentation – as a catalyst for us to expand digital
interfaces with customers and suppliers. For example, we completed the
industry’s first end-to-end blockchain transaction in Renminbi, with the
China Baowu Steel Group. We will continue to pilot and adopt new digital
tools to improve our customers’ and suppliers’ experience.
This year, we also progressed a range of partnerships and programmes
aligned with our product stewardship strategy and our customers’ growing
demand for responsibly produced materials. Key achievements included:
– Our Kennecott and Oyu Tolgoi operations were the first in the world to
be awarded the Copper Mark – the industry’s independent assurance
programme – verifying our copper is responsibly produced.
60
Annual Report 2020 | riotinto.com
– We are working with Shawinigan Aluminium Inc to provide our
aluminium customers in Canada and the US with high-quality alloys
made with recycled content from 2021.
– We began trialling the production of small quantities of high-performance
aluminium-scandium master alloys, using scandium oxide recovered
from waste created from the titanium dioxide production process.
Safety
In 2020, we continued to prioritise the safety, health and wellbeing of our
employees, contractors and stakeholders, with an increased focus on
mental wellbeing.
COVID-19 added an additional layer to the diverse range of risks we face
across our global sales and marketing, procurement and marine and logistics
activities. For example, to manage the risks to seafarers from restrictions on
crew changeovers, we continue to work with the industry, our shipowner
partners and regulators to facilitate crew changes and protect crew welfare.
In addition, our primary focus has been on maintaining critical risk
management fatality prevention programmes across areas of greatest
exposure – primarily marine and logistics, and procurement – while
implementing mental and physical wellbeing initiatives to help employees
balance work and personal priorities. In 2020, we had zero fatalities and a
0.11 all-injury frequency rate. In 2021, we intend to continue to make
mental health and wellbeing a central part of our employee initiatives.
Commercial
Market insight and outlook
The global economy suffered the largest recession in
decades with COVID-19 restrictions impacting markets,
resulting in global GDP falling by 3.9% in 2020. As we
begin 2021, there is evidence of a new investment cycle
amid accommodative monetary policy and extensive
deployment of fiscal policy around the world. However,
ongoing efforts to contain COVID-19 remain a headwind,
and geopolitical tensions present risks to the outlook.
China was the only major economy to record positive GDP
growth this year, logging growth of 2.3%. The growth was
commodity intensive, following the government’s rapid
response and stimulus that accelerated infrastructure
projects and encouraged construction. While continued
positive momentum is expected in 2021, China’s recovery
is transitioning to a more broad-based upswing in
consumption and private sector investment. In the longer
term, the trend of income growth in emerging markets,
including those in ASEAN countries and India, will continue
to drive global commodity demand. In China, strong
commodity demand will be increasingly driven by the
government’s urban agglomeration and decarbonisation
targets, as well as a drive for self-sufficiency, which will
continue to grow the manufacturing sector.
Iron ore
The COVID-19 pandemic had a disparate impact on iron
ore demand in 2020: solid growth in China’s imports more
than offset the contractions in other regions. Scrap
collection and availability were significantly disrupted by
the pandemic, further supporting iron ore demand at a
time when weather events constrained supply from the
major producing regions. As a result, the monthly average
Platts index for 62% iron fines converted to an FOB basis
rose 19% in 2020. With the exception of products sold at
ports in China, all of our Pilbara products are priced with
reference to the 62% index.
Global steel production contracted by 1.2% year-on-year
in 2020, as China lifted its steel production output to a
record 1.05 billion tonnes, which compensated for the 9%
contraction in the rest of the world. Pandemic-related
capacity and production cuts in Europe, Japan and the US
brought steel output down by 12-17% compared with
2019. India, the world’s second largest steel producer,
recorded a 11% year-on-year contraction in 2020.
Combined crude steel production in the world, ex-China,
recovered to 2019 levels for the first time in October 2020
and grew year-on-year during Q4 2020.
Weather events in Brazil and Australia during the first half of
2020 curtailed seaborne iron ore supply, but the cumulative
shipments of the major producers increased by 2 % (~25Mt)
over the year. Meanwhile, China’s domestic iron ore supply
expanded by ~20Mt year-on-year to ~290Mt and helped
meet record demand in 2020, as elevated iron ore prices
incentivised some previously idled small-scale mines to
restart operations during the second half of the year.
Reflecting the demand disparity between domestic and
export markets, China’s net finished steel exports also
contracted by 36% year-on-year to 33Mt in 2020.
Due to robust demand and global supply constraints,
the market for iron ore concentrate and pellets was
strong throughout the year. This is expected to continue
into 2021 as more steel producers requiring high-grade,
low impurity pellets increase production and global supply
constraints persist.
Aluminium
Aluminium primary demand declined by ~3.0% in 2020,
following a fall of ~1.0% in 2019. COVID-19 severely
impacted consumption this year, but with notable regional
differences in recovery rates: gradual in the developed
world with China experiencing a strong V-shaped recovery.
Demand in the transport sector has been especially weak
in 2020, but it has been robust in the packaging sector. We
expect overall demand to rebound in 2021, but ongoing
COVID-19 restrictions and political risks remain.
The alumina market remained in moderate surplus, and
low prices have resulted in a high level of idled capacity in
inland China.
China continues to drive demand in the global seaborne
bauxite market as result of stricter environmental measures
and the depletion of domestic bauxite. Chinese bauxite
imports rose by ~11% to 112Mt in 2020 on the back of
increased imports from Guinea, Australia and Indonesia.
Copper & Diamonds
Copper prices fell to a low of 209c/lb in March 2020 as
COVID-19 severely impacted demand. The price rebound
was led by recovering Chinese demand and supply tightness
due to reduced scrap availability and mined supply
disruptions. Chinese inventories subsequently reached their
lowest level in over eight years and LME stocks fell to their
lowest in 15 years. Prices reached a seven-year high of
361c/lb in December 2020, more than 70% higher than the
low earlier in the year, as net-long investor positions (on
COMEX and LME) reached the equivalent of 2Mt. However,
the rate of recovery in growth is slowing in many economies
and the rise of renewed lockdowns threatens the recovery.
Policy direction in the medium term indicates a strong
copper-intensive outlook with the continued rise of electric
vehicles, potential green stimulus packages around the
world and China’s push for carbon neutrality by 2060.
In diamonds, a heavy decline in spending on jewellery
impacted underlying demand, while lockdowns in India’s
manufacturing centres restricted the volume of rough
diamonds purchased from miners.
Energy & Minerals
Underlying demand for titanium dioxide pigment fell
sharply in the second quarter of 2020 leading to a
deterioration of feedstock demand by the middle of the
year. Leading indicators suggest a recovery in 2021.
Structural factors remain favourable for high-grade TiO2
feedstock and zircon supply.
Medium- to long-term demand for borates is tied to
increases in wealth and living standards but is prone to
short-term shocks, as witnessed in 2020. A decline in
demand impacted all regions globally and coincided with a
reduction of supply volumes. A moderate recovery is
expected in 2021.
Annual Report 2020 | riotinto.com
61
Strategic Report Strategic Report
Sustainability
Sustainability came into sharp focus in 2020 in a variety of ways.
When COVID-19 became a global pandemic, we undertook special measures to protect the safety and
wellbeing of employees, contractors and communities, and were able to keep people safe and healthy while
keeping our operations running. This was also important to our shareholders: as restrictions on movement
were implemented, host communities and governments relied on the wages, taxes and royalties we paid in
2020 (over $12 billion across more than 27 countries). Despite the radical changes required, especially at
our operations, we are proud to have delivered a second straight year with zero fatalities.
However, 2020 was overshadowed by the destruction of two rock shelters in the Juukan Gorge. It should
not have happened, and it represented a breach of our values. The steps we have taken – to ensure that
the destruction of a site of such exceptional cultural significance never happens again – are summarised
on pages 10-11. We are determined to learn the lessons from Juukan Gorge, rebuild trust in our company
and to catalyse broader changes as we seek to re-establish our leadership in communities and social
performance.
We know we must work hard to regain the trust of our stakeholders, and today, more than ever,
we acknowledge our responsibility to continue to work in a way that delivers real, lasting benefits to
our host communities and countries. We know we must care for our employees, respect and safeguard
the environment when we explore, build and operate and repurpose or rehabilitate the land when
our operations come to an end. We must also contribute to local and national economies by paying
competitive wages, treating our suppliers fairly, investing in our local communities and paying our
share of taxes.
62
Annual Report 2020 | riotinto.com
Sustainability
An employee and Traditional Owner at our
Weipa bauxite mine, Queensland, Australia.
Annual Report 2020 | riotinto.com
63
Strategic Report Strategic Report
Our sustainability
framework is
predicated on earning
the trust of our employees,
partners and society
Running a safe, responsible and
profitable business
This is the foundation of our approach.
Collaborating to enable long-term
benefits where we operate
We collaborate with others to build respectful relationships
and enable long-term benefits where we operate – working
with governments at all levels and community partners to
help make a difference in people’s lives.
Producing materials essential for human progress
while contributing to some of the greatest
challenges facing society
We aim to contribute to a more sustainable future – through
reducing our own global carbon footprint, addressing the UN
Sustainable Development Goals, forming smart, technology
– and value-chain – focused partnerships and producing
materials essential to a low-carbon economy.
64
Annual Report 2020 | riotinto.com
Sustainability
Our approach to the
United Nations’ Sustainable
Development Goals
Each of our
three pillars
contributes to
the United
Nations’ 17
Sustainable
Development
Goals
This year, we re-examined our approach to the
UN Sustainable Development Goals (SDGs) – in
conjunction with our purpose, business and sustainability
strategies and risks – to better understand how we can
work alongside governments, civil society and others to
pursue meaningful impact on development. We decided
to focus on the two goals – SDG 12 (responsible
consumption and production) and SDG 8 (decent work
and economic growth) – that we feel are most relevant to
operating our business responsibly.
SDG 12 relates to how we – as a custodian of natural and
mineral resources – mine, process and produce materials
and contribute to ethical global supply chains, including
trusted lifecycle assessments. This SDG builds on our
existing health, safety, environment and community
performance standards and our membership of
responsible production and product stewardship
programmes, including the Aluminium Stewardship
Initiative, Copper Mark, the International Council on
Mining and Metal’s Performance Expectations, the
Responsible Jewellery Council and the Mining Association
of Canada’s Towards Sustainable Mining.
SDG 8 speaks directly to our values and priorities,
including our commitments to creating a safe and
inclusive working environment, as well as promoting
education and training partnerships that support social
and economic development, including by helping to
develop skills for the future. We are committed to
supporting underrepresented groups; in particular, we
seek to ensure Traditional Owners and Indigenous
peoples have a stronger voice in the decisions that affect
their lands.
In our business, efforts to further these two ‘lead’ goals
are naturally supplemented by efforts to further several
other ‘supporting’ goals. These are also strongly aligned
with our sustainable development and business drivers
– climate action, water, gender diversity, health and
wellbeing, reduced inequalities, innovation and quality
education, and environment.
SDG 17 (partnerships for goals) reflects our approach to
sustainability and is fundamental to the way we run our
business. We work purposefully with technology partners,
local suppliers, governments, community groups, industry
leaders and NGOs at all stages of the mining lifecycle to
deliver real benefits to all our stakeholders.
Annual Report 2020 | riotinto.com
65
Strategic Report Strategic Report
Reporting What Matters
This year, we incorporated the majority of our sustainability reporting into our Annual Report and have added
content tools, such as a full ‘Sustainability Fact Book’, which has current and historical data on topics including
health, safety, environment, climate, communities, human rights, responsible sourcing and transparency. We are
supplementing these disclosures with additional information on our website.
As a member of the International Council on Mining and Metals (ICMM), we commit to reporting on our
sustainability performance against Global Reporting Initiative (GRI) standards (Core option). Based on extensive
internal and external stakeholder feedback on our sustainability performance, especially with regard to
communities, we adjusted our sustainability materiality assessment. We conducted a comprehensive assessment
in 2019 through structured meetings, surveys and interviews with a broad range of stakeholders around the world.
These included investors, customers, communities, civil society organisations, governments and Rio Tinto experts
and leaders.
s
r
e
d
l
o
h
e
k
a
t
s
r
u
o
o
t
e
c
n
a
t
r
o
p
m
I
Climate change
Communities
Response to
Juukan Gorge
Ethics & integrity
Tailings & structures
Health, safety
& wellbeing
Corporate behaviour
& culture
Governance
Water
Economic contribution
Transparency & disclosures
Biodiversity &
ecosystems
Closure
Human rights
Diversity
Emissions from operations
Business resilience
Importance to our business
*
According to GRI’s guidance, relevant topics that potentially merit inclusion in sustainability reporting are “those that can reasonably be
considered important for reflecting the organization’s economic, environmental, and social impacts, or influencing the decisions of
stakeholders.” Impact “refers to the effect an organization has on the economy, the environment, and/or society (positive or negative).” View
a full glossary of terms at riotinto.com.
66
Annual Report 2020 | riotinto.com
Sustainability
2020 performance against targets
Targets
To reach zero fatalities, and to eliminate workplace injuries and
catastrophic events
Performance
Zero fatalities at managed operations
All-injury frequency rate (AIFR) at 0.37 (target: 0.37), reduced by almost
12% from 2019 (0.42)
1.31 million critical risk management verifications
All businesses will identify at least one critical health hazard material to
their business and will demonstrate a year-on-year reduction of exposure
to that hazard.
Despite a focus on responding to COVID-19, the 12 assets identified by
the business demonstrated an 18% reduction in overall exposure to their
identified critical health risks. Overall, this has reduced the level of
exposure for 723 employees and contractors.
To reduce the rate of new occupational illnesses each year
27% decrease in the rate of new occupational illnesses since 2019
To reduce our absolute Scope 1 and 2 emissions by 15% and our
emissions intensity by 30% by 2030 (relative to our 2018 equity baseline)1
2020 Scope 1 and 2 emissions were 31.5Mt CO2e – a reduction of 1.1Mt
CO2e (3%) relative to our 2018 baseline. Our emissions intensity has
remained approximately level since 2018.
To disclose for all managed operations by 2023, their permitted surface
water allocation volumes, annual allocation usage and the estimated
surface water allocation catchment runoff from average annual rainfall
To achieve local water stewardship targets for selected sites by 2023
Despite the significant challenges faced at the assets and Group level
last year, the water stewardship targets have progressed well, and with
consistent attention we will deliver these as planned by 2023. For further
details on our water performance see pages 81-84.
To demonstrate local economic benefits from employment and
procurement of goods and services by reporting yearly against a locally
defined target
To capture and manage community complaints effectively and reduce
repeat and significant complaints each year
100% (21 out of 21 asset groupings#) have met or are ‘on track’(a)
to achieve their 2021 significant complaints target*
95% (20 out of 21 asset groupings#) have met or are ‘on track’(a)
to achieve their 2021 repeat complaints target*
71% (15 out of 21 asset groupings#) have met or are ‘on track’(b)
to achieve their 2021 local employment target*
81% (17 out of 21 asset groupings#) have met or are ‘on track’(b)
to achieve their 2021 local procurement target*
To improve diversity in our business by:
23% of our Executive Committee were women, down 2% from 2019
– Increasing women in senior leadership by 2% each year
26.1% of senior leadership2 were women, up 3.5% from 2019
– Aiming for 50% women in our graduate intake, with 30% from places
where we are developing new businesses
19% of our workforce were women, up 0.6% from 2019
60% of our graduate intake were women, up 6.1% from 2019
33.3% of Board roles were held by women, up 22.2% from 2019
26% of our graduate intake was from places where we are developing
new businesses3, up 7% from 2019
Improving our employee engagement and satisfaction
One-point increase in our employee net promoter score (eNPS4) from 2019
One-point increase in employee satisfaction score (eSAT5) from 2019
One-point increase in our recommend score from 2019
1.
In 2020, the Rio Tinto Board approved new climate targets to replace the 24% reduction in total greenhouse gas emissions intensity between 2008-20 (managed basis). In 2020, we achieved a 27.4%
decrease in greenhouse gas emissions intensity since 2008 (managed basis).
2. We define senior leadership as general managers, Group advisers and chief advisers as well as employees in leadership roles who report directly to Executive Committee members.
3.
4. eNPS is a measure of “how likely an employee is to recommend Rio Tinto to a friend or colleague”. It is calculated by subtracting the proportion rating 0-6 from the proportion rating 9 and 10
Identifying with a nationality is not mandatory. More than 48% of our graduates have not formally reported a nationality.
(on a 0-10 scale).
5. eSat is a measure of “how happy an employee is to work at Rio Tinto”. It is calculated by averaging the responses on the 1-7 scale and expressing this out of 100.
#
*
Refer to the Sustainability Fact Book on riotinto.com for details on the asset groupings.
Due to COVID-19-related disruptions, the global target requirements have been extended to 2021 and further input has been requested on this extension. The 2020 actual performance will be considered as an
interim report with the final year of the target period concluding in 2021.
(a) ‘On track’ means within one complaint of 2021 target and not on track is greater than one complaint off the 2021 target. A complaint is a communication indicating a community member has suffered
some form of offence or detrimental impact from our business. It is significant if the actual consequence is major or catastrophic or the potential consequence is high. It is a repeat complaint if
someone else complains about the same underlying issue, or the same person complains again.
(b) ‘On track’ means 80% or greater progress towards 2021 targets.
Annual Report 2020 | riotinto.com
67
Strategic Report Strategic Report
Sustainability
continued
Health, safety and wellbeing
Safety is our first value. It is how we start every shift and every meeting.
We believe that all injuries can be prevented. We continue to make the
safety of our colleagues and communities our first priority.
In 2020, for the second year running, we achieved zero fatalities. Over the
past ten years, both the severity of injuries and our all-injury frequency
rate (AIFR) have fallen significantly, from 0.69 in 2010 to 0.37 in 2020.
Compared to 2019, our AIFR has improved by almost 12%.
While we are pleased by this performance, there is no question we can
and must do better. This year, two employees suffered permanent
disabling injuries: an employee lost his hand at Richards Bay Minerals,
our titanium dioxide operation in South Africa, and a contractor was
permanently injured at the Diavik Diamond Mine in Canada. We are
supporting both colleagues and their families, and are committed to learn
from and prevent these tragic incidents from recurring.
Our aluminium business is progressing its five-year plan to reduce health
risk exposures by improving monitoring and implementing engineering
controls, such as ventilation. We expanded the use of technology
to support our fatigue management programmes and eliminate
fatigue-related incidents. We also expanded our global health team
to ensure we have the right support for occupational health and industrial
hygiene matters.
We have also embarked on a systematic programme of minimising –
with the goal of ultimately eliminating – diesel particulates from our
underground mines. We are doing so by measuring diesel exhaust
emissions and installing and upgrading diesel particulate filters on our
existing diesel equipment fleets. We are in the process of investigating
the transition to either battery electric or higher-tiered, cleaner engines
where mobile battery electric equipment is not yet available.
Wellbeing has also been a key focus throughout 2020, particularly with
the onset of the global COVID-19 pandemic. Lives were upended, with
families separated due to border closures and extensive quarantines,
parents needed to balance working from home with raising their children,
and all of us were required to adjust. In response, we introduced more
flexible work schedules, virtual care packs and ensured greater access to
health and medical resources.
We have worked hard over many years on mental health and our strong
foundation enabled us to respond quickly to the crisis. Importantly, our
People Survey results showed employees felt supported during this
challenging time.
Safety and health performance1 2016-20
Fatalities at managed operations
All-injury frequency rate (per 200,000 hours worked)
Number of lost time injuries
Lost time injury frequency rate (per 200,000 hours worked)
Safety maturity model (SMM) score
New cases of occupational illness (per 10,000 employees)
Number of employees3
2020
0
0.37
189
0.22
5.4
15.7
2019
0
0.42
2282
0.27
4.5
21.52
2018
3
0.44
2262
0.27
-
29.6
2017
1
0.42
199
0.25
-
24.6
2016
1
0.44
206
0.26
-
47.3
47,500
46,000
47,500
47,000
51,000
1. Data relating to fatalities, all-injury frequency rate and lost time injury frequency rate includes all employee and contractor exposure hours and incidents at managed operations. New cases of
occupational illness are reported for employees only.
2. Numbers adjusted from previous years to ensure comparability over time.
3.
Includes our share of joint ventures and associates (rounded) and excludes contractors.
Contributing causes for newly reported illness cases (2020)
Noise-induced hearing loss
Musculoskeletal disorders
Mental stress
Others
2020
21(32%)
30(46%)
1(2%)
13(20%)
68
Annual Report 2020 | riotinto.com
Sustainability
COVID-19
In 2020, COVID-19 emerged as a global pandemic. We quickly assessed the
challenges for our company, communities, contractors and employees and
instituted controls to keep people safe and healthy from the virus and allow our
operations to run safely and smoothly.
The protocols we put in place include those in line with government
guidance, directives and best practice advice from leading medical
experts and international health organisations. Our measures included:
travel restrictions, social distancing, increased personal hygiene, and
greater support for employees in areas such as mental health, managing
fatigue and adjusting to working from home as well.
Every mine, operation and office adopted a set of screening measures,
such as health questionnaires and temperature screening. In addition,
for most locations, we were able to implement virus screening.
This work has been closely co-ordinated with local governments.
For example, our Pilbara iron ore business introduced antibody screening
to supplement our rapid screening measures at domestic airports in
Western Australia for our fly-in, fly-out (FIFO) workforce.
We also partnered with a data analytics specialist and used artificial
intelligence (AI) to help us anticipate emerging local COVID-19
geographic risks so we could adjust resources and controls in those
regions. For example, this tool helped us identify the best time to
strengthen or relax control measures, such as when employees could
safely return to offices in different jurisdictions.
We continue to ensure affected employees have the medical support
they need when they, or their families, are affected by the virus. We know
it is a challenging time for many people and we are closely tracking the
wellbeing and fatigue of our employees and offering support as needed.
In addition to our employee assistance programme (EAP), for employees
and their families, this support includes the following:
– Adapting our leave and pay benefits, such as offering our vulnerable
employees special leave
– Providing flexible work arrangements
– Developing ‘virtual care packs’ with key information on
resources available
– Providing telemedicine resources in several locations
An example of operating safely during COVID-19: Iron Ore, Pilbara, Western Australia
Our Iron Ore business in Western
Australia employs 13,600 people.
The majority of our operations are based
in the Pilbara region, more than 1,000
kilometres from Perth, and include a
significant fly-in, fly-out (FIFO) workforce.
Minimising the risk of COVID-19
transmission among our FIFO employees
and contractors was essential to continue
operating safely, and in compliance with
government directives.
From March to August, we implemented
longer rosters (two-week-on, two-week-
off) for thousands of people to reduce the
risk of spreading the virus by reducing the
frequency of travel in and out of the
Pilbara. To service these changes, we
secured additional charter flights,
ensuring compliance with physical
distancing guidelines by spacing people
appropriately on planes and in airports. To
comply with travel restrictions, we also
relocated more than 700 employees with
specialist skills to Perth so they could
continue in their roles.
We introduced a five-layer screening
process – conducted by trained medical
staff – at the Perth, Busselton, Geraldton
and Albany airports for FIFO employees
and contractors returning to work.
This included:
– A health questionnaire prior to
travelling to screen for potential
exposure to COVID-19, consistent
with government restrictions on
intra-state travel
– A face-to-face assessment with a
nurse on arrival at the airport
– Temperature checks via an electronic
thermometer
– Antibody testing, via a small blood
sample, to check for virus-related
antibodies. If antibodies were
detected, the employee was tested for
COVID-19 via a nasopharyngeal swab
(Perth airport) or referred to an
approved COVID-19 testing clinic
(regional airports). They were also
required to self-isolate as a precaution
– An access band allowing employees
who were cleared by the screening
process to board their flight
We also changed the way we worked on
the ground. For example, we
implemented stronger controls on access
to our sites and used technology – such
as drones and mine pit cameras – to
conduct monitoring activities, reducing
the need to visit site. Our health and
safety teams put a range of safeguards in
place: rooms were measured and marked
out to indicate maximum capacity,
crosses marked on floors to indicate
physical distancing guidelines, and we
increased the frequency of cleaning
high-touch areas.
We also supported medically vulnerable
employees, ensuring appropriate medical
assessments were undertaken. We also
made necessary work arrangements to
protect their health.
To support our FIFO teams – many of
whom were spending more time away
from their families – we provided an
on-call service so they could return home
for health or family emergencies.
In addition, we offered a hotline providing
employees with health assessments by
medical advisers on fitness for work,
including fatigue management. We also
provided mental health support through
our employee assistance programme.
Annual Report 2020 | riotinto.com
69
Strategic Report Strategic Report
Sustainability
continued
Health and wellbeing
Domestic violence programme
We want our employees to feel safe at work and at home. We are proud
of our industry-leading programme to help support victims of domestic
violence. In 2020, we extended this programme to more than 98% of our
employees globally, with plans to extend it across the entire Group.
Through the programme, we provide special leave, emergency
accommodation, financial support, and training to equip leaders and
employees to step in and help – safely and effectively. We also provided
additional support to community partners during the pandemic. As part
of an effort to make our communities across Canada safer, we donated
C$360,000 to 12 women’s shelters and local organisations providing a
variety of support for women and families impacted by domestic violence.
Mental health and wellbeing
Mental health continues to emerge as a pressing issue, not only for
Rio Tinto but for the world at large – a situation exacerbated by
COVID-19. For more than 20 years, we have provided peer support
programmes, with specially trained employees playing a pivotal role in
supporting their colleagues at local level. Over the past five years, we
have extended mental health training for leaders and employees,
including to raise awareness about psychosocial hazards so that they can
recognise a problem before it develops – and help.
In 2020, largely but not exclusively in response to the pandemic, we
further strengthened our focus on mental health. We introduced a
mental health framework that consolidates various policies, procedures
and programmes, making it easier for colleagues to provide support and
easier for employees to access it. We offer different kinds of support,
including our employee assistance programme (EAP), which includes
counselling by professional psychologists, telemedicine in some regions,
peer support programmes and online educational tools.
Occupational health
In 2020, we recorded fewer occupational health illnesses, and conducted
more than 65,000 health control verifications, a 12.6% increase over
2019. And, starting in early April, we conducted 193,000 COVID-19
control verifications to assess the efficacy of our health controls, such as
physical distancing and hygiene controls. COVID-19 protocols designed
to protect health workers placed restrictions on the ability to conduct
employee medical exams. We are looking at ways to address this, though
in much of the world, at the time of this writing, restrictions are back
in place.
Strengthening safety systems
Eliminating fatalities requires a strong safety culture coupled with
systems designed to mitigate risk and continually improve the safety of
our work. Our safety maturity model (SMM), introduced in 2019, provides
a roadmap for leaders to advance the foundations of safety without being
overly prescriptive. These foundations include leadership and
engagement, learning and improvement, risk management and work
planning and execution. Annually, we assess assets’ progress against
each of these elements.
In 2020, our assessment of SMM gave us valuable insights into
the effectiveness of safety leadership, key processes and controls.
The average score across our operational sites improved, with the most
significant improvement around site leadership and coaching.
We continue to focus on strengthening our safety culture, in part by
training our employees on best practices. In 2020, for example, we
embedded master coaches in each product group to build safety
leadership capabilities. This included conducting effective pre-start
meetings and providing engaging feedback in the field. By creating a
virtual programme, we ensured this coaching could continue despite
COVID-19 restrictions.
70
Annual Report 2020 | riotinto.com
Critical Risk Management (CRM) – a tool our operations use to verify
that fatality prevention controls are in place before starting each task –
continues to be fundamental to our business. Since introducing CRM
in 2015, our safety, fatality and potentially fatal incident (PFI)
performance has markedly improved. We also expanded CRM to include
COVID-19 critical controls, ranging from physical distancing measures to
travel arrangements. We also completed more than 1.3 million CRM
verifications, not including the 193,000 associated with COVID-19 critical
controls. To help us gauge the quality of verification checks, we track the
number of comments or evidence submitted with non-compliant
verifications. Analysis indicates more than 84% of the non-compliant
verifications completed by leaders had comments and supporting
evidence. We are now looking at ways to improve the quality of
verifications completed by frontline teams most exposed to critical risks.
Finally, we continue to report, investigate and learn from PFIs.
In 2020, we introduced the PFI rapid sharing and learning system,
which ensures lessons from PFIs are shared directly with all leaders –
approximately 3,500. Detailed learnings are also shared when each PFI
investigation is complete. In addition, the executive leader for each
business unit conducts a ‘deep dive’ on the incident to ensure the
underlying causes are well understood and the right follow-up measures
are identified and tracked – to completion – to prevent a future
occurrence.
Safety standards
We do everything we can to prevent catastrophic events, including those
involving tailings and water storage facilities, chemicals, underground
mining and process safety. We identify major hazard risks (low-probability,
high-consequence events) and manage them by verifying controls,
conducting external reviews and requiring compliance with standards and
procedures – such as our tailings and water storage facilities’ management
standard (for more information, please see the Tailings section).
Our standards (available on our website) and procedures provide a
consistent approach to managing major hazards across our managed
operations. We audit managed operations against our standards and
require our businesses to meet their health and safety performance
requirements and targets. In addition, we conducted major hazard
reviews with each product group.
We advanced our work around process safety with the introduction of
‘technology guardians’. These are senior technical professionals, based
either onsite or near our operations, responsible for assuring we have
strong risk-based controls to manage process changes and maintain
asset and process control integrity. We have completed competency
assessments for our technical support and are implementing detailed
training and coaching to address any gaps identified.
In 2020, we completed a comprehensive risk review for underground
hazards; in 2021 we will review and update our underground safety
standard and associated guidelines. This work is also guiding us as we
advance underground technology and improve the technical capability of
our operational leaders.
Also in 2020, we advanced our functional safety standard across the
Group, governing the safety controls for technology we use to minimise
risks such as obstacle detection and collision avoidance systems in
autonomous trucks. The standard includes product assurance by
suppliers, periodic testing and ongoing maintenance of these systems.
Sustainability
Tailings
We use our standard for the management of tailings and water
storage facilities at 108 tailings storage facilities (TSFs) at our
assets globally. There are a further 50 TSFs at non-managed sites.
In total, there are 65 active TSFs, 40 are inactive and 53 are
closed. Our full tailings disclosure is available on our website.
Our facilities are regulated, permitted and have been managed for
many years to comply with local laws, regulations, permits,
licences and other requirements. We have classified tailings
management as a risk in the Group risk register since 2010 and
have had a Group safety standard in place for tailings and water
storage facilities since 2015. Our assurance processes verify that
our managed facilities around the world operate in accordance
with this standard.
All of our operational TSFs have emergency response plans –
tested through training exercises – and follow strict business
resilience and communications protocols. There have been no
external wall failures at our TSFs for more than 20 years.
This year, we updated our Group safety standard for all tailings
and larger water storage facilities. In addition, we reviewed our
relevant standards against the requirements of the new global
industry standard on tailings management (GISTM), released in
August 2020, including how we classify consequences and how
and when we implement independent reviews. Our relevant
standards are well aligned with the GISTM.
The GISTM is the result of the Global Tailings Review, a
collaboration between the International Council on Mining and
Metals (ICMM), of which we are members, the United Nations
Environment Programme and the Principles for Responsible
Investment. The Review established an international standard for
tailings management aimed at preventing catastrophic failure and
enhancing the safety of mine tailings facilities around the world.
We believe the GISTM will ensure more consistency and rigour in
the way the mining industry manages tailings.
We continued to play an active role in the ICMM tailings working
group this year, which focused on the development of the GISTM
conformance protocol as well as a tailings guidance document
designed to help support industry-wide adoption. We have
participated in the tailings working group since 2016, helping
inform the ICMM position statement – including the six elements
of TSF governance, which are reflected in our own standard.
In 2020, we completed the technical risk review programme at
each of our managed and non-managed TSFs. The review
programme, which began in 2019, found that while our TSFs are
generally well managed and there are no immediate dam safety
threats, we have opportunities to improve. Accordingly, we have
implemented improvement plans for water storage facilities and
TSFs and are working towards completing outstanding actions.
While global COVID-19 pandemic restrictions delayed a few items,
we plan to complete all outstanding actions as quickly as possible,
while adhering to restrictions in each jurisdiction.
This year we also:
Ensured all operations with TSFs and ‘high-consequence’ water dams have
appointed a Nominated Manager and Qualified Site Representative. Nominated
Managers are accountable for their site’s conformance to our management of
the tailings and water storage facilities standard; Qualified Site Representatives
are accountable for the day-to-day operations and monitoring of
tailings facilities
Established a new role – the Responsible Dam Engineer – to provide
technical support to the Nominated Manager to manage tailings and water
storage facility risks
Actively engaged with industry forums such as the Canadian Dam Association
and the Minerals Council of Australia tailings working groups
Committed A$2 million over five years to the Future Tails partnership, a
collaboration between Rio Tinto, BHP and the University of Western Australia,
which includes training programmes to build talent and capability; publications
that summarise state-of-the-art tailings analysis, design, operation and
management; and research collaborations with industry to drive
further innovation
Annual Report 2020 | riotinto.com
71
Strategic Report Strategic Report
Sustainability
continued
Communities
To us, communities aren’t just places. They are the people on whom our
operations can have an impact, and with whom we strive to build long-
term partnerships: Indigenous peoples, landowners, suppliers, neighbours
and our colleagues.
This year, at Juukan Gorge, we did not fulfil our own values; we did not
measure up to our own standards. The destruction of the rock shelters
should not have happened, and we are absolutely committed to listening,
learning and changing. For more about Juukan Gorge, please refer to
pages 10-11.
Strengthening communities and social performance
To help transform our relationship with host communities around the
world, including Traditional Owners in Australia, we have taken a number
of actions:
We established a Communities and Social Performance (CSP) Area of
Expertise (AoE), which will deliver a more rigorous assurance framework
across our operations and elevate communities risk processes to align
with our robust health and safety systems. The CSP AoE reports to our
Group Executive, Safety, Technical and Projects, who is a member of our
Executive Committee. While we already conduct social risk analyses at
our sites – informed by day-to-day engagement with, and feedback from,
communities as well as social and economic impact assessments – the
CSP AoE will further strengthen this process.
We also changed the way we structure our CSP teams globally so that
product group and operational leaders have direct responsibility for
managing relationships with their host communities, including
Indigenous peoples.
We are currently rolling out the first phase of a new integrated heritage
management process (IHMP), at our Pilbara iron ore operations and will
subsequently implement the lessons across our business globally, taking
into account local circumstances.
In the Pilbara, the IHMP involves a systematic review of all the heritage
sites that we manage, starting with those that may be impacted by our
activities over the next two years. So far, we have reviewed over 1,000
sites and ranked each one by: (i) cultural significance (which is informed
through consultation with the Traditional Owners of the land on which we
operate); (ii) our re-confirmation that we have recently consulted with
Traditional Owners for potential impacts; and (iii) the materiality of the
impact. Where there is any doubt, we have reclassified the relevant sites
from ‘cleared’ for mining back to ‘protected’ as a precautionary measure,
pending further consultation with the Traditional Owners.
We also progressed our partnerships with First Nations in Canada.
In British Columbia, we signed a Relationship Agreement, called the
‘New Day Agreement’ with the Cheslatta Carrier Nation. The Agreement
formalises commitments relating to training (including collaboration on
the Cheslatta Nation remote industry training centre), land, employment
and business opportunities and environmental stewardship of the
Nechako Reservoir. In Quebec, the Iron Ore Company of Canada signed a
Reconciliation and Collaboration Agreement with the Uashat mak
Mani-utenam and Matimekush-Lac John communities. We are also
progressing a further four agreements with other First Nations
communities in Quebec, Saskatchewan and British Columbia.
We conduct Social Impact Assessments (SIAs) – aligned with international
standards, including the ICMM Mining Principles, International Finance
Corporation Performance Standards and UN Guiding Principles on
Business and Human Rights – to help guide new projects as well as
72
Annual Report 2020 | riotinto.com
inform closure planning. This year, following the events at Juukan Gorge,
we reviewed our social risk analyses across our managed assets to
ensure we had a thorough understanding of our potential impacts at
each, and that suitable mitigation measures were in place.
At our Jadar project in Serbia, we are currently undertaking an SIA as part
of the feasibility study to complement the Environmental Impact
Assessment and ensure that impacts are appropriately identified and
managed. We anticipate this study will be completed by the end of 2021,
and will be informed by detailed community consultation and
participatory methods for identifying impacts and mitigation.
In 2021, we will also review our CSP standard – which governs how we
identify and manage social, economic, environmental, cultural and
human rights impacts from exploration to closure – and ensure that all
operational leaders understand our commitments.
An update on Resolution Copper, Arizona, US
At our Resolution Copper project in Arizona, in the US, we recognise the
historical connection Native American Tribes have with the land involved
at or near the proposed mine. We acknowledge these connections have
endured over centuries.
One lesson reinforced by the events at Juukan Gorge is that meaningful,
transparent engagement with all community members across the entire
lifecycle of an asset is critical to shared success. Resolution Copper
continues to be committed to ongoing engagement with Native American
Tribes and is working to seek consent before any decision on
development of the project, consistent with the International Council on
Mining and Metals (ICMM) Statement on Indigenous Peoples and Mining.
The permitting process at Resolution Copper started in 2013, under the
Obama Administration. Since that time, the US Forest Service (USFS) has led
a rigorous review of the project, including public consultations and extensive
engagement with a broad range of stakeholders. This dialogue has led to
changes in the project design and the implementation of other measures to
address concerns of the local community and Native American Tribes.
Supporting our communities
Donating A$1.25 million over five years to
the Royal Flying Doctor Service in Australia
(Queensland section) to improve emergency
and remotely delivered health care services
across the state
Donating 25,000 masks and other
equipment worth approximately C$100,000
to the local health authority and social
services in Saguenay – Lac-Saint-Jean,
in Quebec, Canada
Sustainability
We also reduced the area identified for an exchange of public and
private lands – necessary for the project to proceed – to protect areas
of cultural significance, and are required to set aside more than 324
hectares to permanently protect the culturally significant Apache Leap
area. We created the Emory Oak Restoration & Conservation Program,
which recognises this species’ importance to the Western Apache.
We expect to invest in a range of important initiatives during the mine’s
life, including cultural heritage, education, youth programme support,
economic development, environmental mitigation, and recreation.
On 15 January 2021, after more than seven years of public and 11 years
of tribal consultation, the USFS published its Final Environmental Impact
Statement (FEIS) for Resolution Copper. Decisions on whether to invest
fully in developing the project remain subject to further permitting
processes and a feasibility study conducted over the next several years.
An update on the Panguna mine, Bougainville,
Papua New Guinea (PNG)
The civil war in Bougainville led to the complete withdrawal of
Bougainville Copper Limited (BCL), a subsidiary of Rio Tinto, in 1990,
from the Panguna mine site it operated. Since that time, no Rio Tinto
personnel have visited the site. In June 2016, we transferred our full
interest in BCL for no consideration to the PNG government and the
Autonomous Bougainville Government (ABG), providing them with equal
shares in BCL.
In September 2020, the Human Rights Law Centre (HRLC) filed a
complaint on behalf of 156 Bougainville residents with the Australian
National Contact Point (AusNCP) against Rio Tinto regarding the
Panguna site. The complaint alleges we are accountable for significant
breaches of the OECD Guidelines for Multinational Enterprises (the OECD
Guidelines) relating to past and ongoing environmental and human rights
impacts arising from the Panguna mine.
In response, we have entered into discussions with the HRLC and
representatives of the communities that have filed the complaint using
the confidential conciliation processes of the AusNCP to support dialogue
towards a sustainable solution. These discussions are ongoing including
how to scope and safely conduct an independent environmental and
human rights impact assessment as well as how to involve other
relevant stakeholders.
An update on CBG, Guinea
The Compagnie des Bauxites de Guinée SA (CBG) is a bauxite operation
in Guinea owned by Halco Mining Inc (51%) and the Guinean government
(49%). Halco is a consortium comprised of Rio Tinto (45%), Alcoa (45%)
and Dadco Investments (10%). We participate on the boards of Halco and
CBG, with representation on various shareholder oversight committees.
Through our Board and committee roles, we have been proactively
monitoring CBG’s approach to community issues and its response to the
complaint filed through the International Finance Corporation’s grievance
mechanism. We have increased our support to CBG by providing
additional expert help in the form of a Guinea-based Africa specialist and
a senior manager with extensive experience on resettlement and human
rights, and are encouraging CBG to work towards a constructive outcome
aligned with international standards. More detail on this can be found on
our website www.riotinto.com.
Supporting communities through the pandemic
During the COVID-19 global pandemic, we took active measures to
reduce the risk of transmission from our employees and contractors to
local communities. For example, at our Weipa bauxite operations in far
north Queensland, Australia, we worked closely with the local disaster
management group, including the town authority and medical
department, to develop and implement specific plans in response to the
federal government declaring biosecurity health zones. At the Diavik
Diamond Mine in the Northwest Territories, Canada, where many of our
employees come from vulnerable, remote communities, we introduced a
range of measures to minimise the risk of transmission, including
mandatory testing, calls with medical professionals prior to travel,
enhanced hygiene and physical distancing measures, roster and flight
changes, and the mandatory use of masks.
We have strict protocols in place guiding the way we engage with
communities. This includes building two community-related verification
steps into our critical risk management system, requiring our teams to
assess potential COVID-19 risks to the community and develop a plan to
manage them. If, for whatever reason, physical interaction with any
community may pose risks, we have asked our employees and partners
to turn to non-physical ways to interact, or to cancel or postpone the
engagement. Our employees and contractors cannot visit vulnerable
communities – those in which underlying health challenges are prevalent,
or those in remote areas where health care infrastructure is not strong –
without the approval of appropriate community and Rio Tinto leadership.
During the pandemic, we engaged with our Australian suppliers – many
of whom are small businesses – and offered support, financial or
otherwise, to those experiencing hardship.
We also committed $25 million to help communities during the
pandemic. For example, to help support small businesses in financial
stress in the Saguenay – Lac-Saint-Jean region of Quebec, Canada, we
partnered with five municipal governments, the First Nation of
Mashteuiatsh and financial services group Desjardins to create a regional
stimulus fund, which provided financial support for health and safety,
productivity and efficiency measures to make businesses more
sustainable. The fund, which complemented existing local government
initiatives, provided C$750,000 to more than 100 businesses.
In the Anosy region of Madagascar, upgrading a
building and turning it into a dedicated treatment
centre that can receive up to 108 patients, and treat
60 people – including up to 32 needing intensive care
Providing alternative housing support to a local
shelter in Labrador, Canada, for women and children
needing a secure refuge
Donating more than R6 million to provide critical
support for local communities near Richards Bay
Minerals, our operation in KwaZulu-Natal, South
Africa, including food and water supplies, as well as
PPE and essential equipment for frontline health
workers and clinics
Donating €20,000 to the Red Cross in
Belgrade, Serbia, and €20,000 to the Red
Cross in Loznica, Serbia, for essential food
and hygiene items for the cities’ most
vulnerable citizens
Working with United Food and other
partners to distribute more than 100,000
cans of drinking water and donate more
than 280,000 meals to the communities
near the Resolution Copper project in
Arizona, US
Annual Report 2020 | riotinto.com
73
Strategic Report Strategic Report
Sustainability
continued
Economic contributions (US$ million) (2020)
Gross product sales
Net cash generated from operating activities(a)
Underlying earnings
Underlying earnings per share (US cents)
Profit/(loss) after tax for the year
Net cash/(debt)
Capital expenditure(b)
Employment costs
Payables to governments(c)
Value add(d) (e)
Payments to suppliers(e)
Amounts paid by Rio Tinto
Amounts paid by Rio Tinto on behalf of its employees
Community contributions (2016-2018 data includes payments to landowners)
2020
47,018
15,875
12,448
769.6
10,400
(664)
(6,189)
(4,770)
(8,224)
31,472
2019
45,367
14,912
10,373
636.3
6,972
(3,651)
(5,488)
(4,522)
(7,175)
2018
42,835
11,821
8,808
512.3
13,925
255
(5,430)
(4,728)
(7,217)
2017
41,867
13,884
8,627
482.84
8,851
(3,845)
(4,482)
(4,765)
(6,637)
2016
35,336
8,465
5,100
283.8
4,776
(9,587)
(3,012)
(4,881)
(4,025)
27,841
30,504
27,734
20,065
(15,547)
(17,245)
(17,231)**
(16,471)**
(15,812)**
n/a(f)
n/a(f)
*
(7,635)
(1,284)
*
(6,575)
(1,342)
(192)
(5,138)
(1,402)
(176)
(3,984)
(1,416)
(168)
*
Note: In 2019, we adopted new definitions and data collection processes for reporting discretionary community investments, non-discretionary development contributions, management costs and payments to
landowners to align with GRI Reporting Standards. As a result of these changes, 2019 data is not comparable with previous years. For 2020, we have adopted the same definitions as for 2019. The 2020 data is
comparable to 2019, but not to previous years.
** Numbers restated from those originally published to ensure comparability over time.
(a) Data includes dividends from equity accounted units, and is after payments of interest, taxes and dividends to non-controlling interests in subsidiaries.
(b) Capital expenditure is presented gross before taking into account any disposals of property, plant and equipment.
(c) Payables to governments includes corporate taxes, government royalties and employer payroll taxes.
(d) Value add is the sum of labour, payables to governments and returns on capital invested in operations.
(e) These figures include the Group’s share of joint ventures and associates.
(f) Our Taxes Paid report will be published later this year on riotinto.com.
Community investment (discretionary)(a)
Development contributions (non-discretionary)(b)
Payment to landowners (non-discretionary)(c)
2020
(47)
(12.8)
(165.9)
2019
(36.4)
(12)*
(147)**
Note: In 2019, $13 million was reported for development contributions. This has been revised down to $12 million due to an error noted in reporting.
*
** Numbers restated from those originally published.
(a) Community investments are voluntary financial commitments, including in-kind donations of assets and employee time, made by Rio Tinto to third parties to address identified community needs or
social risks.
(b) Development contributions are defined as non-discretionary financial commitments, including in-kind donations of assets and employee time, made by Rio Tinto to a third party to deliver social,
economic and/or environmental benefits for a community, which Rio Tinto is mandated to make under a legally binding agreement, by a regulatory authority or otherwise by law.
(c) Payment to landowners are non-discretionary compensation payments made by Rio Tinto to third parties under land access, mine development, native title, impact benefit and other legally binding
compensation agreements.
Economic and social development
In 2020, our direct economic contribution was $47 billion, including the
total value of operating costs, employee wages and benefits, payments
to providers of capital, payments to government, development
contributions, payments to landowners and community investments.
Also in 2020, our total discretionary global community investments were
$47 million, covering primarily health, education, environmental
protection, housing, agricultural and business development sectors.
The economic and social development of communities continues to
be a priority: we strive to employ local people, buy local products and
engage local services, and we have targets reflecting this at each of
our operations.
In Mongolia, for example, between 2010 and the fourth quarter of
2020, Oyu Tolgoi (OT), our copper and gold mine, spent $3.54 billion
on national procurement#. OT maintains a dedicated national
procurement policy focused on promoting and developing a safe and
sustainable local supply chain, which includes the ‘Made in Mongolia’
strategy. Since 2017, OT has signed 30 contracts with Mongolia-based
businesses for goods and services including personal protective items
such as FFP2 masks and winter safety gloves, hygiene products such as
hand sanitiser and wipes, and specialised professional services.
#
Oyu Tolgoi's (OT) national procurement figure represents spend with suppliers registered in
Mongolia and more than 50% owned by Mongolian citizens. It relates to the OT operations only,
and does not include the underground project.
74
Annual Report 2020 | riotinto.com
OT is also partnering with German international development agency GIZ
and the Umnugovi Aimag to run a capacity building programme for
businesses on topics such as health and safety, business integrity and
management, financial literacy and lean manufacturing. Since 2018,
OT has hosted 266 training sessions with more than 3,500 participants
from more than 450 small and medium size businesses – 58% of whom
were women. Following the training, 72% of the trainees recorded that
their businesses expanded, including ten Umnugovi businesses that have
become OT suppliers and/or subcontractors.
Work of the future
This year, we progressed partnerships that help develop students’ skills for
the future. For example, in Australia, as part of our four-year A$10 million
investment in the education technology sector, we supported the Future
Minds Accelerator programme in partnership with leading start-up
accelerator BlueChilli and Amazon Web Services. The Future Minds
programme engaged 100,000 Australian children, focusing on skills such
as critical thinking, problem solving and automation. In addition, the
programme provided training and professional development opportunities
for 2,700 teachers and engaged more than 1,000 schools, helping drive
interest in digital skills among students. The programme also helped the
participating start-ups grow their businesses, creating 32 new jobs.
In Western Australia, 28 high school students participated in the
Certificate II in Autonomous Workplace Operations programme, the first
nationally recognised automation qualification in Australia, which we
launched in partnership with South Metropolitan TAFE (a technical and
further education institution). The course, which launched in 2019, is
designed to provide participants with the knowledge and skills needed to
succeed in the resources industry of the future.
Sustainability
People
2020 has been a challenging year for all of our stakeholders,
including our employees, as COVID-19 significantly altered our ways
of working. Still, our employees told us they were proud to work for a
business considered essential during a global pandemic.
The destruction of the rock shelters at Juukan Gorge shocked and deeply
disappointed many of our employees. We recognise we must do better
– and that doing better must begin with creating an environment in which
everyone feels comfortable speaking up.
In August-September 2020, we conducted virtual employee focus groups
across our business, in which almost 1,000 employees participated –
72% were site-based and 28% were from our corporate offices. These
focus groups, which included employees from a variety of backgrounds
and perspectives – diverse by gender, ethnicity, location, age and length
of service, and with a particular focus on underrepresented groups –
revealed that employees view Rio Tinto as an industry leader and
appreciate the genuine care they feel from their colleagues. However,
employee pride has been eroded, particularly in Australia, due to our
destruction of the Juukan Gorge rock shelters. And while our employees
appreciate our response to COVID-19, life for many is becoming more
difficult as the pandemic wears on.
Our employees also said we need a stronger message on sustainability,
which is a focus of our new Chief Executive. This includes what
sustainability means to us as a business; on matters of inclusion and
diversity, they told us we need to take more meaningful action. Partly as
a result, we are expanding our diversity targets to include our entire
workforce – targeting a 2% increase in female representation – and
investing $50 million to increase Indigenous leadership across our
business in Australia.
Some of these themes were also mirrored in our annual People Survey
employee engagement results, which included more than 64,000 written
comments from more than 26,000 employees (a 57% response rate).
We were pleased to see a one point increase in our employee net
promoter score (eNPS) over the past year. Our employee satisfaction
score also increased by one point. This is the sixth consecutive increase,
so while we must do better, we also know there are many strengths of
which we can be proud and on which we should continue to build.
Our employees continue to share in the success of our business: one way is
through myShare, our all-employee global share purchase plan. The number
of employees that buy Rio Tinto shares through myShare is today at its
highest level, having increased 13% this year; more than 22,000 employees
actively contribute every month, with 13,000 contributing the maximum
permitted. We have participants in 30+ countries, with 94% in Australia,
Canada, the US, Mongolia and South Africa. On average, employees
purchase shares worth $14 million each year, and participants hold more
than $600 million of shares within their myShare plans (comprising
shares bought with their own contributions plus matching shares and
shares bought through dividends).
We continued to invest in skills development throughout 2020. We launched
LinkedIn Learning – an online learning tool, providing access to more than
16,000 courses on a wide range of topics and skills. To date, more than
11,000 employees have accessed training on the platform, consuming more
than 22,000 hours of content. We are also investing in our critical capabilities:
this year, 29 people were formally recognised as technical RioExperts,
bringing the total number to 77. Of these, 23% are women. Our flagship
commercial fundamentals programme continued to be deployed
virtually. Leadership development also transitioned to virtual, prioritising
the development of our leaders to become effective coaches and
encourage teams to contribute their full potential. Our average learning
hours per employee increased from 25.6 in 2019 to 27.7 in 2020.
Pay equity
We seek to provide competitive pay, delivered through fair and non-
discriminatory pay practices and processes. We are committed to
ensuring that employees with similar skills, knowledge, qualifications,
experience and performance are paid equally for the same or comparable
work. In 2020, we continued to evolve our remuneration to eradicate bias
and otherwise enhance the transparency and robustness of our
decision making.
Our pay equity statistics (ie ‘equal pay gap’ and ‘gender pay gap’) are
integral to our monitoring of employee pay; they guide pay decisions and
investment during our annual remuneration review. The statistics are
affected by gender representation across our organisation (we employ
more men than women). We remain focused on improving female
representation at all levels.
Our equal pay gap measures the extent to which women and men
employed by our company in the same location and performing work of
equal value receive the same pay. In 2020, the equal pay gap decreased
marginally, compared to 2019, and remains less than 2%. The equal pay
gap is the primary lens we use when assessing progress against our
ambition to eradicate bias.
Gender pay is a measure of the difference between average earnings of
women and men across the Group (excluding incentive pay), regardless
of role, expressed as a percentage of men’s earnings. In 2020, our gender
pay gap was just over 1% in favour of women (in 2019, it was less than
1% in favour of men). While part of this positive shift is attributable to
decisions made to reduce the gap, which is reflected in the slightly higher
increase in average earnings for women this year, it is also a reflection of
employee movements (attrition, recruitment and promotion) and the fact
that more women are in higher-paying roles in our operational workforce.
A key area of focus in 2021 will be equity statistics as we look to extract
added insight. We want to expand the suite of statistics we use and find
indicators that provide insights, on both a lead and lag basis, to help close
any remaining gaps – and prevent new ones.
Annual Report 2020 | riotinto.com
75
Strategic Report Strategic Report
Sustainability
continued
Diversity
We aspire to an environment in which the aspects and dimensions of
diversity reflect the communities in which we operate.
We employ people on the basis of job requirements and do not
discriminate on any grounds. We do not employ forced, bonded or child
labour. We employ people with disabilities and make considerable efforts
to offer suitable alternative employment and retraining to employees
who become disabled and can no longer perform their regular duties.
Our graduate programme continues to help us bring new perspectives
into the organisation. This year, we increased our proportion of female
graduates – by 6% – to 60%. In Australia, 8% of our graduate intake and
9% of our vacation student programme were Indigenous. We continued
to offer scholarships, hire vacation students and graduates throughout
the pandemic, leveraging virtual campus recruitment and development.
The overall percentage of female employees increased marginally – by
0.6% – to 19%. Our focus on women in leadership increased the proportion
of women in senior management roles – by 3.5% – to 26.1%. We
continue to focus on the representation of women across all levels and in
all disciplines. For example, at our Pilbara iron ore operations, in Western
Australia, this year we launched our ‘Pathways to Mining’ recruitment
campaign, which aimed to recruit 100 women – including those without
mining experience – for site-based operational roles and traineeships.
The response to the campaign exceeded our expectations, attracting over
2,500 applications, which are currently being assessed for roles ranging
from trade assistant to plant, laboratory, and drill and blast operator.
As noted earlier in this report, in 2021, we will expand our gender
diversity targets beyond women in leadership to women at all levels. The
dual challenge of increasing diversity and evolving our work environment
to welcome diverse voices and perspectives will require significant and
sustained effort across the organisation. To that end, we have also
committed $50 million over five years to advance Indigenous leadership
in our business across Australia. And, as part of our ongoing commitment
to our signatory Traditional Owner groups, we will continue to work on
broader employment pathways, including entry level opportunities,
career readiness programmes, school-to-work pathways, apprenticeships
and other local employment programmes and activities. Our goal is to
achieve a target of 8% Indigenous participation across our business
in Australia.
The overall percentage of female employees
increased by 0.6% to
19%
(7,713 women; 32,962 men)
Women in professional roles increased
by 0.7% to
26.5%
(3,489 women; 9,659 men)
Executive Committee – 2021
23%
(3 women; 10 men)
33.3% of Board roles
held by women (4 women; 8 men)
increased from 11.1% in 2019
26.1% of senior leadership
roles held by women (132 women;
373 men).
We define senior leadership as general managers, Group
advisers and chief advisers as well as employees in leadership roles
who report directly to Executive Committee members
$50 million to attract, retain and support the development of Indigenous
employees across Australia
We are:
– Supporting employees’ growth and
– Changing our hiring practices by focusing on
an Indigenous candidate’s potential, not their
mining experience.
– Introducing a cultural onboarding programme
to ensure leaders have the skills they need to
support Indigenous employees.
– Pairing Indigenous employees with senior
leaders and providing career coaching for
employees while also developing leaders’
cultural competence.
development by identifying skill gaps and
working with each employee to create a career
plan, including further education.
– Growing cultural competency through cultural
awareness training, and where possible,
cultural immersion opportunities on Country
or through working directly with Indigenous
businesses and organisations.
A note on 2021 reporting
For 2021 reporting, the definition used to calculate diversity will be changed to include people not available for work due to extended leave for reasons such as parental leave and contractors
(those engaged on temporary contracts to provide services under the direction of Rio Tinto leaders). This will mean our 2021 targets will be re-set to a slightly higher baseline.
76
Annual Report 2020 | riotinto.com
Sustainability
Employee hiring and turnover rates(a)(b)(c) (2020)
Gender(d)
Age group
Employee hiring rate(e)
Employee turnover rate(f)
Female
29.5%
7.2%
Male
Under 30
70.5%
6.9%
40.7%
8.5%
30-39
30.7%
5.8%
40-49
18%
5%
Over 50
10.6%
9.7%
Africa
1.8%
5%
Americas
33.3%
6.1%
Region
Asia
5.8%
3.9%
Australia/
New
Zealand
54.9%
8.3%
Europe
4.2%
8.9%
(a) Includes our total workforce based on managed operations (excludes the Group’s share of non-managed operations and joint ventures) as of 31 December 2020.
(b) Excludes non-executive directors and contractors.
(c) Rates have been calculated over average monthly headcount in the year per category.
(d) Less than 1% of the workforce gender is undeclared.
(e) Hiring rate includes total employee hires per category over total hires for the year.
(f) Turnover rate excludes temporary workers and the reduction of employees due to business divestment. Turnover rate includes total terminations per category over average monthly headcount in the
year per category.
Employees by employment type(a)(b)(c) (2020)
Senior leaders
Managers
Supervisory and professional
Operations and general support
Graduates
Total
Women
132
882
3,489
3,058
152
Men
373
2,123
9,659
20,677
130
7,713
32,962
(a) Includes our total workforce based on managed operations (excludes the Group’s share of non-managed operations and joint ventures) as of 31 December 2020.
(b) Excludes non-executive directors, Executive Committee, contractors and people not available for work. From 2021, the definition used to calculate diversity will be changed to include people not
available for work and contractors (those engaged on temporary contracts to provide services under the direction of Rio Tinto leaders).
(c) Less than 1% of the workforce gender is undeclared.
Workforce data by region(a)(b)
Region
Africa
Americas
Asia
Australia/New Zealand
Europe
Total
Average
Employee
Headcount(c)
2,429
14,128
4,070
19,002
955
Headcount
Distribution % Absenteeism(d)
Average
Contractor
Headcount(e)
Headcount
Distribution %
6.0%
34.8%
10.0%
46.8%
2.4%
2.8%
1.1%
1.7%
3.1%
0.1%
78
483
405
3,618
34
4,618
1.7%
10.4%
8.8%
78.4%
0.7%
100.0%
40,583
100.0%
2.4%
(a) Includes our total workforce based on managed operations (excludes the Group’s share of non-managed operations and joint ventures) as of 31 December 2020.
(b) Rates have been calculated over average monthly headcount in the year.
(c) Employee headcount excludes our share of joint ventures and associates, non-executive directors, contractors and people not available for work.
(d) Absenteeism includes unplanned leave (sick leave, disability, parental and other unpaid leave) for populations on global, centralised HR systems. Excludes non-executive directors and contractors.
(e) Contractors include those engaged on temporary contracts to provide services under the direction of Rio Tinto leaders.
Annual Report 2020 | riotinto.com
77
Strategic Report Strategic Report
Sustainability
continued
Human rights
Respecting human rights is central to our values, and to the way we work
– wherever we work. We believe respect for human rights starts with
everyday actions. It is a responsibility we take seriously – from governance
of our human rights-related policies, which are overseen by the
Sustainability Committee of the Board of Directors, to processes like pre-
screening suppliers and providing human rights training to key employees.
ICMM. We reiterate our commitment to respect internationally
recognised human rights aligned with the Universal Declaration on
Human Rights and to implement core international standards, including
the UNGPs.
Key actions and achievements during 2020
– Progressing a remedy process with the PKKP people
– Engaging with human rights-related complaints in different fora,
including the Australian National Contact Point for the OECD
Guidelines on Multinational Enterprises regarding the Panguna mine
in Bougainville
– Providing support to our partner, the Compagnie des Bauxites de
Guinée SA, in its participation in discussions with the International
Finance Corporation’s Office of the Compliance Advisor and
community complainants regarding the Sangaredi mine in Guinea
– IOC signed a Reconciliation and Collaboration Agreement with the
Uashat mak Mani-utenam and Matimekush-Lac John communities
and is currently negotiating an agreement with the Naskapi Nation of
Kawawachikamach
– Engaging openly with investors, civil society and community members
in relation to a range of human rights issues to get feedback and
improve our approach, including by convening roundtables in
Australia and the UK with civil society organisations
– Publishing our third annual report on implementation of the VPSHR
and our fourth modern slavery statement
– Commencing and progressing a labour rights supply chains risk
assessment with a third-party provider to help us better target our
labour rights risk management work in our supply chain, including in
relation to modern slavery
– Raising awareness of modern slavery and other human rights issues
among our global procurement team
– Progressing a new internal assurance process on human rights and on
Communities and Social Performance with a focus on cultural
heritage, grievance mechanisms and third-party due diligence
– Conducting VPSHR risk assessments, human rights training for
security personnel and capacity building with business partners. This
included delivering in-person training at our QIT Madagascar Minerals
operation in March 2020, and sharing our VPSHR programme with a
joint venture partner in South America
– Ranking third overall, and second within our sector, in the 2020
Corporate Human Rights Benchmark (CHRB). We note that the CHRB
has appended a statement to our 2019 and 2020 results on recent
events concerning Juukan Gorge
This year, in the wake of Juukan Gorge, many stakeholders raised
concerns about the implementation of our human rights commitments.
The destruction of the rock shelters was a breach of our values,
standards and procedures. The steps taken to address these matters are
set out on pages 114-115.
In 2020, we strengthened controls to ensure that we continue to prevent
our involvement in adverse human rights impacts and, importantly, that
we also provide remediation when we have caused or contributed to
human rights harm. Provisions in this regard include assurance and
auditing of sites to ensure compliance with the human rights section of
our Communities and Social Performance Standard, and Group-function-
specific human rights training. They also require that each of our sites
has a complaints, disputes and grievance mechanism in place, in line with
the UN Guiding Principles on Business and Human Rights’ (UNGPs)
effectiveness criteria for non-judicial grievance mechanisms.
We recognise the need to continually evolve our human rights
performance and approach, and in 2021 we will focus, as part of a
scheduled review of our human rights policy, on further embedding the
policy and awareness of our salient human rights risks.
We also recognise the importance of addressing human rights risks in our
business relationships, from our suppliers and customers to joint venture
partners. We therefore look for ways to help our business partners
respect human rights in line with international standards. At our
non-managed operations, this may include best practice sharing around
complaints handling, discussing human rights issues at joint
management meetings and making our experts available to build
capacity of operational employees.
We pre-screen potential business partners on human rights and require
suppliers (including subcontractors) to adhere to our Supplier Code of
Conduct, which necessitates respect for human rights. From 2019, our
standard contractual terms have also required suppliers (including
subcontractors) to take reasonable steps to prevent and address modern
slavery in their supply chains, and granted us the right to audit our
suppliers for compliance against these requirements. We also regularly
report on modern slavery and other supply chain human rights themes.
We have identified our salient human rights issues as operational
security, labour rights, environmental impacts, the rights of Indigenous
peoples, including cultural heritage, land access and resettlement and
in-migration. Our salient human rights issues are those on which we
could have the most severe impact on people through our operations or
business relationships.
Adherence to international standards
Consistent with the UN Declaration on the Rights of Indigenous Peoples,
we are committed to respecting all internationally recognised human
rights, including acknowledging and respecting Indigenous peoples’
connections to lands and waters. We voluntarily uphold a range of other
international standards and guidelines, including the Voluntary Principles
on Security and Human Rights (VPSHR), the OECD Guidelines for
Multinational Enterprises and the UN Global Compact. Our human rights
performance is also assessed through various external initiatives,
including the Aluminium Stewardship Initiative, Copper Mark and the
78
Annual Report 2020 | riotinto.com
Sustainability
Climate change
In a world dealing with the COVID-19
pandemic, societal expectations on
climate action remain high. Addressing
them will, today more than ever, require
businesses, governments and society to
work together.
We divested the last of our coal businesses in 2018 and no longer extract
fossil fuels. Our ambition is to reach net zero emissions across our
operations by 2050. This year, with a strong focus on execution, we have
also articulated a more explicit link between executive remuneration and
our climate change targets: to reduce our absolute emissions by 15%
by 2030 and emissions intensity by 30% (relative to our 2018 equity
baseline). These targets were informed by a comprehensive analysis
of abatement opportunities across the Group and supported by our
commitment to spend approximately $1 billion on emissions reduction
initiatives over a five-year period, starting in 2020.
In 2020, we started the transition to renewable energy in the Pilbara, in
Western Australia, with the approval of the $98 million, 34MW solar plant
at Gudai-Darri and 45MW battery system at Tom Price. Today, 75% of
electricity used at our managed operations is from renewable sources.
Of the $1 billion we committed to climate-related projects over five years,
in 2020, we approved spend of more than $140 million.
Since 2018, we have reduced Scope 1 and 2 emissions by 1.1Mt CO2e,
or 3%, which is on track with our 2030 target for absolute emissions.
However, in 2020, our emissions remained at the same level as in 2019
at 31.5Mt CO2e. We expect progress on emissions to accelerate later in
our 2030 target period as we develop and implement our mitigation
projects, studies and research and development.
Our approach
Our climate change strategy is aligned with the goals of the Paris
Agreement; climate change considerations are integrated with our
strategic and operational decision making and our approach is supported
by strong governance and continual strengthening of processes and
capabilities. Our third climate change report is available on our website
and details progress against the four pillars of our approach:
1. Produce materials essential for a low-carbon future
2. Reduce the carbon footprint of our operations
3. Partner to reduce the carbon footprint across our value chains
4. Enhance our resilience to physical climate risks
Climate risks and opportunities have been part of our strategic thinking,
including on capital allocation, for more than two decades. We test our
portfolio against a range of integrated strategic scenarios, each capturing
alternative climate change narratives. Our most recent analysis, conducted
in 2020, indicates the diversity of our portfolio strengthens our resilience,
including in a scenario aligned with the goals of the Paris Agreement.
Most of our assets already sit at the low end of their respective
commodity carbon intensity curves and our 2030 targets are aligned with
a 45% reduction in absolute emissions from 2010 levels, which is
consistent with 1.5°C pathways described by the Intergovernmental
Panel on Climate Change.
Over the past year, we have further developed our asset-by-asset
decarbonisation roadmaps and started work on mitigation projects, with a
particular focus on renewables, process heat and ways to replace diesel
fuel in our mobile fleets and rail networks. These roadmaps and actions are
owned by our product groups and fully integrated into our annual business
planning process, with support and co-ordination from our Energy and
Climate Change Centre of Excellence. In 2020, we progressed partnerships
essential to executing our abatement projects and we continued to develop
technology solutions to meet our mid- to long-term ambitions.
Partnerships and Scope 3 goals and targets
In late 2020, China, Japan and South Korea joined the European Union to
set carbon neutrality ambitions within a 2050-60 timeframe. Together,
these countries account for more than 70% of our sales and around 90%
of our value chain emissions (Scope 3) from our key products, including
iron ore and aluminium. We have updated our approach to calculating
Scope 3 emissions which are estimated to be 519 Mt CO2e in 2020.
We continue to explore collective solutions to reduce emissions across
our value chain. This year, we defined a series of measurable Scope 3
emissions reduction goals to guide our partnership approach.
With about 80% of our Scope 3 emissions coming from customers’
hard-to-abate processes, our Scope 3 goals are focused mostly on our
contribution to the development and deployment of low-carbon
technologies. These include targets related to emissions from shipping
our products. Our Scope 3 goals are to:
– Work with customers on steel decarbonisation pathways and invest in
technologies that could deliver reductions in steelmaking carbon
intensity of at least 30% from 2030.
– Work in partnership to develop breakthrough technologies with the
potential to deliver carbon neutral steelmaking pathways by 2050.
– Continue to scale up the ELYSISTM breakthrough technology enabling
the production of zero-carbon aluminium.
– Meet our ambition to reach net zero emissions from shipping our
products by 2050.
In many important applications, there are no low-carbon alternatives to
steel, aluminium and copper. Furthermore, these materials will enable the
low-carbon transition. The challenge is to produce them sustainably – not
only with lower emissions, but also in a way that respects communities.
Disclosures consistent with the TCFD
recommendations
In 2018, we welcomed the recommendations from the Task
Force on Climate-related Financial Disclosures (TCFD) in
our first climate change report and have aligned our climate
change disclosures to be more transparent. Climate-related
disclosures on governance, strategy, risk management and
metrics and targets are also integrated into this Annual
Report in the following sections: strategic context, key
performance indicators, risk management, principal risks
and uncertainties, governance, Sustainability Committee
report and remuneration.
Our climate change report provides a more thorough and
consolidated review of our climate change strategy, our
approach to evaluating and managing climate-related risks
and progress towards our targets. Our 2020 Sustainability
Fact Book includes a full list of the TCFD recommendations
alongside references to our disclosure against them.
We see ongoing development of good practice on
climate-related disclosures in our sector and beyond, in
part as a result of an iterative process of feedback from
stakeholders. We anticipate, therefore, continuing to
progress along the TCFD ‘implementation path’ and further
enhancing our climate reporting in years to come.
Annual Report 2020 | riotinto.com
79
Strategic Report Strategic Report
Sustainability
continued
Greenhouse gas emissions
Scope 1&2 emissions – equity basis
Total equity greenhouse gas emissions – million tonnes carbon dioxide equivalent (Mt CO2e)
Total Emissions
Scope 1 Emissions
Scope 2 Emissions
2020 equity greenhouse gas emissions by product group (Mt CO2e)
Aluminium
Aluminium (Pacific)
Aluminium (Atlantic)
Bauxite & Alumina
Energy & Minerals
Iron Ore
Copper & Diamonds
Other (includes shipping and corporate functions)
Rio Tinto total
2020 equity greenhouse gas emissions by location (Mt CO2e)
Australia
Canada
South Africa
US
Other: rest of Africa
Other: Europe
Other: Asia, New Zealand, Central America, South America
Rio Tinto total
Scope 1&2 emissions intensity – equity basis (tCO2e / t Cu-eq)
Greenhouse gas emissions intensity
Scope 3 emissions – equity basis
Scope 3 emissions (Mt CO2e)
2020
31.5
22.8
8.7
2019
31.5*
23.1
8.3
2018(a)
32.6
23.8
8.8
Scope 1
emissions
(Mt CO2e)
15.8
Scope 2
emissions
(Mt CO2e)
6.0
Total
emissions
(Mt CO2e)
21.8
4.6
5.2
6.0
2.4
3.0
1.2
0.5
22.8
5.4
0.1
0.5
1.2
0
1.5
0
8.7
10.1
5.3
6.4
3.6
3.0
2.7
0.5
31.5
Scope 1
emissions
(Mt CO2e)
12.8
Scope 2
emissions
(Mt CO2e)
5.9
Total
emissions
(Mt CO2e)
18.6
0
1.2
0
0
0
1.6
8.7
2019
6.4
6.0
1.6
1.1
0.2
0.4
3.7
31.5
2018
6.5
6.0
0.3
1.1
0.2
0.4
2.1
22.8
2020
6.4
2020
519.4
Note: Scope 1 greenhouse gas emissions are direct greenhouse gas emissions from our operations (e.g. from fuel consumption and anodes). Scope 2 greenhouse gas emissions are from the electricity,
heat or steam brought in from third parties (indirect emissions). Scope 3 emissions are indirect emissions or greenhouse gases generated as a result of activities undertaken across our value chain, either
upstream or downstream of our operations.
(a) The 2018 figure is the baseline for our 2030 emissions target and has been adjusted to exclude emissions from assets divested in that year. Actual emissions in 2018 were 34.0Mt CO2e.
Please see our Scope 1, 2 & 3 Emissions Methodology report on our website for further detail on our approach to calculating our emissions.
Scope 1&2 emissions & energy – 100% managed basis
Total managed greenhouse gas emissions (Mt CO2e)
Total managed energy (PJ)
2020
26.2
402
2019
26.4
406*
2018
28.5*
425
2017
30.6
440
2016
32.0
458
2010
43.0
Note: Total managed GHG emissions equal the sum of Scope 1 emissions and Scope 2 emissions minus the Scope 1 emissions resulting from the supply of electricity and steam to third parties.
* Numbers restated from those originally published to ensure comparability over time.
In 2008, we set our first climate change target, to reduce the GHG emissions intensity of our managed operations. This was updated in 2015 and called for a 24% reduction in intensity by 2020 and we
achieved that target. In 2020 our emissions intensity was 72.6 (index, 2008 = 100).
2020 sources of electricity used (managed operations)
2020 sources of emissions (managed operations)
Hydro 71%
Coal 15%
Natural gas 8%
Other renewable 4%
Diesel 1%
Others 1%
Fuel 38%
Net purchases electricity
and steam 35%
Anodes and reductants 23%
Process gases and other 4%
80
Annual Report 2020 | riotinto.com
Sustainability
Water
Water is a key part of our operational environmental footprint and a critical,
shared resource for wildlife, the environment and people and their economic
prosperity. From the Gobi Desert in Mongolia to the Arctic environment of our
Diavik Diamond Mine in Canada, we use water to access and process ore,
manage dust and promote rehabilitation. At some sites, most notably at our
aluminium operations, we also use water to produce hydropower.
We take a catchment-level approach to water management at each site,
meaning that we manage our impacts, risks and potential solutions not
only within our operations but with the understanding that we share
water with host and downstream communities and ecosystems. We
consider the catchment landscape and local communities’ needs. We
also consider the impact of dewatering on nearby communities and the
environment now and over the long term, including beyond the life of
our operations.
We aim to avoid permanent impacts to water resources like lakes,
streams and groundwater aquifers, and carefully manage the quality and
quantity of the water we use and return to the environment. We also
strive to balance our operational needs with those of local communities,
First Nations and Traditional Owners, and local ecosystems. And we
consider the impact of climate change, which is already affecting rainfall
and water security at many of our sites. This requires a proactive,
collaborative approach with a broad range of local stakeholders, including
domestic water users and other industries.
We aim to use water as efficiently as possible in the design and operation
of our sites, and our risk assessment process is fundamental to this. We
consider water risk against the following four themes:
1. Water resource – is there sufficient water for operational and broader
catchment needs?
2. Quantity/quality – does site water inventory or its management cause
operational constraints or environmental impacts?
3. Dewatering – do dewatering or depressurisation activities impact the
mine plan or regional aquifers?
4. Long-term obligations – do our activities generate long-term or
ongoing obligations?
We use this framework to identify, assess, manage and communicate
water risk – both internally and to the communities where we operate.
We provide our Group water risk profile below. This provides an indication
of the distribution of water risk across our portfolio. While we have sites
that sit in the ‘very high’ and ‘high’ categories for each of the risks – and
appropriately rigorous standards, processes and capabilities to effectively
manage them – the majority of our portfolio sits in the ‘low’ to ‘moderate’
range. We apply the same approach across our entire portfolio.
Group water risk profile (% of managed operations)(a)
Water resources
Quantity and quality
Low 68%
Moderate 17%
High 9%
Very high 6%
Not applicable 0%
Dewatering
Long-term obligations
Low 19%
Moderate 11%
High 13%
Very high 8%
Not applicable 49%
Low 32%
Moderate 43%
High 21%
Very high 4%
Not applicable 0%
Low 34%
Moderate 21%
High 22%
Very high 17%
Not applicable 6%
(a) QAL is a non-managed operation, but is part of our water stewardship target programme.
Annual Report 2020 | riotinto.com
81
Strategic Report
Strategic Report
Sustainability
continued
As ICMM members, we report against the ICMM water stewardship statement:
To apply strong and transparent water governance
To manage water at operations effectively
To collaborate to achieve responsible and sustainable water use
We are among the most transparent in the industry regarding our water
stewardship. There are a range of water risks, not just water scarcity, so
we have set targets – tailored to the specific challenges at each site – and
publicly report on progress against each one. This year, we are also
providing further detail on our website through asset-level disclosures,
which show key water risks at each site.
Our 2019-23 water targets
Last year, we set new water targets that allow us to be more transparent
about our water usage, risk profile, management and challenges. These
targets, and the data required to measure progress against them, will
help us become better water stewards today and for future generations
– whether in water-scarce regions or where water is plentiful. They will
also help us improve our performance over the next five years.
Water – performance data 2016–2020 (in GL)
Our water targets consist of one Group target and six site-based
targets; the site targets were chosen based on their water risk profile,
our ICMM commitments, and local community and environmental
interdependencies.
This year, we continued to progress against our Group target and remain
on track to meet it by 2023. We have collected water allocation volume
data for all our assets in Australia and will complete this
for our remaining operations during 2021. We will also focus on
estimating surface water catchment rainfall runoff volumes for
our managed operations.
Withdrawals (by source)
Surface water
Groundwater
Marine
Municipal
Third party
Entrained in ore
Total
Withdrawals (by quality)
Type 1
Type 2
Type 3
Fresh
Other
Total
Discharges (by destination)
Surface water
Groundwater and seepage
Marine
Third party
Total
Discharges (by quality)
Type 1
Type 2
Type 3
Fresh
Other
Total
Consumption
Evaporation & other losses
Entrained in product and process waste
Total
Recycled/reused
Total
2020
315
312
71
34
29
398
1,159
2020
457
240
462
–
–
1,159
2020
327
129
146
34
636
2020
290
127
218
–
–
636
2020
438
86
524
2020
335
2019
326
296
70
24
38
471
1,225
2019
–
–
–
562
664
1,225
2019
330
115
93
35
573
2019
–
–
–
376
197
573
2019
575
83
657
2019
331
2018
272
321
48
31
36
485
1,193
2018
–
–
–
539
654
1,193
2018
314
127
63
30
533
2018
–
–
–
362
171
533
2018
650
85
734
2018
296
2017
348
304
109
30
34
369
1,193
2017
–
–
–
584
609
1,193
2017
275
160
133
26
594
2017
–
–
–
351
243
594
2017
523
85
609
2017
304
2016
346
293
79
36
34
467
1,255
2016
–
–
–
573
682
1,255
2016
247
148
99
37
531
2016
–
–
–
331
199
531
2016
640
85
725
2016
282
Water quality type categories correlate with reporting requirements for the International Council of Mining & Metals (ICMM), Minerals Council of Australia (MCA) and the Global Reporting Initiative (GRI).
For water definitions, including water type, please refer to the glossary on the ‘Sustainability reporting’ page on our website.
Note: The sum of the categories may be slightly different to the total, due to rounding.
82
Annual Report 2020 | riotinto.com
Sustainability
Progress against our targets
Group target
Water risk theme
Status
Commentary
Rio Tinto Group (Tier 1)
By 2023, we will disclose – for all managed operations –
permitted surface water allocation volumes, annual
allocation usage and the associated surface water
allocation catchment rainfall runoff volume estimate.
Water resource
Achievable, plan in
place
Progress remains on track
despite some delay due to
COVID-19. Additional
resources allocated
for 2021.
Site-based target
Water risk theme
Status
Commentary
Pilbara operations, Iron Ore (Tier 1)
Our Iron Ore product group will complete six managed
aquifer recharge investigations by 2023.
Dewatering
(aquifer reinjection)
Achievable, plan in
place
Oyu Tolgoi, Copper & Diamonds (Tier 1)
Oyu Tolgoi will maintain average annual water
use efficiency at 550 L/tonne of ore to concentrator
from 2019-23.
Water resource
(intensity and efficiency)
Achieved for 2020
Kennecott Utah Copper (KUC), Copper &
Diamonds (Tier 1)
Kennecott will reduce average annual imported water
per ton of ore milled by 5% over the 2014-18 baseline of
393 gal/ton (1,487L/ton) at the Copperton Concentrator
by 2023.
Ranger Mine*, Energy Resources of Australia
Limited (ERA), Energy & Minerals (Tier 1)
ERA will achieve the planned total process water
inventory treatment volume by 2023, as assumed in the
Ranger water model.
Water resource
(import reduction)
In progress, options
being investigated
Quantity/quality
(inventory reduction)
Achievable, plan in
place
QIT Madagascar Minerals (QMM), Energy &
Minerals (Tier 2)
QMM will develop and implement an improved integrated
site water management approach by 2023.
Quantity/quality
(discharge quality)
Achievable, plan in
place
Queensland Alumina Limited (QAL), Aluminium
(non-managed joint venture) (Tier 2)
QAL will complete the following four water-related
improvement projects from the QAL 5-year Environment
Strategy by 2023:
Quality/quantity
(discharge quality)
JV performance
improvement
Achievable, plan in
place
– Project L1 – integrity of bunds and drains
– Project W3 – caustic pipe and wasteline 4 integrity
– Project W6 – residue disposal area surface/ground
water impacts
– Project W7 – residue disposal area release to
receiving environment
Tier 1 water targets form part of the Rio Tinto external limited assurance programme.
Tier 2 water targets do not form part of the Rio Tinto external limited assurance programme.
*
Ranger Mine is owned and operated by ERA. Rio Tinto is an 86.3% shareholder in ERA.
Successful completion of
two of the proposed six
managed aquifer recharge
investigations.
Average annual water
use efficiency maintained
below 550 L/tonne for
2019-20 period.
KUC remains committed to
achieving its 2023 target
through the ongoing
improvement and
effectiveness of imported
water reduction measures.
ERA remains committed to
achieving its 2023 target
through the ongoing
improvement and
effectiveness of the process
water treatment options.
Water management
improvement areas
identified and
implementation studies
have commenced.
Despite COVID-19 delays,
progress for nominated
water-related improvement
projects is aligned with
current project schedules.
Annual Report 2020 | riotinto.com
83
Strategic Report Strategic Report
Sustainability
continued
More detailed information about our progress against our site-based water targets is available in the water section of our website.
Water withdrawals 2020 – by product group, region and source (in GL)
Product group
Region
Total
Surface water
Groundwater
Marine
Municipal
Third party Entrained in ore
Aluminium
Atlantic operations
Pacific operations
Total
Copper & Diamonds
Copper
Diamonds
Total
Energy & Minerals
Borates and lithium
Iron and titanium
Iron ore
Uranium
Total
Iron Ore
Iron ore
Salt
Total
Other
Commercial
Exploration
Total
Canada
Europe
Australia
New Zealand
Asia
US
Australia
Canada
Europe
US
Africa
Canada
China
Canada
Australia
Australia
Australia
Not applicable
Australia
Other
Note: The sum of the categories may be slightly different to the total, due to rounding.
Operational environment overview (2016-2020)
Significant environmental incidents
Fines and prosecutions – environment (US$’000)
Land footprint – disturbed (square kilometres)
Land footprint – rehabilitated (square kilometres)
Mineral waste disposed or stored (million tonnes)
Non-mineral waste disposed or stored (million tonnes)
SOx emissions (thousand tonnes)
NOx emissions (thousand tonnes)
Fluoride emissions (thousand tonnes)
Particulate (PM10) emissions (thousand tonnes)
23
10
103
1
137
15
39
10
3
67
1
4
23
50
0
204
10
291
288
361
649
15
0.07
0.05
15.12
19
0
18
1
38
0
11
8
1
20
1
0
11
47
0
180
10
249
0
8
8
0
0.00
0.01
0.01
1
10
21
0
31
15
28
2
1
46
0
2
4
2
0
21
1
29
205
2
207
0
0.07
0.03
0.10
0
0
53
0
53
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
3
15
0.00
0.00
15
2020
0
27.4
3,629
491
969
0.46
74.1
85.6
2.24
55.4
2019
0
19.0
3,626*
490
905*
0.28
79.0
64.3
2.34
55.4*
2
0
10
0
13
0
0
0
0
0
0
3
8
0
0
2
0
13
8
0
8
0
0.00
0.00
0.01
2018
0
284.7
3,595
485
886
0.27
84.2
62.0
2.61
62.8
1
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
28
0
28
0
0.00
0.00
0.00
2017
0
89.5
3,616
497
1,188
0.33
86.9
65.8
2.49
67.2
0
0
1
0
1
0
0
0
0
1
0
0
0
0
0
1
0
1
47
348
395
0
0.00
0.00
0.00
2016
1
57.6
3,696
541
1,726
0.53
88.0
69.1
2.50
91.7
* Numbers restated from those originally published to ensure comparability over time.
Note: The increase of NOx emissions from 2019 to 2020 is due to a change in the calculation method from emissions factors to direct measurement using stack sampling data.
In 2020, we paid environmental fines totalling $27,387 resulting from storm water and tailings environmental releases at our Kennecott operations, in Utah, US, the death of a goitered gazelle in Mongolia
and a spill of cell wash at NZAS in New Zealand.
In September 2018, QAL (a joint venture) experienced an alkali release that left the boundaries of the refinery. In December 2020, QAL was found guilty by Gladstone Magistrates Court of unlawfully
causing serious environmental harm and contravening a condition of the Environmental Authority issued by the Queensland Government’s Department of Environment and Science. Further details –
including the steps QAL has taken to improve its environmental performance – are available on our website.
Please refer to the Sustainability Fact Book on our website for more detail.
84
Annual Report 2020 | riotinto.com
Sustainability
Biodiversity
We are acutely aware of the interconnected challenges of climate change and
biodiversity loss, and the significant risks these have for the environment,
wildlife and humanity as a whole. We recognise our operations inherently pose a
risk to biodiversity, as well as to the communities that rely on the environment
– directly and indirectly – for their lives and livelihoods. Our aim is to avoid such
harm when possible and mitigate it when we cannot avoid it.
Protecting biodiversity, therefore, is an important part of our commitment
to communities and our employees, as well as to the environment.
We are committed to minimising our risks and impacts to biodiversity
through the application of the mitigation hierarchy, with the ambition of
achieving no net loss to biodiversity at our assets. ‘No net loss’ means
striking a balance between negative impacts on biodiversity and positive
outcomes through mitigation.
To that end, we have been engaging with several external programmes to
develop both our roadmap for disclosure and target-setting approach for
biodiversity and land. For example, in 2020, we joined the Informal Working
Group on the Task Force on Nature-related Financial Disclosures, which
will help steer business towards positive outcomes for nature.
This year, to further sharpen our biodiversity management processes,
we assessed all of our managed operations using an approach developed
in 2019 by experts from the UN Environment Programme World
Conservation Monitoring Centre (UNEP-WCMC). Using this methodology
– combined with global biodiversity datasets of threatened species and
conservation and protected areas – we prioritised our operations based
on their biodiversity sensitivity. Twenty-eight managed operations were
identified as being within a five kilometre radius of a Protected Area; we
confirmed 12 high-priority sites.
Also in 2020, we assessed the implementation of our biodiversity
protection and natural resources management standard across all of our
operations. The review indicated that the completion of risk assessments
for biodiversity features, development of action plans and monitoring
programmes across our operations is tracking well (see figure one).
In 2021, we will focus on ensuring all priority sites have their monitoring
programme independently reviewed – another key requirement of
the standard.
Assurance processes such as these allow us to identify good practices for
replication across the business, while also ensuring assets receive the
right support and expertise to match their level of risk.
Figure one summarises the implementation of key components of the biodiversity protection and natural resources management standard for all
managed sites with a focus on the high-priority sites.
Our biodiversity standard implementation status
across all Rio Tinto sites
Our biodiversity standard implementation status
across Rio Tinto high-priority biodiversity sites
5%5%
7%7%
12%12%
88%88%
93%93%
95%95%
No
Yes
A risk and impact
assessment on important
biodiversity features has
been completed
An action plan has
been designed and
implemented to address
risks and impacts
A monitoring programme
is in place as part of the
action plan
17%17%
83%83%
100%100%
100%100%
Annual Report 2020 | riotinto.com
85
Strategic Report Strategic Report
Sustainability
continued
Closure
We recognise our impact and responsibility do not end when our
operations cease, so we consider closure in the way we design, build and
run every site.
We seek to create a consensus with stakeholders on a shared vision for
the land, balancing environmental and community considerations with
long-term capital implications associated with water treatment,
repurposing and/or remediating land. Our goal is to leave a positive
legacy, delivering value for the Group and our stakeholders.
We have 92 active legacy assets around the world. At the end of 2020,
closure provisions on our balance sheet totalled $13.3 billion (compared
with $11.1 billion in 2019). This year, we have provided more detail on
our financial liabilities related to closure – please see page 244.
Over the next five years, we will transition a number of assets into closure
and to their next use. Our Argyle diamond mine, in Western Australia,
ceased production in 2020 after nearly 40 years of operation. Following
closure, the land will be returned to the Traditional Owners as the
custodians of Country, for activities such as cattle grazing, tourism,
cultural use and possibly small-scale agriculture and native food
production. We target 14% of our closure budget to be spent with
Traditional Owners and local providers.
We are also supporting our Argyle employees’ transition to new career
opportunities, either within Rio Tinto or externally, based on their
personal goals and preferences. We began a structured career coaching
programme in 2017 to ensure people were well prepared for the mine’s
closure, which included providing formal training – of their choice – to all
employees. To date, we have found new roles for 90% of Argyle
employees who wanted to be redeployed within our company.
The Ranger uranium mine, operated by ERA, in the Northern Territory,
Australia, ceased production in early 2021. Progressive closure of the
mine is continuing; Pit 1 has been filled and is currently being
revegetated and Pit 3 is being filled. ERA is tracking towards 2026 for the
completion of closure work.
While mining continues at our Gove bauxite operations, also in the
Northern Territory, we have begun progressive closure activities,
including the decommissioning and demolition of the refinery. We are
also planning for the next stage of closure by doing things like upgrading
the water treatment plant. We expect our mining operations at Gove
to cease in 2030.
Strengthening our approach
Our work supporting operating assets has also expanded and between
2018-20 we completed 14 asset closure strategies, covering 35% of our
assets. These create a progressive vision for future land use after our
operations cease and help ensure closure is considered throughout the
asset lifecycle. All of our operating assets have tactical closure plans in
place, aligned with our closure framework. We regularly review and
update these plans to ensure they reflect stakeholder expectations and
seek to improve our closure practices as we learn from them. At operations
with joint ownership structures, we work in partnership with other asset
owners to embed closure into asset design, planning and operations.
We continue to engage stakeholders of our sites nearing closure –
including Indigenous peoples, government, employees and host
communities – via engagements and partnerships, which in turn helps
them plan their future. For example, collaboration with the local
community and regulators at Mount Rosser, Jamaica, led to successful
revegetation of this former bauxite mine, a legacy site, which now
supports local employment and is also home to an increasing number
of wildlife.
Our approach to supporting regional economic development includes a
strong focus on economic diversification. We endeavour to foster wider
economic activities alongside national and local governments and
community development plans. This reflects our commitment to
sustainability as well as our aim to have communities thrive long after
our operations cease.
Accordingly, we look for commercial opportunities to repurpose assets to
reduce the social and economic impact of closure. At a number of our
former assets, we are exploring options to repurpose the site for
renewable energy, such as our pilot photovoltaic cell facility at Marignac,
France, a former ferro alloy plant. At times, we partner with universities
and other companies to find opportunities to repurpose and reprocess
waste and improve water and waste treatment. For example, in the
Saguenay – Lac-Saint-Jean region of Quebec, Canada, we worked with
local blueberry growers to create a safe and effective fertiliser made from
waste created by our aluminium operations.
For more information on closure provisions and financial statements,
refer to page 244 of this report.
86
Annual Report 2020 | riotinto.com
Sustainability
Ethics and compliance
Our code of conduct, The Way We Work, lays out clear expectations on
how we should conduct our business, and ourselves, no matter where we
work or where we are from. Integrity is one of the five core values defined
in The Way We Work: the courage and commitment to do what is right,
not what is easy.
Business integrity
The Way We Work makes it clear that we do not offer, pay or accept
bribes, no matter where we operate, no matter what the situation, and no
matter who is involved. This position is further supported by our business
integrity standard and procedure, which require employees, core
contractors and associated persons acting for, or on behalf, of the
company to not commit, authorise or be involved in bribery, corruption,
fraud or other economic crimes. We also provide clear rules regarding
third-party benefits, managing conflicts of interest, facilitation payment,
sponsorships, donations and community support, mergers, acquisitions
and joint ventures, and engaging third parties. We continue to co-operate
fully with relevant authorities in connection with their investigations in
relation to contractual payments of $10.5 million made to a consultant
who provided advisory services in 2011 on the Simandou project in
Guinea. Please refer to the Contingent Liabilities on page 261 for
further information.
Our business integrity compliance programme, which is managed
independently of our business’s operations, is designed to manage our
compliance risks and regulatory requirements in the jurisdictions where
we conduct our business.
In 2020, we established a new risk and monitoring forum to monitor the
management of Group-level business integrity risks and ensure our key
internal compliance controls are effective.
We also engaged external experts and finalised maturity assessments
of our data privacy and business integrity compliance programmes.
We rated well overall, but there are always opportunities to improve;
we are implementing actions as needed.
In 2020, we expanded our business integrity standard and procedure to
strengthen controls in areas such as terrorist financing and anti-money
laundering, as well as reducing declaration thresholds for giving and
receiving benefits and making sponsorships and donations. We also
enhanced controls to manage third-party business integrity risks by
improving our due diligence and monitoring processes, adding more
controls for high-risk, third-party engagements and payments and
providing training for third parties, where needed.
Employees are required to complete annual online compliance training,
tailored to suit the risks employees are most likely to encounter in their
roles. This year, we also provided additional risk-based training to 4,410
employees and contractors in 23 countries, and launched enhanced
business integrity training online, covering integrity-driven decision
making, anti-bribery and corruption, anti-money laundering and fraud for
higher risk roles. In 2020, we also developed our ethics ambassadors
programme to extend the sharing and reach of integrity insights and
champion an integrity-driven culture across the business.
Finally, in response to COVID-19, we conducted a Group-level risk
assessment and implemented monitoring and due diligence activities,
such as supporting compliance reviews of community preparedness and
recovery donation proposals.
Whistleblower programme
A key change this year was to establish the Business Conduct Office,
a dedicated team responsible for the management of the
whistleblower programme.
In 2020, we reviewed 748 incidents reported through whistleblower
programme channels, 42% of which were substantiated. There were
113 (15%) business integrity cases reported, of which 34 cases (30%)
were substantiated.
Whistleblower programme
Whistleblower programme
748
42%
Number of cases
Cases
substantiated
Personnel
55%
Business
integrity
15%
Information
security
Health and
safety
Communities
13%
9%
3%
Finance
1%
Other
4%
Cases
Types of whistleblower programme cases
Training
4,410 employees and contractors in 23 countries had face-to-face training in recognising and managing business integrity dilemmas.
Value chain
Due diligence checks on third parties, (‘Know Your Customer’ & ‘Know Your Supplier’)
Due diligence checks on third parties – baseline screening only
Centrally monitored third parties*
*
Once third parties are screened, they then form part of ongoing monitoring.
We have applied the reporting principles of GRI 101: Foundation 2016 Standard in this report.
2020
4,055
20,371
30,120
Annual Report 2020 | riotinto.com
87
Strategic Report Strategic Report
Sustainability
continued
Transparency
We believe transparency both encourages accountability
– ours as well as others’ – and allows us to have
fact-based conversations about the issues at hand.
In 2010, we pioneered transparency in tax payments
within the mining industry, and in 2018, became a
signatory to the B Team Responsible Tax Principles.
We continue to report in increasing detail on taxes and
royalties paid and economic contribution. We are a
founding member of the Extractive Industry Transparency
Initiative (EITI) and have actively supported EITI’s
principles and global transparency and accountability
standard since 2003.
In 2020, for the first time, we released comprehensive
financial and tax disclosures for 2018 for each country
where we operate, through our 2018 Country by Country
Report. In 2021, we will make additional disclosures,
thereby fully implementing the requirements of the tax
and payments to governments standard of the Global
Sustainability Standards Board of the Global
Reporting Initiative.
We also disclosed additional mineral development
contracts with governments, where they are not subject
to confidentiality restrictions, thus meeting the
commitments we made in our Transparency Statement,
available on our website. We continue to encourage
governments to allow such disclosures. We also continued
to disclose information about the beneficial owners of our
joint ventures in line with EITI standards and expectations.
Political integrity
As a company, we do not favour any political party,
group or individual, or involve ourselves in party political
matters. We do not contribute to political parties
or candidates.
Our business integrity standard and procedure includes
strict guidelines for dealing with current and former
government officials and politicians, including that they
cannot be appointed to company positions or engaged as
consultants, in certain circumstances, without approval
of executive leadership and the Chief Ethics &
Compliance Officer.
We engage in public policy on issues that affect or could
affect our business, including by contributing relevant
information and sharing experiences that help create
viable outcomes. For example, we provided submissions
to the Government of Western Australia and engaged in
the broader public consultation process to facilitate the
repeal and replacement of the Aboriginal Heritage Act
1972 with a modernised act reflective of current practice
and expectations.
We join industry associations where membership
provides value to our business, investors and other
stakeholders. We publish on our website the principles
that guide our participation, the way we engage, as well as
a list of the top five memberships by fees paid. We also
track and disclose how we engage on climate policy
issues, disclosing when positions and advocacy are
significantly different to those we set out in our industry
association documentation.
88
Annual Report 2020 | riotinto.com
Sustainability
Our approach to
sustainability
The Sustainability Committee oversees strategies designed to manage
social and environmental risks, including management processes and
standards. The Committee reviews the effectiveness of management
policies and procedures relating to safety, health, employment practices,
relationships with neighbouring communities, environment, human
rights, land access, political involvement and sustainable development.
For more about our Sustainability Committee, including the terms of
reference, see the Governance section of this report.
We complete a sustainability materiality assessment every year to
ensure we are publicly reporting on topics that matter most to our
stakeholders and to our business. In simple terms, a sustainability
materiality assessment records the threshold at which an issue or topic
becomes important enough to be reported on externally. This considers
the impact and level of perceived importance to stakeholders. This differs
from financial materiality, which may use financial metrics or other
quantitative analyses to determine what would be considered a
significant, or material, impact. Not all sustainability-related topics have
the same risk profile, which the assessment reflects.
Last year, we altered the approach to our sustainability materiality
assessment. We used various sources of direct input from external
engagement to strengthen our understanding of what is important to
stakeholders. This revised approach combined the views of our external
stakeholders with those of our internal subject matter experts (SMEs)
through a quantitative and qualitative assessment.
This year, we engaged an independent external assurance
organisation, KPMG, to provide the directors of Rio Tinto with assurance
on selected sustainability subject matters. In 2019 and years prior,
PricewaterhouseCoopers LLP provided this independent external
assurance. KPMG’s assurance statement satisfies the requirements
of subject matters 1 to 4 of the ICMM assurance procedure. See page 133
in the Governance report for more information about our external
auditors and internal assurance.
Non-financial information statement
This section (pages 62-91) provides information as required by regulation
in relation to:
– Environmental matters
– Our employees
– Social matters
– Human rights
– Corruption and bribery
Other related information can be found as follows:
– Our business model – page 16
– Principal risks and how they are managed – pages 92-108
– Non-financial key performance indicators – pages 24-28
Notes on data
The data summarised in this sustainability section relates to calendar years. Unless stated
otherwise, parameters are reported for all managed operations without adjustment for equity
interests. Where possible, we include data for operations acquired before 1 October of the
reporting period. Divested operations are included in data collection processes up until the
transfer of management control.
We report against GRI standards and the requirements of other select reporting frameworks,
and reflect the ten principles of the ICMM and the mandatory requirements in the ICMM
position statements within our policies, standards and procedures. For more information
please visit riotinto.com.
Annual Report 2020 | riotinto.com
89
Strategic Report Strategic Report
Sustainability
continued
Voluntary commitments, accreditations and memberships
We take part in a number of global, national and regional organisations
and initiatives that inform our sustainability approach and standards,
which in turn allows us to better manage our risks. External organisations
and initiatives assess and recognise our performance, and we participate
in industry accreditation programmes for some of our products.
These organisations and initiatives include the following:
Aluminium Stewardship Initiative (ASI)
The ASI aims to create sustainability and transparency
throughout the aluminium industry. It has developed the
world’s first global Responsible Aluminium Standard, used
to assess environmental, social and governance practices
across the aluminium supply chain for responsible
sourcing. We were the first company in the world to receive
certification under the ASI.
Business for Social Responsibility (BSR)
BSR is a global non-profit organisation that works with its
network of more than 250 member companies and other
partners to build a just and sustainable world. As a
member, we share information on sustainable practices.
Extractive Industries Transparency
Initiative (EITI)
We are a founding member of the EITI and have played an
active role in this global standard since 2003. The EITI
promotes open and accountable management of natural
resources to make sure our activities benefit the many, not
the few. We are transparent about the taxes and royalties we
pay – publishing an annual Taxes Paid Report since 2010.
Global Reporting Initiative (GRI)
GRI is an international independent organisation with an
international framework and standards for sustainability
reporting. Our Group-level sustainability reporting is informed
by the GRI Sustainability Reporting Standards (Core option)
and the GRI Mining and Metals Sector Supplement.
International Council on Mining & Metals (ICMM)
As a member, we commit to implementing and reporting
on ICMM’s 10 Principles for Sustainable Development.
These cover corporate governance, environmental
stewardship and community engagement. Our Chief
Executive is a member of the ICMM Council, and we
participate actively in various working groups.
Kimberley Process (KP)
We participate in the Kimberley Process through
our involvement with the World Diamond Council (WDC).
The KP focuses on preventing conflict diamonds from
entering the global supply chain.
London Bullion Market Association (LBMA)
The LBMA has renewed Rio Tinto Kennecott’s responsible
gold certificate, which guarantees that the precious metal
produced from Kennecott’s refinery can be sold and traded
globally. The certificate is one of the requirements for a
gold refinery to be placed on the LBMA’s Good Delivery
List, universally acknowledged as the international
standard for quality and responsible production. Many
precious metal exchanges will accept gold bars only from
refineries that appear on the list.
90
Annual Report 2020 | riotinto.com
Sustainability
OECD Guidelines for Multinational Enterprises
The OECD Guidelines for Multinational Enterprises are
recommendations by governments to multinational
enterprises operating in or from adhering countries.
They include non-binding principles and standards for
responsible business conduct in a global context consistent
with applicable laws and internationally recognised
standards. These guidelines are a multilaterally agreed and
comprehensive code of responsible business conduct that
governments have committed to promoting.
Proteus Partnership
The Proteus Partnership was formed in 2003 as a
collaborative effort between leading extractive companies
and the United Nations Environment Programme World
Conservation Monitoring Centre (UNEP-WCMC) to
improve accessibility to biodiversity data for better
decision making and support the further development of
global biodiversity resources. As a Proteus Partner, we
have access to the UNEP-WCMC online biodiversity
assessment tool, which allows us to scan for potential
sensitive areas in places where we are seeking tenure
before major investments are made.
Responsible Jewellery Council (RJC)
The RJC is an international non-profit organisation that
promotes transparent and responsible ethical, human
rights, social and environmental practices throughout the
jewellery industry – from mine to retail. We are a founding
member and were the first mining company to be certified
in 2012. We were re-certified in 2015 against the RJC
Code of Practice Standard. RJC certification covers
operations or activities of our businesses that produce
diamonds, gold or gold in concentrates that contribute to
the jewellery supply chain. This includes our diamond
mines – Diavik in Canada and Argyle in Western Australia
– and our Kennecott copper mine in Utah for gold.
The B Team Responsible Tax Principles
We are a signatory to The B Team Responsible Tax
Principles, developed by a group of cross-sector,
cross-regional companies to define what leadership in
responsible tax looks like. The disclosures in our Taxes Paid
Report, available on our website, demonstrate our approach
to the B Team’s seven ‘Responsible Tax Principles’.
The Copper Mark™
Developed by the International Copper Association –
with input from a broad range of stakeholders including
customers, NGOs and producers – The Copper Mark™
is a comprehensive, credible assurance framework to
demonstrate the copper industry’s responsible production
practices and industry contribution to the United Nations
Sustainable Development Goals. Our Kennecott mine, in
Utah, in the United States, and Oyu Tolgoi, in Mongolia,
were the first producers to be awarded the Copper Mark
– verifying our copper as responsibly produced.
Towards Sustainable Mining (TSM)
We participate in the TSM programme through our
membership of the Mining Association of Canada (MAC).
TSM is a sustainability certification that applies to
members of MAC operating in Canada.
United Nations Universal Declaration of Human
Rights (UDHR)
The UDHR is a milestone document in the history of
human rights, which sets out, for the first time,
fundamental human rights to be respected. We respect
and support all internationally recognised human rights
consistent with the UDHR.
United Nations Global Compact (UNGC)
The UNGC is a voluntary initiative based on CEO
commitments to implement universal sustainability
principles and to take steps to support UN goals. As
members, we incorporate the Ten Principles of the UN
Global Compact into strategies, policies and procedures.
United Nations Guiding Principles
on Business and Human Rights (UNGPs)
The UNGPs are a global reference point for preventing
and addressing the risk of adverse impacts on human
rights linked to business. We seek to operate in a manner
consistent with the UNGPs.
United Nations’ Sustainable Development
Goals (SDGs)
The SDGs are a set of 17 goals and 169 targets endorsed
by the UN in 2015. These present a broad sustainability
agenda focused on the need to end poverty, fight
inequality and injustice and respond to climate change
by 2030. Please see page 65 for more on our approach to
the SDGs.
Voluntary Principles on Security and
Human Rights (VPSHR)
The VPSHR guides extractives companies on how to
maintain the safety and security of their operations in line
with respect for human rights. Participants, including
governments, companies and non-governmental
organisations, agree to proactively implement or support
the implementation of the VPSHR. We published our
VPSHR report for the first time in 2018 (previously only
provided to other participants) and have committed to
doing this each year.
Annual Report 2020 | riotinto.com
91
Strategic Report Strategic Report
Risk Management
Taking and managing risk responsibly is essential to running
our business safely, effectively and in a way that creates value for our
customers and shareholders, employees and partners.
Effectively managing our risks ensures we meet our strategic objectives,
mitigate threats and create opportunities in alignment with our values
– Safety, Teamwork, Respect, Integrity and Excellence.
third lines also need to be sufficiently well connected to identify the true
nature of the underlying risk and how this may then be symptomatic or
thematic for other assets or jurisdictions within the Group.
Our approach
Effective risk management is necessary to manage both threats and
opportunities to our strategy and operations. Our risk management
process helps us identify, evaluate, plan, communicate, and manage
material risks that have the potential to impact our business objectives.
While risk management is a key accountability and performance criteria
for our leaders, all employees have a responsibility for identifying and
managing risks. Our Board and Executive Risk Management Committee
provide oversight of our principal risks and associated management
responses described on pages 95-105. The Audit Committee monitors
the effectiveness of risk management and internal controls. Our risk
management system is made up of six core elements (see page 93) – one
of which is our risk management framework, which sets out clear roles
and responsibilities, standards and procedures. We also have three lines
of defence to verify that risks are being effectively managed in line with
our policy, standards and procedures, including across core business
processes such as finance, health and safety, social performance,
environment and major hazards. You can view our risk management
standard at www.riotinto.com.
The overall effectiveness of the risk management framework requires
clear expectations and consistency of application of the framework,
across different product groups and businesses, countries of operation
and functional areas of expertise.
This clearly did not happen in the case of the events leading to the
destruction of the rock shelters at Juukan Gorge in May 2020. Following
the events at Juukan Gorge, we have made changes to cultural heritage
risk management within that framework. These changes strengthen the
first and second lines of defence, establishing a Communities and Social
Performance Area of Expertise to deliver a more rigorous assurance
framework with regard to the way we manage host communities and
cultural heritage risks across our operations globally. The tragedy of
Juukan Gorge highlights the critical dependency on risks being identified
and then monitored on an ongoing basis by operational management
(within the first line of defence). From there, if circumstances change, the
risk needs to be escalated quickly and appropriately to senior leaders and
the relevant functional experts within the second line. The second and
Of course, all of this system of risk management and internal control is
predicated upon a culture that recognises and prioritises cultural heritage
specifically, and more generally supports the timely and effective
communication and escalation of risk. Fundamentally, risk frameworks
are only ever as good as the information that flows through them, and
the experience and judgment of individuals in key positions. This is
particularly important in a group that is of our size, scale and complexity.
The Board, Audit Committee and our business and functional
management teams are all determined to play a part in making these
improvements to the overall culture and systems of risk management
and internal control to ensure that the lessons learned from Juukan
Gorge are applied to other risk areas, particularly other environmental
and social risks.
Every part of our risk management
framework is there to challenge and
evaluate the status of our risk profile in
the pursuit of our business objectives.
The way we challenge the status is
by having three lines of defence that
support leaders in critically reviewing and
validating their own operating assumptions.
Three lines of defence
Responsibilities
Accountability of
1st – All operational leaders
Identification, management, verification and monitoring of risks and controls
Management
2nd – Centre of Excellence and
Areas of Expertise
Oversees risks, control effectiveness, advice on capability and ensures objective
assurance against Group’s policies, standards and procedures
Management
3rd – Group Internal Audit
Provides independent verification that risks and internal controls are being
managed effectively
Board and Board committees
92
Annual Report 2020 | riotinto.com
Risk Management
Risk assurance
– Assurance for management that
risks and critical controls are being managed
effectively.
Capability and culture
– Risk capability built through coaching and training
for leaders and teams across our business
– Risk culture of active management of risks is
embedded into how we run our business
– Risk culture fosters collective ability to identify
and understand, openly discuss and respond to
current and future risks.
Systems, technology and data analytics
– Leverage systems and data analytics
to support risk analysis, management
and oversight.
Risk
management
Risk management framework
– Group’s roles and responsibilities, standards,
procedures and guiding principles for effective,
consistent and integrated risk management.
Risk analysis and management
– Risks are measured, monitored and managed,
which requires that critical controls performance
is also being measured, monitored and managed
– Risks and their control information are current,
transparent and connected
– Leader-led analysis and management.
Reporting oversight and insights
– Management’s oversight is supported by proactive
reporting and effective escalation
– Decision-making is supported by connected and
insightful risk analysis.
Emerging risks
As a company, we are inherently exposed to long-term risks because of
our long-life operations and growth pipeline. We track leading indicators
of emerging risks and their likely impact on our long-term prospects. We
proactively analyse the impact of these risks on our business model
through plausible scenarios of the interplay between geopolitics, societal
expectations and technology advancement.
The COVID-19 pandemic has brought additional uncertainty globally and
the recovery pathway remains unclear. Our agility and resilience has
enabled us to continue to operate, deliver products to our customers and
contribute to economies and communities. Since early 2020, we have
activated business resilience teams across our global operations,
introduced strict health measures to protect our employees and
communities, and adapted our systems to support a significant number
of employees working from home. We continue to closely monitor the
potential short-to-long-term impacts on our business. This includes
impacts on our employees, supply chain, market demand and trade,
as well as the resilience of global financial markets to support an
economy recovery.
Emerging risks by nature are highly uncertain, with scope for rapid or
non-linear evolution. The main categories of emerging risks that we
monitor continuously, and that could potentially have an impact
(positive or negative) on the Group are described below:
Trade tensions: Trade is an essential part of our business, and the
mining sector in general, as the majority of our products cross national
borders. Throughout the year, we have seen the dynamics of geopolitics
causing volatile market conditions including the introduction of tariffs on
various goods between China and the US, tariffs on Canadian aluminium
imports to the US, a targeted reduction on imports from Australia by
China and tightening of foreign investment laws in Australia and Canada.
Although we have not been significantly affected by these dynamics to
date, we monitor these trends closely, and in particular the evolution of
the relationship between Australia and China.
Increasing societal and investor expectations: In 2020, we continued
to see increasing expectations and focus on social equality, fairness
and sustainability – and how companies address these issues. Financial
institutions are also placing greater emphasis on environmental, social
and governance (ESG) considerations when making investment decisions.
The increasing focus on ESG has the potential to shape the future of the
mining industry, supply cost structures, demand for global commodities
and capital markets. While this presents us with opportunities for
portfolio and product differentiation, it has the potential to impact how
we operate.
Host communities and cultural heritage: We are committed to
strengthening our relationships with host communities, including
Traditional Owners and First Nations and improving the way we manage
cultural heritage. We have taken a number of actions to address the
lessons learned from Juukan Gorge, including establishing a standalone
Communities and Social Performance (CSP) Area of Expertise, which will
deliver more rigorous assurance across our operations and elevate
communities risk processes. We have also set up an Integrated Heritage
Management Plan with strict approval protocols at both the product
group and Group levels. We include more detail about the actions we are
taking in response to Juukan Gorge on 114-115.
Resource depletion: The continual replenishment of economically viable
resources is essential for our future growth. Our past divestments,
planned closures and uncertainty over resource assumptions – without
reciprocal resource replenishment through exploration or acquisitions –
could impact our growth options. Additionally, our ability to access
resources could potentially be impacted as regulations evolve.
Transition to a low-carbon future: Climate change constitutes an
important part of our sustainability approach. Climate change risks have
formed part of our strategic thinking and investment decisions for over
two decades. The transition to a low-carbon future presents both
challenges and opportunities for our portfolio over the short to long term.
Key areas of uncertainty include future climate change regulation and
policies, the development of low-carbon technology solutions and the
pace of transition across our value chains, in particular the
decarbonisation pathways across the steel sector.
We are targeting a 15% reduction in absolute emissions from 2018 levels
by 2030, with an ambition to reach net zero emissions by 2050 across our
operations. Overall, our growth between now and 2030 will be carbon
neutral. We continue to enhance our monitoring and management of
greenhouse gas emissions, water and land use, and rehabilitation.
We are also actively engaging in partnerships to explore ways to improve
environmental performance across our value chains, such as with China
Baowu Steel Group, Tsinghua University and Nippon Steel Corporation in
the steel sector, and the ELYSISTM joint venture in the aluminium sector.
We are also active participants in the International Council on Mining and
Metals and the Climate-Smart Mining initiative. Please refer to our
climate change report, available on our website, for further details.
Annual Report 2020 | riotinto.com
93
Strategic Report Strategic Report
Risk Management
continued
Structural change across commodity markets: The increasing focus on
ESG investors and the developments of current geopolitical tensions,
coupled with the transition to a low-carbon future, have the potential to
structurally change the supply and demand of global commodities.
Demand for our commodities could shift to ‘greener’ alternatives, with a
higher dependence on recycling, ie secondary supply. Alternatively, an
increased focus on ensuring supply security could see large volumes of
supply enter the market, potentially impacting future margins.
Technology advancement: Technological advances bring both
opportunities and threats for our business. Digital connectivity has
enabled us to conduct essential activities, including assurance work, at
remote sites where travel has been restricted due to COVID-19.
Technology will also be a key enabler to reaching our net zero emissions
ambition, through initiatives such as decarbonising the electricity
network at our Pilbara iron ore operations in Western Australia and the
ELYSISTM carbon-free aluminium smelting process. However, cyber
attacks are becoming more prevalent and we have had to invest
significantly in technology to enhance our cyber security.
Longer-term viability statement
As discussed above, we closely monitor and assess the impact of key
emerging risks on our long-term prospects and, where possible,
proactively build response plans into our investment decisions.
Our long-term planning reflects our business model of running our
business in ways that are safer, smarter and more sustainable. To ensure
we remain resilient in the long term, our business model is continuously
stress tested against the key uncertainties within the emerging risks,
with recommended actions to mitigate potential downside. These are
presented to the Board on an annual basis as part of the Group strategy
discussions. We then develop our strategy and make capital investment
decisions based on this assessment. We also regularly assess our
financial investment capacity to ensure our capital commitments can be
funded in line with our disciplined approach to capital allocation.
Our business planning processes include preparing a one-year detailed
financial plan and a longer-term life-of-asset outlook. This planning
process includes modelling a series of macroeconomic scenarios and
using a range of assumptions that consider both internal and external
factors. As part of our robust risk management framework, we closely
track, monitor and mitigate principal risks to our business plan and model.
The key assumptions underpinning our long-term plan include:
– long-term economic growth and commodity demand in major
markets, such as China;
– continued access to and economic viability of resources and reserves
to support organic and inorganic growth programmes;
– pathways to reduce carbon footprint;
– no significant industry-wide disruptive technology or productivity
enhancement that unlock very low cost supply; and
– no operational risks materially impacting the long-term plan.
Our business plan and macroeconomic forecast has its greatest level of
certainty in the underlying assumptions in its first three years. However,
our longer-term viability assessment examines the first five years
(2021-25) of the business plan. This not only enables a detailed analysis
of potential impact of risks materialising in quick succession in the first
three years but also enables us to further stress test the business plan
for risk materialising towards the end of the time period, although with
lesser certainty. This allows directors to assess our capacity to exercise
financial levers available in both the three-year and five-year time frame
to maintain the Group’s viability.
94
Annual Report 2020 | riotinto.com
The principal risks and uncertainties included in our longer-term viability
assessment are as follows:
– Economic risk: A global financial crisis triggered as the COVID-19
pandemic persists and global tensions intensify that lead to positive
but low growth in China and an economic downturn in the rest of the
world. Large negative pricing shocks are assumed in 2021, followed
by persistent slow growth rates.
– Operational risk: A ‘one-off’ catastrophic event resulting from a major
operational failure, such as a tailings and water storage facility failure,
extreme weather event, underground or geotechnical event resulting
in multiple fatalities, cessation of operations and significant financial
impacts.
We quantify the expected financial impact of each risk based on internal
macroeconomic and business analysis, as well as internal and external
benchmarking on similar risks. We apply a probabilistic approach to
quantify risks and impacts where relevant. Although the likelihood of
more than one principal risk materialising in close succession is unlikely,
the stress test assumes these risks could materialise individually and in
multiple combinations to create severe but plausible scenarios that could
threaten the Group’s viability.
Applying these scenarios, the first five years of the Group’s business plan
is stress tested to assess the impact on the Group’s longer-term viability,
including whether additional financing facilities will be required. In
addition to liquidity and solvency, the assessment also considers other
financial performance metrics such as cash flow, debt capacity and credit
rating, as well as dividend payments. These metrics are subject to robust
stress tests and reverse stress tests.
Taken in isolation, each risk does not threaten the viability of our
business model. The main impact from each risk is a significant decrease
in our free cash flow and subsequent reduction in the dividend. We have
levers in place to maintain adequate levels of liquidity, including reducing
discretionary capital expenditure and accessing lines of credit.
The most ‘severe’ scenario, albeit unlikely, considers the financial impact
of both economic and operational risks materialising in a single year at
the start of the assessment period, followed by a second operational risk
occurring towards the end of the five-year time period. This scenario
would create both an immediate and prolonged severe impact, followed
by a second impact on the Group’s financial performance towards the
end of the period of assessment with an estimated negative free cash
flow of $11 billion. The Group has a suite of management actions
available to preserve resilience, including accessing lines of credit,
reducing capital expenditure and raising debt while maintaining the
shareholder return policy. Our financial flexibility could potentially be
limited during the peak of the crisis. The viability of the Group under all
the severe but plausible scenarios tested remained sound.
Although we have made significant efforts to predict global recovery
pathways from the COVID-19 pandemic, there still remains large
uncertainty on how the situation will develop and how far reaching the
impact will be. We have assumed a ‘severe’ recovery pathway to mitigate
some of this uncertainty and give a greater level of confidence to the
directors in assessing our long-term viability.
Therefore, taking into account the Group’s current position and the
robust assessment of our principal risks, the directors have assessed the
prospects of the Group over the next five years (until 31 December 2025)
and have a reasonable expectation that we will be able to continue to
operate and meet our liabilities as they fall due over that period.
Principal Risks and Uncertainties
Principal Risks and Uncertainties
The principal risks and uncertainties outlined in this section
reflect the risks that could materially affect (negatively or positively)
our performance, future prospects or reputation.
We examine our principal risks and uncertainties to our business
objectives within the strategic context of our geopolitical, societal and
technological landscape. A principal risk is one or a combination of risks
that can manifest externally or internally, be of any nature, and escalate
from any area of the business. As such, we set expectations that all our
leaders and team members understand their risks, assess them in line
with Group policies and procedures, and respond. Where risks are
material to the Group, they are escalated to the Executive Risk
Management Committee and, as appropriate, to the Board or its
committees. This requires a strong risk culture that we continue to
develop and foster.
The principal risks, uncertainties and trends outlined in this report should
be considered as forward-looking statements and are made subject to
the cautionary statement on page 384. We regularly assess the potential
impact and likelihood of our principal risks to support the prioritisation of
our efforts and resources. The assessment of these principal risks and
the effectiveness of our associated controls reflect management’s
current expectations, forecasts and assumptions and, by definition,
involve subjective judgments and are subject to changes in our internal
and external environments. While we deploy preventative and mitigative
controls to reduce the likelihood and consequence of risks, and manage
potential impacts, the following describes the inherent risks to our
business. There remain certain threats, such as natural disasters and
pandemics, where there is limited capacity in the international insurance
markets to transfer such risks. We closely monitor these threats and
develop business resilience plans. We also seek to bring a commensurate
level of rigour and discipline to our managed and non-managed joint
ventures as we do to our wholly-owned assets, through engagement and
influence, in line with applicable laws.
In 2020, the ongoing management and monitoring of these risks, controls
and response plans has continued to be the responsibility of the Group’s
Executive Risk Management Committee (RMC) and, where required, a
dedicated management committee chaired by an Executive member to
oversee a specific principal risk. This year, we are providing greater
transparency to our shareholders in disclosing not only the mitigations
for principal risks but also where in our business (resources, assets or
relationships) the risk exists. Additionally, we identify the
interconnectivity of our Strategic1, Economic2 and Operational3
principal risks within our investors’ Environment4, Social5 and
Governance6 (ESG) approach.
Current assessment of principal risks
As of February 2021
Principal risks
1
2
3
4
5
6
7
8
9
Living our corporate values
Geopolitics impacting trade and/or
investment
Transition to a low-carbon future
Execution of acquisitions and
divestments
New ore resources
Strategic partnerships
Relationships with communities
Attract and retain requisite skilled
people
Commodity economics
10 Access to capital through economic
cycles
11 Resources to reserves
12 Capital project delivery
13 Change in tax regulations
Focus
Strategic; ESG
Strategic
Strategic; ESG
Strategic
Strategic; ESG
Strategic; ESG
Strategic; ESG
Strategic; ESG
Economic
Economic
Economic
Economic
Economic
14
Safety incident or major hazard event
Operational; ESG
15 Cyber breach
Operational
16 Physical impacts from climate change
Operational; ESG
17 Water scarcity and management
18 Natural disaster exposure
Operational; ESG
Operational; ESG
19 Closure, reclamation and rehabilitation
Operational; ESG
20 Civil unrest
21 COVID-19
22 Breach of our policies, standards and
procedures, laws or regulations
Operational; ESG
Operational; ESG
Operational; ESG
i
n
a
t
r
e
c
t
s
o
m
A
l
y
l
e
k
L
i
i
e
l
b
s
s
o
P
y
l
e
k
i
l
n
U
e
r
a
R
i
)
s
l
o
r
t
n
o
c
g
n
i
t
s
x
e
f
o
s
s
e
n
e
v
i
t
c
e
f
f
e
r
o
f
g
n
i
t
n
u
o
c
c
A
(
d
o
o
h
i
l
e
k
L
i
4
7
8
1
3
19
22
20
21
5
11
2
10 12
15
16
17 18
9
6
14
Very Low
Low
Moderate
High
Very High
Impact
1. Strategic – risks arising from uncertainties that may impact our ability to achieve our strategic objectives.
2. Economic – risks that directly impact financial performance and realisation of future economic benefits.
3. Operational – risks arising from our business that have the potential to impact people, environment, community and operational performance including our supply chain. HSE risks are specific
operational risks.
4. Environment – risks arising from our business that have the potential to impact on air, land, water, ecosystems and human health.
5. Social – risks arising from our business that have the potential to impact on society, including health and safety.
6. Governance – risks arising from our workplace culture, business conduct and governance.
Annual Report 2020 | riotinto.com
95
Strategic Report
Strategic Report
Principal Risks and Uncertainties
continued
1. Living our corporate values
Living our values (Safety, Teamwork, Respect,
Integrity and Excellence) goes to the heart of our
Group’s performance, future prospects and reputation.
Sharing and demonstrating our values through our
behaviours together unlocks opportunities for high
performance in all that we do.
Management response
Our code of conduct, The Way We Work, provides clear
guidance on how we should conduct our business, no matter
where we work or where we are from. The following
programmes have been deployed to support our leaders
and teams in living our values:
– Leader and employee training in our values and
behaviours.
– Business integrity training tailored to their role
responsibilities and risk exposures.
Strategic
ESG
Opportunities
Our reputation and ability to build respectful and trusting
partnerships is dependent on our business conduct
consistent with our corporate values.
Trend
Threats
COVID-19 travel restrictions have reduced the ability to have
face-to-face cultural and leadership development
programmes. Hence, we are finding new ways to engage,
induct and develop our people through use of virtual and
online programmes.
Potential impact
– Group reputation
– Licence to operate
– Future financial and
operational
performance
2. Geopolitics impacting trade and/or investment
Strategic
International geopolitics may impact our ability to
operate effectively and/or invest.
Opportunities
Operations spanning diverse commodities and jurisdictions
provide resilience against country-specific tariffs.
Trend
Management response
We aim to mitigate the impact of geopolitics by:
– Continually testing the resilience and optionality from our
diverse portfolio of commodities, markets and
jurisdictions.
– Ongoing monitoring of the political environments where
we operate as well as our key markets and engagement
with government and customers in those areas.
Threats
Increased trade tensions may undermine rules-based trading
system and lead to trade actions (increased tariffs and
retaliation), potentially impacting key markets for our
products.
Potential impact
– Future financial
performance
– Liquidity
– Group reputation
Link to strategy
P
Portfolio
P
People
P
Performance
P
Partners
96
Annual Report 2020 | riotinto.com
Strategic
ESG
Opportunities
Each of the commodities we produce has a role to play
in the transition to a low-carbon future – aluminium
in electric vehicles, copper in wind turbines, iron ore for
critical infrastructure and minerals for rechargeable batteries,
such as lithium.
Threats
Current and emerging climate regulations have the potential
to result in increased costs, change supply and demand
dynamics for our products and create compliance risks, all of
which could impact our financial performance and reputation.
Trend
Potential impact
– Business model
value
– Future financial and
operational
performance
– Group reputation
– Partner to operate
Principal Risks and Uncertainties
3. Transition to a low-carbon future
Climate change is a systemic challenge and will
require co-ordinated actions between nations,
industries and society. Our risk is that we do not adapt
competitively to the requirements of a low-carbon
future, including expectations of Scope 3
commitments in the products we produce and the way
we operate our business, resulting in reputation
damage with key stakeholders eroding investor
confidence, market value and business resilience.
Management response
Climate change has formed part of our strategic thinking and
investment decisions for over two decades. We continue to be
part of the solution by:
– Setting targets to reduce our emissions (on an absolute
and intensity basis) over the short, medium and long
term.
– Investing approximately $1 billion over five years in
emissions reduction projects.
– Engaging with key stakeholders on climate change issues,
including investors, industry associations and
governments.
– Partnering to reduce the carbon footprint across our value
chain. This includes the development of new partnerships
for technologies and responsible sourcing to explore
pathways with our customers and suppliers to improve
the environmental performance of our product value
chains.
– Investing in projects and research and development
initiatives that will increase the supply of the materials
essential to a low-carbon future.
– Considering climate change in our strategic and
operational decision-making, including the use of an
internal carbon price.
4. Execution of acquisitions and divestments
Strategic
Acquisitions’ (or divestments’) actual realised value
may vary materially from original business case.
Management response
We practise a disciplined approach to acquisitions and
divestments that includes:
– Detailed, objective due diligence on all material
divestments and acquisitions.
– Rigorous third-party due diligence and assurance.
– Involving business unit leaders early in the process to
manage post-acquisition integration into the Group.
– Conducting post-investment reviews on divestments and
acquisitions to identify key learnings and embed them in
future initiatives.
Opportunities
Proceeds realised from divested assets are greater than
planned, allowing more capital to be returned to shareholders
or redeployed into higher-returning or more productive uses.
We successfully acquire and integrate businesses on
acceptable terms that provide sustainable future cash flow
and/or future growth options.
Threats
Value is not realised from divestment or acquisition through
changing or incorrect assumptions, unanticipated liabilities
or integration costs.
Trend
Potential impact
– Valuation
– Future financial
performance
– Solvency
– Liquidity
– Group reputation
Annual Report 2020 | riotinto.com
97
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
5. New ore resources
The success of exploration programmes and/or
acquisitions may be insufficient to offset depletion.
Management response
We have grouped the reporting lines of our Exploration,
Mergers and Acquisitions and Group Strategy teams under
one Executive Committee member to better leverage our
collective knowledge of opportunities. This enhances our
ability to:
– Continually review opportunities in the exploration and
acquisitions portfolios and prioritise accordingly.
– Leverage and develop new technologies for exploration
and evaluation of reserves/resources.
– Create and maintain third-party partnerships to grow
our portfolio.
Strategic
ESG
Opportunities
Exploration and/or acquisitions have the potential to increase
resources in commodities currently within our portfolio or
diversify into new commodities. We focus our activity on our
highest-value projects, particularly on evaluating the
Resolution Copper project in Arizona, US, and advancing our
Winu copper/gold deposit in Australia. When determining
targets, we consider our customers’ and society’s needs for
new products and design our strategy to maximise
opportunities.
Trend
Potential impact
– Valuation
– Future financial and
operational
performance
– Group reputation
Threats
Recent assessment indicates a net decrease in our resources
and reserves across all commodities. New large, long-life
deposits are increasingly scarce and those that are known
require advances in processing technology and/or significant
capital investment in infrastructure.
6. Strategic partnerships
Strategic partnerships play a material role in delivering
our growth, production, cash or market positioning,
and these may not always develop as planned.
Strategic partnerships include our Traditional Owners,
customers, joint ventures partners (managed and
non-managed), governments and our suppliers.
Management response
We approach investments and partnerships with a view
to long-term development of relationships rather than
short-term transactional advantage. To support that we:
– Actively participate within the governance structures of
joint ventures to promote, where possible, alignment with
the Group’s policies and strategic priorities.
– Modernise our agreements with Traditional Owners, which
includes modifying clauses to ensure respect,
transparency and mutual benefit.
– Engage in partnerships to explore ways to improve
environmental performance across our value chains, such
as with China Baowu Steel Group and Tsinghua University
and the ELYSIS.
In addition, our code of conduct, The Way We Work, provides
clear guidance on how we should conduct our business, no
matter where we work or where we are from.
Strategic
ESG
Opportunities
Strategic partnerships offer opportunities to create mutual
benefits for all parties involved by leveraging the differing
strengths of the participants. This may be realised through
increased community participation in employment and
procurement opportunities, access to resources, increased
shareholder returns, or reduced political, portfolio and
operational risks. Where we partner in operations, we seek to
bring a commensurate level of rigour and discipline to our
managed and non-managed joint ventures as we do to our
wholly-owned assets, through engagement and influence and
in line with applicable laws.
Trend
Potential impact
– Group reputation
– Future financial
and operational
performance
– Valuation
Threats
Disruption to our partnerships may limit the expected
benefits received by participants and lead to interruptions to
our operations, development projects and exploration
activities. For non-managed operations, the decisions of the
controlling partners may cause adverse impacts to the value
of our interest in the operation, or to our reputation, and may
expose us to unexpected liabilities.
98
Annual Report 2020 | riotinto.com
Principal Risks and Uncertainties
7. Relationships with communities
We may not be viewed as a trusted partner by society
and governments, affecting our ability to operate and
grow through collaborative and mutually beneficial
partnerships.
Management response
We aim to make a positive contribution to the communities in
which we operate through:
– Establishing a Community and Social Performance (CSP)
Area of Expertise to deliver a more rigorous assurance
framework across our operations and elevate CSP risk
processes.
– Ensuring respect for communities’ human rights, aligning
our commitments with international standards.
– Modernising our agreements, which includes modifying
clauses to ensure respect, transparency and mutual
benefit.
– Implementing an integrated cultural heritage
management system with strict approval protocols at
both the product group and Group levels.
– Developing mutually beneficial partnerships with local
communities and establishing appropriate social
performance targets.
– Instigating community investment programmes.
– Implementing local procurement policies and targets.
– Setting local content commitments for major
capital projects.
Strategic
ESG
Opportunities
Strong relationships with the communities in which we
operate have the potential to provide stable operating
environments. Respectful and positive engagement with
communities, governments and other stakeholders can
support access to new resources, create stable and
predictable investment and operating environments, and
shape mutually beneficial policies and legal/regulatory
frameworks.
Trend
Potential impact
– Group reputation
– Future financial and
operational
performance
Threats
Access to land and resources may be impacted if we are not
considered a trusted partner in certain regions. Other
potential actions can include litigation, expropriation, export
or foreign investment restrictions, increased government
regulation and delays in approvals, which may threaten the
investment proposition, title, or carrying value of assets.
8. Attract and retain requisite skilled people
Strategic
ESG
Our ability to maintain our competitive position is
dependent on attracting, developing and retaining
services of a wide range of internal and external skilled
and experienced personnel and contracting partners.
Opportunities
Enhance productivity and business resilience through
building operational and commercial excellence. Higher local
employment can increase our business resilience and
community trust.
Threats
Business interruption or underperformance may arise from a
lack of capability in people, standards, processes or systems
to prevent, mitigate or recover from an interruption which
results in a material loss to the Group.
Management response
Attracting, developing and retaining the best people is crucial
to our success. We aim to achieve this by:
– Investment in leadership and team member skills to
develop an environment of inclusion to attract and
leverage our diversity.
– Talent management and planning.
– Engagement strategy that is able to respond to changing
external and internal expectations of people.
– Maintain a safe working environment.
– Maintain competitive remuneration and benefits.
– Provide learning and career development opportunities
for our people to build skills for today and our future.
Trend
Potential impact
– Future financial and
operational
performance
– Communities and
social performance
– Group reputation
Annual Report 2020 | riotinto.com
99
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
9. Commodity economics
Economic
Commodity prices, driven by demand for and supply
of our products, vary and may not be as expected
over time. China is the largest market for our products
and its growth pathway could affect demand for
our products.
Opportunities
A rise in commodity prices or favourable exchange rate
movements generates more cash flow from our operations,
enabling us to pursue growth options or capital expansions,
pay down debt and/or increase returns to shareholders.
New opportunities for ‘green’ supply.
Threats
Falling commodity prices or adverse exchange rate
movements reduce cash flow, limiting profitability and
shareholder returns. These may trigger impairments and/or
impact our credit ratings. Extended subdued prices may
reflect a longer-term fall in demand for our products, and the
reduced earnings and cash flow streams resulting from this
may limit investment and/or growth opportunities.
Unfavourable changes in the cost of production can arise,
such as increased fuel prices.
Management response
We operate in global markets and accept the value impact of
exchange rate movements and market-driven prices on our
commodities. Our approach includes:
– Maintaining low-cost production, allowing profitable
supply throughout the commodity price cycle. We deliver
this through productivity initiatives that seek to create
value and/or reduce waste and procurement and supply
chain management practices that respond to changes in
input costs.
– Maintaining a diverse portfolio of commodities across a
number of geographies.
– Maintaining a global portfolio of customers and contracts.
– Leveraging market-facing sales, marketing and trading
resources in the Group.
– Monitoring multiple leading indicators and undertaking
detailed industry analysis to inform our forecasting
assumptions and using scenarios to test the resilience of
our portfolio and exploring opportunities.
10. Access to capital through economic cycles
Economic
Trend
Potential impact
– Future financial
performance
– Solvency
– Liquidity
Opportunities
Favourable market conditions and strong financial
discipline could increase our liquidity and/or balance
sheet strength, allowing us to pursue investment or
growth opportunities, pay down debt and/or enhance
returns to shareholders.
Threats
Our ability to raise sufficient funds for capital
investments during a major economic downturn.
Trend
Potential impact
– Future financial
performance
– Solvency
– Liquidity
– Group reputation
External events and financial discipline may impact our ability
to access capital and support our strategy.
Management response
We aim to manage the liquidity and financing structure of the Group
using forecasts and sensitivity analysis tools to actively monitor,
determine and enable access to the appropriate level, sources and
types of financing required. This process is strengthened by:
– Ensuring compliance with our Treasury policy and standard, which
outlines the fundamental principles that govern our financial risk
management practices.
– Committing to prudent financial policies and financial discipline,
including credit and liquidity metrics commensurate with a strong
investment grade rating.
– Maintaining the liquidity and financing structure of the Group
through regular forecast, sensitivity and stress testing tools to
actively monitor, determine and enable access to the appropriate
level, sources and types of funding required.
– Subjecting funds invested to credit limits, dynamic risk scoring,
and maturity profile based on Board-approved frameworks to
ensure appropriate liquidity and risk diversification.
– A disciplined capital allocation process supported by Evaluation
and Investment Committee.
– Board approval of the financial strategy, long-term planning and
cash flow forecasting.
– Applying a shareholder returns policy that allows shareholder
returns to adjust with the cycle.
100
Annual Report 2020 | riotinto.com
Principal Risks and Uncertainties
11. Resources to reserves
Economic
Opportunities
Through operational efficiencies, deployment of new
technologies or increased orebody knowledge we can
improve the discovery of new Resources, convert a greater
proportion of Resource to Reserve, and extract them in a
more economical way.
Threats
Inadequate knowledge of our Resources and Reserves
increases production costs and ore loss within our production
systems. Failure to capture the benefits of new technologies
may reduce our volume of available Reserves.
Trend
Potential impact
– Future financial
performance
– Valuation
Our estimates of ore resources and reserves may vary.
The volume of material reported in Resource and
Reserve is based on the geological, commercial and
technical information available at the date of the
report and is, by its nature, incomplete. As new
information comes to light, the economic viability of
some Ore Reserves and mine plans may be reassessed
with material impacts (positive or negative).
Management response
We invest in developing our orebody knowledge to inform our
company’s organic growth pathways and projections of
financial performance. This includes:
– Compliance with the Group’s Resources and Reserves
standard.
– Establishment of the Orebody Knowledge (OBK) Centre
of Excellence.
– Development of operational KPIs to ensure inputs to
Mineral Resource and Ore Reserve calculations remain
valid. This includes spatial plan conformance and grade
and tonnage reconciliation.
– Compliance with processes for optimal asset development
and Resource and Reserve maintenance.
12. Capital project delivery
Economic
Opportunities
An ability to develop projects safely, on time and within
budget enhances our cash flow, licence to operate and
investor confidence. Effectively implementing optimisation
programmes reduces cost and accelerates development
schedules, resulting in higher returns earlier.
Threats
A delay or overrun in a project schedule and/or a significant
safety or process safety incident could negatively impact our
profitability, cash flow, ability to repay project-specific debt,
asset carrying values, growth aspirations and relationships
with key stakeholders. A failure to secure the required
approvals (regulatory and from partners) may cause delays in
project delivery with a corresponding increase in costs. In
2020, COVID-19 has affected the delivery of major projects
due to restrictions on travel and supply chains, though some
mitigation activities have reduced these impacts.
Trend
Potential impact
– Future financial and
operational
performance
– Health, safety,
environment and
security (HSE&S)
– Solvency
– Liquidity
– Group reputation
Large capital investments require multi-year execution
plans and are complex. Our ability to deliver projects
to baseline plan – principally in terms of safety, cost
and schedule – may vary due to changes in technical
requirements (eg geotechnical), law and regulation,
government or community expectations, or through
commercial or economic assumptions proving
inaccurate through the execution phase.
Management response
We develop large-scale capital projects through a specialised
division. Our methodology includes:
– Implementation of the project management
control framework and assurance activities to
ensure compliance.
– Stakeholder engagement is managed by the product
group that will have ownership of the project through
to operation.
– Following a rigorous project approval and stage-gating
process, including monitoring and status evaluation,
as articulated in the project evaluation standard
and guidance.
– Maintaining a strong focus on contractor management.
– Undertaking strategic workforce planning to ensure the
critical roles are appropriately managed.
Annual Report 2020 | riotinto.com
101
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
13. Change in tax regulations
Economic
Trend
Potential impact
– Financial
– Valuations
– Stakeholder
relations
Opportunities
We actively promote transparent and responsible tax
practices and will further increase our transparency to adopt,
in full, the new Global Reporting Initiative (GRI) tax
transparency standard. This presents an opportunity to
demonstrate our commitment to meeting regulatory and
social obligations consistent with increasing community
standards.
Threats
Tax revenues play an important role in assisting governments
to provide essential services and provide an opportunity for
companies to contribute to the communities in which they
operate. Tax policy settings are a relevant factor in
investment decisions, particularly for industries that require
significant upfront investment. Changes to the global tax
framework must provide appropriate outcomes in the
allocation of taxing rights between countries and provide
certainty for companies seeking to invest. The potential for
policy design that does not consider the features relevant to
capital intensive industries or the adoption of unilateral
approaches risks uncertainty, complexity and double
taxation, which may adversely impact future investment
decisions.
The international tax policy landscape is becoming
increasingly contentious with discussion related to
digital taxes raising threats of trade wars and providing
the impetus to implement significant changes to the
global tax framework.
Management response
Our approach to tax policies and governance seeks to keep
pace with increasing community standards, increasing tax
authority and government expectations, and civil society
initiatives promoting responsible tax and transparency.
We aim to achieve this by:
– Engaging constructively in local and international tax
reform dialogue to contribute to the development of
sustainable and effective tax systems.
– Maintaining our commitment to the B Team Responsible
Tax Principles, which are intended to provide a leadership
standard driving best practice in tax governance, reporting
and interactions with tax authorities. These principles are
embedded in our tax policy.
– Verifying our compliance to our tax policy through our
Internal Audit, which sets the following expectations:
– Full compliance with statutory obligations
accompanied by full disclosure in our Annual Taxes
Paid report.
– High standards of tax risk management.
– Transparent and constructive working relationships
with tax administrators.
– Proactive management of taxes pursuant to a robust
tax governance framework.
102
Annual Report 2020 | riotinto.com
Operational
ESG
Opportunities
Meeting and exceeding our commitments in safety and
hazard management.
Trend
Threats
Failure to manage our health, safety, environment or
community risks could result in a catastrophic event or
other long-term damage that could harm our financial
performance and licence to operate.
Potential impact
– Multiple fatalities
– Operations
disruption
– Communities and
social performance
– Group reputation
– Financial loss
Principal Risks and Uncertainties
14. Safety incident or major hazard event
Our operations and projects are inherently hazardous,
with the potential to cause illness or injury, damage to
the environment, and disruption to communities.
Major hazards include process safety, underground
mining, surface mining and tailings and water storage.
Management response
Nothing is more important than the safety and wellbeing of
our employees, contractors and communities. We believe all
incidents are preventable, so we concentrate on identifying,
understanding, managing and, where possible, removing
the hazard or removing people from the hazardous area.
Key initiatives include:
– Development of Centres of Excellence for key technical
capability in major hazard and asset management.
– Implementation of slope geotechnical, tailings
management, underground mining and process safety
technical and safety standards and procedures.
– Business resilience planning and execution exercises for
‘severe but plausible’ scenarios.
– Oversight by the Sustainability Committee, supported by
the Group’s Executive Risk Management Committee, as
well as second and third line defence activities. The
second line of defence is provided by our central support
functions and technical Centre of Excellence (CoE) teams
to verify compliance with Group policies, standards and
procedures.
– Regular review and audit of HSE&S processes, training
and controls to promote and improve effectiveness at
managed and (where practicable) non-managed
operations.
– Monitoring monthly HSE&S performance at the
Group level and sharing learnings from HSE&S incident
investigations.
– Building safety targets into personal performance metrics
to incentivise safe behaviour and effective risk
management (see Remuneration Report).
– Focus on fatality elimination through our critical risk
management programme, which verifies safety risk
controls are in place before work starts.
Annual Report 2020 | riotinto.com
103
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
15. Cyber breach
Operational
Threats
The growing volume and sophistication of cyber threats is
increasing the likelihood of compromise, offset by significant
improvements in the effectiveness of control measures.
Trend
Potential impact
– Operational
disruption and/or
breach of
operational integrity
– Breach of data
privacy or
commercially
sensitive data
– Group reputation
– Financial loss
Cyber risk may disrupt our operations, affect how our
employees work and/or breach data privacy and other
sensitive information related to customers,
contractors and suppliers. Cyber breaches can arrive
from malicious external or internal attacks, but also
inadvertently through human error.
Management response
We continue to invest in our information systems and
technology (IS&T) infrastructure and teams not only to
advance our automation projects but also to safeguard our
assets. Measures include:
– Cyber controls including detection, identification,
protection and recovery.
– Group standard and procedure with improved monitoring
and compliance.
– Improved IS&T asset management with executive level
sponsorship and oversight from our Cyber Security
Steering Committee.
– New technology solutions implemented to improve cyber
threat detection and response for critical assets.
– Third-party risk management through contractual
inclusions and proactive compliance assessments.
– Business resilience plans for cyber breaches across all
critical assets.
16. Physical impacts from climate change
Operational
ESG
Our operating sites may be vulnerable to the physical
impacts of climate change including extreme weather
events, rising sea levels or extreme temperature
impacts on operating environments.
Opportunities
By understanding specific exposures across our portfolio, we
can build in measures as part of our capital programmes to
reduce losses in the event of a natural disaster.
Trend
Threats
Climate change has the potential to significantly reduce
rainfall in areas where we operate, which may lead to water
shortages. Conversely, an extension of the tropical cyclone
season in the Pilbara, Western Australia, would impact our
iron ore operations. A significant warming trend, particularly
influencing maximum temperatures, would also impact the
way we operate.
Potential impact
– Multiple fatalities
– Operational
disruptions
– Financial loss
Management response
We conduct climate change physical risk assessments to
identify vulnerabilities across our portfolio including over the
life of our assets in the way we design, operate and close
them. Additionally we have:
– Introduced a new Energy and Climate Change Centre of
Excellence that uses scenarios to assess medium- and
long-term risks.
– Implemented a series of controls to manage the threat of
extreme weather, including structural integrity
programmes across all critical assets, emergency
response plans and flood management plans. These
controls keep our people safe and help our operations
return to normal capacity as quickly as possible.
– Implemented a Critical Risk Assessment programme,
including natural catastrophe modelling, to support our
insurance programme.
104
Annual Report 2020 | riotinto.com
Operational
ESG
Opportunities
We improve the way we design and run our operations to
avoid permanent impacts to water resources and carefully
manage the quality and quantity of the water we use and
return to the environment.
Threats
Our water management causes unacceptable operational,
environmental or community impacts. Sources of this
risk exposure are diverse across geographies and
commodities, with both financial and non-financial
implications without proactive management in new
asset developments, operations and closures.
Trend
Potential impact
– Financial
– Valuations
– Production and
growth constraints
– Group reputation
– Ecosystem impacts
– Stakeholder
relationships
Principal Risks and Uncertainties
17. Water scarcity and management
Water is a key part of our operational environmental
footprint and a critical, shared resource for people, the
environment and economic prosperity. In some
regions where we work, water scarcity is an inherent
risk, like the Gobi Desert in Mongolia. In others, rainfall
can vary greatly from year to year, such as Weipa in
Queensland, Australia. Many of our sites are also
experiencing changes in rainfall and water availability
due to climate change.
Management response
We aim to balance our operational water needs with those of
local communities, Traditional Owners and ecosystems. We
manage our water risks against four themes: water resource,
quantity and quality, dewatering and long-term obligations.
This framework allows us to identify, assess, manage and
communicate water risk, controls and actions both internally
and to the communities where we operate. Risk management
measures include:
– Site water management plans and controls including
monitoring data collection and interpretation.
– Improved methodology for calculating our water risk
exposure; recalculation is underway.
– Identification global controls for the four water
management risk areas: water resource, quantity and
quality, dewatering, long-term water obligations.
– Actively supporting and reporting our practices against
the commitments outlined in the International Council on
Mining and Metal’s position statement on water
stewardship: to apply strong and transparent water
governance, manage water at operations effectively, and
to collaborate to achieve responsible and sustainable
water use.
18. Natural disaster exposure
Operational
ESG
A natural disaster occurs with significant
operational interruption or damage to our assets
and/or communities.
Opportunities
Improving the resilience of our operations to minimise impact
to our communities, customers and supply chain.
Trend
Management response
We aim to prepare for and mitigate the impact of a natural
disaster event by:
– Enhancing our communication plans and co-ordination
with local, regional and state agencies.
– Increasing our understanding of our exposure at each
asset through programmes such as our critical risk, asset
integrity assurance, and climate change physical impact
assessment programmes.
– Improving our business resilience plans and emergency
response plans, training and annual exercises to prepare
for a natural disaster event.
Threats
This primarily includes major impacts to our Pilbara iron ore
operations due to Category 5 cyclone storm surges hitting
coastal operations and nearby communities, causing
significant operational interruption or damage to mines,
rail, port and/or other infrastructure. Non-financial impacts
may include multiple fatalities or severe permanent
impairment to multiple people. Other natural disasters
that can affect our operations, depending on their location,
include bush fire, drought, earthquakes and tsunami. In 2020,
our Kennecott copper operation in Utah, US, was impacted by
an earthquake.
Potential impact
– Operational
disruptions
– Fatalities
– Financial impacts
Annual Report 2020 | riotinto.com
105
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
19. Closure, reclamation and rehabilitation
Planning for the future of our sites after they cease
operating is a core business function governed by our
Closure Steering Committee. Estimated costs and
liabilities are provided for, and updated annually, over
the life of each operation. However, estimates may
vary due to a number of factors that create either
opportunities or challenges.
Management response
We have established a Closure Division to ensure we manage
the future of our site after operations cease in a sustainable
and cost-efficient manner. We aim to achieve this through:
– Compliance with Group policies and standards, which
provide guidance concerning risk management,
communities and social performance. This is overseen
by our Sustainability Committee and Closure Steering
Committee.
– Collaboration with key stakeholders and participation in
strategic partnerships and/or governance structures to
create opportunities and mitigate threats.
– Developing long-term relationships with a range of
international and national stakeholders.
– Monitoring jurisdictional risks, including sovereign risks,
and taking appropriate action.
Operational
ESG
Opportunities
We are actively assessing opportunities to find solutions
to repurpose and reuse sites for future economic or
social benefit through working collaboratively with our
stakeholders. For all new asset developments, we incorporate
closure into their design, and find ways to optimise
decommissioning, remediation and any long-term
management obligations. For existing operations, where
possible, we progressively rehabilitate land throughout the
life of the operations.
Trend
Potential impact
– Valuation
– Future financial and
operational
performance
– Group reputation
Threats
Plans and provisions for closure, reclamation and
rehabilitation may vary over time due to changes in
stakeholders’ expectations, legislation, standards, technical
understanding and techniques. In addition, the expected
timing of expenditure could change significantly due to
changes in the business environment and orebody
knowledge, which might vary the life of an operation.
106
Annual Report 2020 | riotinto.com
Principal Risks and Uncertainties
20. Civil unrest
Civil unrest may expose our employees and/or
operations to significant threats or impact our key
markets and customers, potentially resulting in
compromised employee safety, and damage to
or loss of assets.
Management response
The safety of our employees is our priority. Avoiding damage
or loss of our assets is important to sustaining our business.
We manage this through:
– Implementation of a new country entry procedure to
increase risk awareness.
– Business resilience planning for operations and
communities at risk.
– Communication plans and co-ordination with local,
regional and state agencies.
Operational
ESG
Opportunities
Strong relationships with the communities in which
we operate have the potential to provide stable operating
environments.
Trend
Threats
Where there is potential for civil unrest, our access or
operational continuity may be disrupted. Our African and
South American operations and exploration sites have the
most exposure to this risk.
Potential impact
– Group reputation
– Future financial and
operational
performance
– Health, safety and
security
21. COVID-19
Operational
ESG
The potential for transmission across our teams,
communities and supply chains continues to be a
threat that requires proactive management to guard
against business impacts.
Opportunities
The introduction of stringent health measures to protect our
employees, partners and host communities resulting in an
improved reputation among communities and key partners.
Trend
Threats
COVID-19 transmission has the potential to compromise
the health of employees, partners, communities and, in
particular, vulnerable populations (eg elderly, First Nations,
immuno-compromised people). A large-scale outbreak could
lead to the complete shutdown of operations, affecting the
flow of products to customers.
Potential impact
– Health, safety and
security
– Future financial and
operational
performance
– Group reputation
Management response
The safety and our ability to operate with minimal disruption
is vital to our success. Our business resilience teams across
the Group have helped mitigate the impact of the pandemic
through:
– Trigger, action and response plans.
– COVID-19 screening and testing protocols.
– Segregation measures to prevent transmission among
vulnerable people and communities.
– Hygiene practices, PPE and industrial cleaning practices.
– Physical distancing.
– Health and wellbeing support.
– Contact tracing.
Annual Report 2020 | riotinto.com
107
Strategic Report Strategic Report
Principal Risks and Uncertainties
continued
22. Breach of our policies, standards and procedures, laws or regulations
Operational
ESG
Opportunities
Good corporate citizens are acknowledged to operate to a
high ethical standard, attracting talent and securing access
to resources and investment opportunities.
Trend
Threats
Investigations by regulatory authorities and litigation
(regardless of the ultimate finding) may have a serious
impact on our reputation. Fines may be imposed for
breaching laws and/or regulations or for other inappropriate
business conduct, as well as resulting in a loss in share price
value and/or assets or loss of business. Other consequences
could include the criminal prosecution of individuals and/or
Group companies, imprisonment, and reputational damage to
the Group.
Potential impact
– Group reputation
– Licence to operate
– Future financial and
operational
performance
This risk may greatly impact our reputation, licence to
operate, and potentially exposes us financially. It is
important that we foster a culture aligned with our
values, provide education and guidance to employees,
and implement proactive compliance monitoring.
Management response
– Our dedicated legal and compliance teams work closely
with our businesses and help them to identify, understand
and comply with current and emerging laws and
regulations.
– We continue to train and create awareness on regulatory
obligations for employees working in high-risk roles and
third parties.
– We maintain ongoing assurance of compliance to
our policies, standards and procedures and conduct
an internal audit review of our third-party risk
management framework.
– We have reorganised our structure to create a centralised
Litigation Team and Centres of Excellence in the areas of
Anti-Bribery and Corruption, Anti-Trust, and Export
Controls & Sanctions.
– Aligned with living our corporate values, leaders and
employees receive training in our values and behaviours.
108
Annual Report 2020 | riotinto.com
Five-year Review
Five-year Review
Selected financial data
The selected consolidated financial information below has been derived from the historical audited consolidated financial statements of the Rio Tinto
Group. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the 2020 financial
statements and notes thereto. The financial statements as included on pages 200-300 have been prepared in accordance with IFRS as defined in note 1.
Rio Tinto Group
Income statement data
For the years ending 31 December
Amounts in accordance with IFRS
Consolidated sales revenue
Group operating profit(a)
Profit for the year
Basic earnings for the year per share (US cents)
Diluted earnings for the year per share (US cents)
Dividends per share
Dividends declared during the year
US cents
–
–
–
–
interim
interim special
final
special
UK pence
–
–
–
–
interim
interim special
final
special
Australian cents
–
–
–
–
interim
interim special
final
special
Dividends paid during the year (US cents)
–
ordinary
Weighted average number of shares basic (millions)
Weighted average number of shares diluted (millions)
Balance sheet data
Total assets
Share capital/premium
Total equity/Net assets
Equity attributable to owners of Rio Tinto
2020
US$m
44,611
16,829
10,400
604.0
599.8
155.0
–
309.0
93.0
119.74
–
221.86
66.77
216.47
–
397.48
119.63
386
1,617.4
1,628.6
97,390
8,302
51,903
47,054
2019
US$m
43,165
11,466
6,972
491.4
487.8
151.0
61.0
231.0
123.32
49.82
177.47
219.08
88.50
349.74
635.0
1,630.1
1,642.1
87,802
7,968
45,242
40,532
2018
US$m
40,522
17,687
13,925
793.2
787.6
2017
US$m
40,030
14,135
8,851
490.4
486.9
2016
US$m
33,781
6,795
4,776
256.9
255.3
127.0
110.0
45.0
180.0
243.0
180.0
125.0
96.82
83.13
33.80
135.96
183.55
170.84
250.89
338.70
307.0
1,719.3
1,731.7
90,949
8,000
49,823
43,686
129.43
100.56
137.7
228.5
59.13
163.62
235
1,786.7
1,799.5
95,726
8,666
51,115
44,711
152.5
1,797.3
1,808.6
89,263
8,443
45,730
39,290
(a) Group operating profit or loss includes the effects of charges and reversals resulting from impairments (other than impairments of equity accounted units) and profit and loss on disposals of interests
in businesses. Group operating profit or loss amounts shown above excludes equity accounted operations, finance items, tax and discontinued operations.
Directors’ approval statement
This Strategic Report is delivered in accordance with a resolution of the Board, and has been signed on behalf of the Board by:
Simon Thompson
Chairman
22 February 2021
Annual Report 2020 | riotinto.com
109
Strategic Report Directors’
Report
An employee and local Indigenous participant at
our Gove Bauxite Mine in the Northern Territory,
Australia. Aluminium, found in a wide range
of essential products, including electronics,
is made from bauxite.
110
Annual Report 2020 | riotinto.com
l
e
a
d
e
r
s
h
p
i
t
o
i
n
c
r
e
a
s
e
I
n
d
g
e
n
o
u
s
i
I
n
v
e
s
t
i
n
g
Annual Report 2020 | riotinto.com
111
$50m
to attract, retain and grow Indigenous
professionals and leaders
Governance
Directors’
Report
Governance
Chairman’s Introduction
Juukan Gorge
Board of Directors
Executive Committee
Governance Framework
Matters Discussed in 2020
Our Stakeholders
Board Insights
Evaluating Our Performance
Nominations Committee Report
Audit Committee Report
Sustainability Committee Report
Remuneration Report
Annual Statement by the Remuneration Committee Chairman
Remuneration at a Glance
Remuneration Policy
Implementation Report
Additional Statutory Disclosure
Compliance with Governance Codes and Standards
113
114
116
118
120
121
122
124
126
128
131
136
140
144
151
159
186
191
112
Annual Report 2020 | riotinto.com
Governance
Chairman’s Introduction
2020 was an extraordinary and challenging year for this
company and many of its stakeholders.
The Board’s response to the destruction of the rock
shelters at Juukan Gorge is described in detail on pages
114-115. The Board Review of those events, the
implementation of its recommendations and extensive
engagement with stakeholders have been a significant
focus of our activity this year. This will continue in 2021 as
we work with the new executive leadership team to
rebuild the trust that has been lost and apply the lessons
of Juukan Gorge.
In my letter on pages 7 to 9 of this Annual Report, I spoke
of my pride in the way Rio Tinto responded to the global
COVID-19 pandemic, safeguarding our employees,
contractors and local communities while keeping our
operations running safely and smoothly.
The Board has also had to respond, as COVID-19 related
travel restrictions prevented physical Board meetings. I
am grateful to my fellow directors not only for their
adaptability in ensuring that we still managed to complete
our scheduled programme of work – including a “virtual”
site visit to Oyu Tolgoi – but also for their time and
commitment in responding to the pandemic and Juukan
Gorge. These activities are described in detail on the
following pages.
We have seen significant changes to our Board in 2020.
We welcomed three new non-executive directors – Hinda
Gharbi, Jennifer Nason and Ngaire Woods – and have
already benefited from their insights and expertise in
natural resources, finance, technology, governance, and
public policy, and in fostering diversity and inclusion.
At the end of the year, Jakob Stausholm replaced
J-S Jacques as Chief Executive, and David Constable
stepped down to assume the role of CEO at Fluor
Corporation.
In making appointments to the Board, our goal is to bring
a range of expertise and diverse perspectives. Following
the changes to the Board this year, we are fully compliant
with both the Hampton Alexander and the Parker review
guidelines on board composition.
The following pages set out the activities of the Board
over the year, and how we have evolved our governance
arrangements as we continue to learn and develop as an
organisation.
Simon Thompson
Chairman
22 February 2021
Annual Report 2020 | riotinto.com
113
Governance Governance
Juukan Gorge: the Board Perspective
The destruction of two ancient rock shelters in the Juukan Gorge represented a breach
of our partners’ trust and a failure to uphold our values as a company.
A review of the events leading up to the destruction of the rock shelters
published by the Rio Tinto Board of Directors in August 2020 identified a
series of systemic failures of our communities and heritage management
processes at Brockman 4 over an extended period of time. To read the
full review please visit www.riotinto.com/news/inquiry-into-juukan-gorge.
Both the Board Review and the Inquiry of the Joint Standing Committee
on Northern Australia (the Parliamentary Inquiry) make it clear that the
events at Juukan Gorge represented a breach of our partners’ trust and a
failure to uphold our values as a company.
The Board is determined to learn the lessons to ensure that the
destruction of a site of exceptional cultural significance never
happens again.
The oversight role of our Sustainability Committee
The Sustainability Committee supports the Board in ensuring
Rio Tinto delivers a strong business performance on a sustainable
basis that builds trust with our people, our partners and stakeholders
and with wider society.
Internal and external reviews of the events leading to the blasting
of the rock shelters at Juukan Gorge have identified various deficiencies
including how our partnership with the PKKP people was managed, a lack
of integration of our heritage management with our front-line operational
teams, and a work culture that was too focused on business performance
and not enough on building and maintaining relationships with
Traditional Owners.
The archaeological and ethnographic reports received in 2013-14 should
have triggered an internal review of the implications of this material new
information for the mine development plans. Such a review did not take
place. Following completion of the archaeological surveys and other
mitigation measures agreed with the PKKP people in 2014, the site was
reclassified as ‘cleared’ for mining and removed from relevant risk
registers. As a consequence, knowledge and awareness of the location
and significance of the site was progressively lost. Further opportunities
to revise the mine plan were missed in 2018, when the final
archaeological report was received, and again during 2019-20.
The Sustainability Committee has been charged with overseeing the
implementation of the recommendations set out in the Board Review and
Parliamentary Inquiry, and with ensuring that these lessons are applied
to our operations across Australia and the globe. The Committee has
already commenced the oversight of this implementation process and, at
each of its six meetings in 2021, will receive updates on progress, as well
as maintaining an ongoing overview of our global Communities and Social
Performance (CSP) risks.
Implementation of the recommendations will also form part of the
new ESG component of the short term incentive plan for the
Executive Committee and other relevant managers. For more detail,
please refer to page 173 of our Remuneration Report.
Our new Integrated Heritage Management Process
One of the most important recommendations for the Sustainability
Committee to oversee will be the full integration of heritage management
into our mining operations such that our product groups have primary
responsibility for our CSP partnerships and engagement. In visits on
Country in late 2020, Board members heard how Traditional Owners
want to engage directly with the person who is in control of the mine site,
the drills and the dozers. It is clear that our mines’ general managers also
want this direct line of communication with Traditional Owners to ensure
there is no room for error.
Another critical component is the new Integrated Heritage Management
Process (IHMP).
Phase 1 of the IHMP is well underway and comprises an assessment
of all heritage sites, assessing each on the basis of cultural significance,
which is informed through consultation with Traditional Owners.
Over 1,000 sites have been reviewed to date and all sites of high
cultural significance have been allocated protective buffer zones.
Under the IHMP, any approvals to disturb sites that are low to moderate
significance are made at the Rio Tinto Iron Ore Chief Executive level with
decisions regarding sites of high or very high significance being made at
the Chief Executive level. Where there is any doubt, we have reclassified
the relevant sites from ‘cleared’ for mining back to ‘protected’ as a
precautionary measure, pending further consultation with Traditional
Owners. An increased level of consultation is also occurring, on an
ongoing basis, to ensure a shared understanding of heritage sites and the
proposed mine plans.
Phase 2 of the IHMP will fully integrate heritage considerations into mine
planning and development studies. Our aim is to ensure that Traditional
Owners are actively involved in the management of the cultural heritage
aspects of mine design. This will inform the conduct of resource
development, studies and the approvals process.
Further information on the steps that we are taking in response to the
recommendations of the Board Review and the Parliamentary Inquiry can
be found on pages 10-11 and at riotinto.com. These include details of our
commitment, in consultation with Traditional Owners, towards the
modernisation of our agreements, the formation of an Indigenous
Advisory Group and the status of the remedy process with the PKKP
people, including a moratorium on mining in the Juukan Gorge area
and a remediation plan for the rock shelters.
114
Annual Report 2020 | riotinto.com
Juukan Gorge
Risk management and internal control
The overall effectiveness of any risk management framework requires
clear expectations and consistency of application of the framework across
different product groups and businesses, countries of operation and
functional areas of expertise. Unfortunately, this did not happen in the
case of Juukan Gorge.
The appointment of Jakob Stausholm as our new Chief Executive
represents an important milestone as we continue the process of
rebuilding trust. One of the reasons the Board chose Jakob is because he
will provide clear leadership of our efforts to re-establish Rio Tinto’s
reputation as an industry leader in environmental and
social performance.
To support the product groups, a new CSP Area of Expertise has
been formed to own the relevant standards and procedures, and to
ensure that best practices are consistent globally. This team will also
provide the second line of assurance on CSP and ensure we have the
right people with the right skills in the right locations. Our Internal
Audit team will provide the third line of assurance, reporting directly to
the Sustainability Committee.
These changes to cultural heritage risk management are designed to
deliver more rigorous assurance of the way we manage our communities
and cultural heritage risks across our operations globally. The Audit
Committee will monitor the effectiveness of these changes to our overall
risk management and internal control framework.
Culture
Risk frameworks are only ever as good as the information that flows
through them, and the experience and judgment of individual managers
in key positions. This is particularly important in a group that is the size,
scale and complexity of Rio Tinto.
Effective management of community, heritage and other social risks
is therefore dependent upon a work culture that creates the same
awareness and accords the same priority to these issues as it does
to operational, production or safety risks.
One of the key findings from Juukan Gorge is that we need to provide
additional training to our front-line operational managers on the
increasingly complex social and environmental risks they are required
to manage.
Ensuring that we have the right work culture and relationships to
support good decision-making will require sustained effort over many
years. We have launched initiatives to increase awareness and training
on community and heritage issues and the amount of time that general
managers invest in our relationships.
Over the past few months, the Board has held a series of virtual town
halls and engagements with staff around the world to seek their views on
what we need to do to create a more inclusive, more diverse work culture,
where people feel empowered to challenge decisions. In particular, we
need to ensure that Indigenous Australians have a stronger voice, not
just in our host communities but also within the company. Alongside
these steps to build a more inclusive work culture, it is clear that we need
to break down silos within the company to ensure that community and
heritage issues are fully integrated into business planning decisions (in
exactly the same way as safety or production).
In April 2020, we appointed Hinda Gharbi and Jennifer Nason to the
Board, and Professor Ngaire Woods joined us in September. All three new
directors bring relevant experience of championing inclusion, diversity,
cultural change and governance. We currently have a search underway
for a fourth new NED, to replace David Constable. One of our selection
criteria will be their ability to support this change programme.
Consequence management
During the two weeks following the publication of the Board Review in
August 2020, we engaged with over 70 of our shareholders, Traditional
Owners, Indigenous leaders, the governments of Australia and Western
Australia, and other stakeholders. At the end of that two-week period of
intense engagement, the Board unanimously agreed that J-S Jacques,
Chris Salisbury and Simone Niven should leave the company by mutual
agreement as it was clear that a number of influential shareholders and
other important stakeholders (mainly, but not exclusively, in Australia)
had lost confidence in their ability to lead the necessary change.
We acknowledge that some commentators believed that the Board
should have acted sooner. There was, however, a very wide range of
opinion on the appropriate sanctions and we believe that it was right, on a
decision of this magnitude, to establish the facts and engage with as
many stakeholders as possible before removing three of our most senior
executives, including the Chief Executive, from the business.
In making the eligible leaver determination for the three executives, the
Board fully recognised the gravity of the destruction at Juukan Gorge but
was mindful that they did not deliberately cause the events to happen,
they did not do anything unlawful, nor did they engage in fraudulent or
dishonest behaviour or wilfully neglect their duties.
In making the final determination on their separation terms, it was
necessary to balance the findings of the Board Review, the financial
penalties that had been applied and the loss of employment for the three
individuals, on the one hand, against the considerable achievements of
those executives over many years. In this context, the loss of
employment was considered the greater sanction.
The full details of the separation terms for each executive are set out in
the Remuneration Report on pages 169 and 174.
The non-executive directors donated the equivalent of 10% of their 2020
non-executive director fees to the Clontarf Foundation, which supports
education, training and employment for Indigenous Australians. Jakob
Stausholm, the Chief Executive and executive director, has made a
donation of an equivalent amount.
Annual Report 2020 | riotinto.com
115
Governance Governance
Board of Directors
Rio Tinto plc and Rio Tinto Limited have a common Board of Directors.
The directors are collectively responsible for the stewardship and long-term
sustainable success of the Group.
Simon Thompson
Chairman, MA, PhD. Age 61. Appointed April 2014;
Chairman from March 2018
Skills and experience: Simon has significant global
experience in mining and metals, finance, and
corporate governance. Among a wide range of board
appointments, Simon was an executive director of
Anglo American plc, where he held the roles of
Chairman and Chief Executive Officer of the Base
Metals Division. He also served as chairman of Tarmac,
and chairman of the Exploration Division. Earlier in his
career he held various investment banking positions at
S. G. Warburg and N M Rothschild.
Simon chairs 3i plc and has chaired Tullow Oil plc. His
experience as a non-executive director includes
serving on the boards of AngloGold Ashanti Limited
and Newmont Mining Corporation. Simon is also a
Commissioner at the Energy Transitions Commission.
Current external appointments:
Chairman of 3i Group plc since 2015.
Jakob Stausholm
Chief Executive, Ms Economics. Age 52. Appointed
Chief Executive from January 2021; Chief Financial
Officer in September 2018
Skills and experience: As Chief Executive, Jakob brings
strategic and commercial expertise and a strong focus
on sustainability. He is committed to rebuilding trust
with communities, Traditional Owners and stakeholders
globally. As Chief Financial Officer, Jakob focused on
maximising cash flow and allocating capital with discipline.
He balanced investment in sustaining and high-value
growth, to maintain a strong balance sheet and deliver
superior shareholder returns in the short, medium and
long term. Jakob has over 20 years’ experience in senior
finance roles in Europe, Latin America and Asia, including
in capital-intensive, long-cycle businesses, as well as in
innovative technology and supply chain optimisation.
Jakob spent six years with the Maersk Group, where his
roles included group Chief Financial Officer and executive
director of the Group’s integrated transport and logistics
business. He was previously with Royal Dutch Shell plc,
holding a range of finance positions, including chief
internal auditor.
Current external appointments: None.
Megan Clark AC
Independent non-executive director, BSc, PhD. Age 62.
Appointed November 2014
Skills and experience: Megan combines experience in
the mining and metals industry with leadership in
science, research and technology, and brings valuable
insights on sustainable development and innovation to
the Board. She was Head of the Australian Space
Agency from 2018 to 2020 and Chief Executive of the
Commonwealth Scientific and Industrial Research
Organisation (CSIRO) from 2009 to 2014. Following
mining and exploration roles with Western Mining
Corporation, Megan was a director at N M Rothschild
and Sons (Australia), and a Vice President Technology
at BHP. Megan received the Australian Academy of
Science Medal in 2019.
Current external appointments:
Non-executive director of CSL Limited since 2016,
Chair of the Advisory Board of the Australian Space
Agency since January 2021.
Hinda Gharbi
Independent non-executive director, BSc, MSc. Age 50.
Appointed March 2020
Simon Henry
Independent non-executive director, MA, FCMA.
Age 59. Appointed April 2017
Skills and experience: Hinda is Executive Vice
President of Services & Equipment at Schlumberger
Limited and has some 25 years’ experience at
Schlumberger, working in various field engineering,
functional and line management positions, including
health and safety, human resources, technology
development and operations across France, Malaysia,
Nigeria, Thailand, the United Kingdom and the
United States.
Current external appointments: None
Skills and experience: Simon has significant
experience in global finance, corporate governance,
mergers and acquisitions, international relations,
and strategy. He draws on over 30 years’ experience
at Royal Dutch Shell plc, where his roles included
Chief Financial Officer from 2009 to 2017.
Current external appointments:
Independent director of PetroChina Company Limited
since June 2017. Member of the UK Defence Board.
Nominated as Senior Independent Director of Harbour
Energy plc from Spring 2021. Member of the Advisory
Board of the Centre for European Reform and the
Advisory Panel of CIMA.
Sam Laidlaw
Independent non-executive director, MA, MBA. Age 65.
Appointed February 2017, Senior Independent Director
in May 2019
Skills and experience: Sam has more than 30 years’
experience of long-cycle, capital-intensive industries
in which safety, the low-carbon transition and
stakeholder management are critical. Previous roles
include: president and chief operating officer, Amerada
Hess Corporation; CEO, Enterprise Oil plc; executive
vice president, Chevron Corporation; CEO, Centrica plc;
and membership of the UK Prime Minister’s Business
Advisory Group.
Current external appointments:
Chairman of Neptune Energy Group Holdings Ltd.
Chairman, National Centre of Universities & Business.
Board member, Oxford Saïd Business School. Advisory
Board member, The Smith School of Enterprise and
Environment.
Former directors
David Constable stepped down from the Board on
31 December 2020.
116
Annual Report 2020 | riotinto.com
Jean-Sébastien Jacques stepped down from
the Board on 1 January 2021.
Past external appointments over the last three years
For details of each director’s past appointments, see
the Directors’ Report on page 187.
Board of Directors
Michael L’Estrange AO
Independent non-executive director, BA (Sydney),
MA (Oxon). Age 68. Appointed September 2014
Skills and experience: Michael’s distinguished public
service career gives him practical experience of the
geopolitical and societal trends which affect Rio Tinto.
Michael served in senior roles for the Australian
government, including head of the Cabinet Policy Unit
and secretary of the Department of Foreign Affairs and
Trade. He was High Commissioner to the United
Kingdom. Michael chairs our Australia Forum,
which meets twice a year.
Current external appointments:
Director and deputy chancellor of the University of
Notre Dame, Australia. Non-executive director of
Qantas Airways Limited since April 2016.
Simon McKeon AO
Independent non-executive director, BCom,
LLB, FAICD. Age 65. Appointed January 2019,
Senior Independent Director, Rio Tinto Limited in
September 2020
Skills and experience: Simon brings insights into
sectors including financial services, the law,
government and charities. He practised as a solicitor
before serving at Macquarie Group for 30 years,
including as executive chairman of its business in
Victoria, Australia. Simon served as chairman of AMP
Limited, MYOB Limited and the Commonwealth
Scientific and Industrial Research Organisation,
(CSIRO). He was the first president of the Australian
Takeovers Panel.
Current external appointments:
Chancellor of Monash University. Chairman of the
Australian Industry Energy Transitions Initiative
Steering Group. Non-executive director of National
Australia Bank Limited since February 2020.
Jennifer Nason
Independent non-executive director, BA, BCom (Hons)
(Melbourne). Age 60. Appointed March 2020
Skills and experience: Jennifer has over 30 years’
experience in corporate finance and capital markets.
For the past 17 years, she has led the Technology,
Media and Telecommunications global client practice
at JP Morgan, based in the USA. During her time at JP
Morgan, she has also worked in the metals and mining
sector team in Australia.
Current external appointments:
Board member of the American Australian Association.
Ngaire Woods CBE
Independent non-executive director, BA/LLB
(Auckland), D.Phil (Oxford). Age 58. Appointed
September 2020
Skills and experience: Ngaire is the founding Dean of
the Blavatnik School of Government, Professor of Global
Economic Governance and the Founder of the Global
Economic Governance Programme at Oxford University.
As a recognised expert in public policy, international
development and governance, she has served as an
adviser to the African Development Bank, the Asian
Infrastructure Investment Bank, the Center for Global
Development, the International Monetary Fund and the
European Union.
Current external appointments:
Board member of the Mo Ibrahim Foundation, the Van
Leer Foundation and the Schwarzman Education
Foundation.
Board committee membership key
Committee chairman
Remuneration Committee
Sustainability Committee
Audit Committee
Nominations Committee
Steve Allen
Group Company Secretary,
BA (Modern Languages and
European Studies), Solicitor
(England and Wales). Age 49.
Appointed January 2017
Skills and experience: Steve is
Company Secretary of Rio Tinto plc
and Joint Company Secretary of Rio
Tinto Limited. Before joining Rio Tinto,
Steve was Deputy General Counsel at
BG Group plc. He served as Company
Secretary of BG Group from 2011 to
2016 having previously been Chief
Counsel, Corporate, from 2008 to
2011. Before joining BG Group in
2005, Steve was a corporate lawyer
for Herbert Smith LLP in London.
Current external appointments:
Vice-Chair of the Association of
General Counsel and Company
Secretaries working in FTSE-100
companies and a member of the
Corporate Governance Council.
Tim Paine
Joint Company Secretary, Rio Tinto
Limited BEc, LLB, FGIA, FCIS. Age 57.
Appointed January 2013
Skills and experience: Tim joined
Rio Tinto in 2012 and became Joint
Company Secretary of Rio Tinto
Limited in January 2013. He has over
25 years’ experience in corporate
counsel and company secretary roles,
including as General Counsel and
Company Secretary at Mayne Group,
Symbion Health and Skilled Group.
Tim also spent 12 years at ANZ Bank,
including as Acting General Counsel
and Company Secretary.
Current external appointments:
Company secretary for the
Foundation for Australia-Japan
Studies. Member of the Governance
Institute of Australia’s Legislation
Review Committee.
Annual Report 2020 | riotinto.com
117
Governance
Governance
Executive Committee
Day-to-day management of the business is delegated by the
Board to the Chief Executive and, through him, to other members of the
Executive Committee and to certain management committees.
Jakob Stausholm
Chief Executive
Peter Cunningham
Interim Chief Financial Officer
Bold Baatar
Chief Executive, Rio Tinto Copper
Alf Barrios
Chief Commercial Officer
Biography can be found on page 116.
Peter was appointed Interim Chief
Financial Officer in January 2021.
He has been with the business for
27 years and held senior leadership
roles, including Group Controller;
Head of Health, Safety, Environment
and Communities; Head of Energy
and Climate Strategy; and Head of
Investor Relations.
As Group Controller, he was responsible
for Group financial reporting, including
external reporting, and led the business
evaluation team, providing independent
assessments of projects and commercial
transactions to support the Group’s
capital allocation efforts. Peter was
also responsible for Group planning
with oversight of the analysis of Group
financial and operating performance
and preparation of Group forecasts
and plans.
Prior to being appointed Chief Executive,
Rio Tinto Copper, Bold was Chief Executive,
Energy & Minerals, a position he had held
since 2016. Since joining our Copper
business in 2013, he has held a number
of leadership positions across operations,
marine, iron ore sales and marketing.
Bold brings to the role deep experience
across geographies, commodities
and markets. Alongside a passionate
commitment to ESG issues, he brings
a strong commercial and business
development focus with particular
interest in developing markets and
partnerships with host countries
and communities.
Prior to his appointment as
Chief Commercial Officer, Alf joined
the Group as Chief Executive Rio Tinto
Aluminium in 2014. In this role he
optimised the portfolio, created a strong
safety and performance culture, and
grew the business. He established
strong relationships with Indigenous
communities and delivered industry-
leading customer partnerships and
ESG initiatives.
Alf brings to the Executive Committee
nearly 30 years’ global experience
in the natural resources sector across
operations, trading, marketing and
business development. He will work
with the Commercial team to enhance
value delivery across the company.
Mark Davies
Group Executive, Safety,
Technical and Projects
Mark was appointed to his current role
in July 2020. Mark joined in 1995 as a
senior mechanical engineer and has
worked in operational and functional
leadership roles, including in our Iron
and Titanium business unit, Group Risk,
and Global Procurement.
Mark is responsible for continuing to
deliver on our number one priority – the
health, safety and wellbeing of our
employees, contractors and
communities – and on our long-standing
commitment to the environments where
we live and work. Mark also oversees our
Communities & Social Performance area
of expertise, our major capital projects
team and our technical centres of
excellence, which partner with our
assets and with external stakeholders to
embed best practice and help deliver
sustainable outcomes.
Sinead Kaufman
Chief Executive, Rio Tinto Minerals
Barbara Levi
Chief Legal Officer & External Affairs
Barbara joined in January 2020. She has
over 20 years’ experience in senior legal
roles across Europe and in the US in
private practice and in-house and is an
attorney admitted in the US (Supreme
Court of the US and New York) and in
Italy (Milan).
Barbara brings to the role extensive
experience across corporate,
commercial and compliance matters.
Alongside leading our global legal
and external affairs teams, Barbara
oversees a range of governance
functions, including Company
Secretariat, Ethics & Compliance and
the Technical Evaluation Group.
Since she joined Rio Tinto in 1997 as a
geologist, Sinead has held senior
leadership and operational roles across
Aluminium, Copper & Diamonds, Energy
& Minerals, and Iron Ore. Most recently,
she was Managing Director, Operations,
at Copper & Diamonds.
Sinead brings to her current role strong
operational expertise and asset
leadership combined with a track record
and commitment to sustainability: under
her tenure as Managing Director, Copper
& Diamonds, our Kennecott copper
operation in Utah, US, became the first in
the world to be awarded the Copper
Mark, the industry’s independently
assessed responsible production
programme. Sinead also oversaw the
reduction of Kennecott’s carbon
footprint by more than 60%, achieved by
closing the coal-fired power station and
using renewable energy carbon offsets.
118
Annual Report 2020 | riotinto.com
Executive Committee
Former Executive
Committee members who
served during the year
Chris Salisbury
Chris stepped down as Chief Executive,
Iron Ore on 11 September 2020.
Stephen McIntosh
Stephen retired from his role as
Group executive, Growth & Innovation
and Health, Safety & Environment
(HSE) on 30 September 2020.
Simone Niven
Simone stepped down as Group
executive, Corporate Relations on
31 December 2020.
Jean-Sébastien Jacques
J-S stepped down as Chief Executive
on 1 January 2021.
Vera Kirikova
Vera will step down as Chief People
Officer on 5 April 2021.
James Martin
Chief People Officer
Kellie Parker
Chief Executive, Australia
Arnaud Soirat
Chief Operating Officer
James has been a partner at
Egon Zehnder for 15 years and will
join our Executive Committee on
6 April 2021. He has led a range
of global practices and specialises
in coaching, talent management and
leadership development. Prior roles
included senior equity research roles
at Credit Suisse First Boston and
ABN AMRO. He began his career as
a pilot in the UK’s Royal Air Force.
Prior to being appointed Chief Executive,
Australia, Kellie was Managing Director,
Pacific Operations, Aluminium. She joined
in 2001 and has held a number of safety,
operational and leadership roles across
both the Iron Ore and Aluminium
businesses.
In her new role, Kellie will represent
our Australian interests with all
stakeholders and bring her operational
experience and community values to
listen, respond and set the direction for
the business. She has a people-centric
approach, with a strong commercial
background and is an advocate for
Indigenous Australians.
Arnaud joined as President and Chief
Executive, Rio Tinto Primary Metal
in 2010 and, most recently, was
Chief Executive, Copper & Diamonds
from 2016. Prior to this, he had
20 years’ experience in commercial
and operations roles in the metals and
mining industry, including at Alcoa and
Pechiney in Australia and Europe.
As Chief Operating Officer, Arnaud will
use his extensive operational and
leadership experience to drive
company-wide improvements in our
production system. From his previous
roles, Arnaud brings significant
experience in the oversight of growth
projects, a strong sustainability legacy,
safety and operational excellence,
improving business profitability and
competitiveness, and deploying lean
manufacturing to help achieve strong
underlying results.
Peter Toth
Group Executive, Strategy and
Development
Peter was appointed in 2020 having
previously been Head of Corporate
Development, responsible for corporate
strategy and business development.
Before joining in 2014, he gained over
25 years’ experience working in the
resources industry around the world,
including senior commercial roles with
BHP and chief executive of ASX-listed
OM Holdings Ltd.
In his role, Peter leads our corporate
strategy (including climate and
sustainability strategy) development.
He is also responsible for our portfolio
transformation efforts – including
exploration and closure, business
development and M&A – as well as our
Energy & Climate Centre of Excellence,
working in close partnership with the
product group and commercial teams.
Simon Trott
Chief Executive, Rio Tinto Iron Ore
Ivan Vella
Chief Executive, Rio Tinto Aluminium
Prior to his appointment as Chief
Executive, Rio Tinto Iron Ore, Simon was
Chief Commercial Officer from 2018,
responsible for our global sales and
marketing, procurement, marine and
logistics. Since joining in 2000, he has
held a variety of operating, commercial
and business development roles across
a number of commodities.
Simon knows Western Australia well and
has a deep understanding of the iron ore
market and our customers globally. He
is committed to leading Iron Ore safely
to its next phase, with a strong focus on
rebuilding trust with our communities
and Traditional Owners.
Prior to being appointed Chief Executive,
Rio Tinto, Aluminium, Ivan was Interim
Chief Executive, Iron Ore. During his 17
years with the business, Ivan has held
senior leadership positions in our Copper
and Iron Ore product groups.
Ivan brings to our Aluminium business
strong operational experience and
critical understanding of end-to-end
value chain processes. Ivan led the
Iron Ore COVID-19 response, which
kept our people and communities safe
and business strong. He is also
passionate about next-generation
technologies and innovations and, under
his leadership, we successfully delivered
one of Iron Ore’s largest automation
initiatives – AutoHaulTM.
Annual Report 2020 | riotinto.com
119
Governance Governance
Governance Framework
Good governance is, fundamentally, about considering the right things, at the right time, with the
right people and insights. We have tried to structure the way the Board works to support that
objective, to strengthen our strategic focus, and to improve both the challenge and the support that
the Board provides to the executive team. Here is a summary of the framework:
Board of Directors
Rio Tinto has a clear purpose: As pioneers in metals and mining, we produce materials
essential to human progress. By doing so efficiently, effectively and sustainably, we aim to
create long-term value for all stakeholders. The Board is collectively responsible for pursuing
this purpose and approves the strategy, budget and plans proposed by the Chief Executive to
achieve this objective.
Board Charter
See the Board Charter for more information on the
role of the Board and the delegation
to management.
Available at
riotinto.com
Audit
Committee
Helps the Board to
monitor decisions
and processes
designed to ensure
the integrity of
financial reporting,
the independence
and effectiveness
of the external
auditors, and sound
systems of internal
control and
risk management.
Nominations
Committee
Helps the Board
ensure its
composition and that
of its committees are
regularly reviewed
and refreshed in
order that they are
effective and able to
operate with the
right mixture of
skills, experience and
backgrounds to
identify and respond
to current and future
opportunities and
challenges.
Remuneration
Committee
Helps the Board
ensure that
remuneration policy
and practices reward
employees and
executives fairly
and responsibly,
with a clear link to
corporate
and individual
performance.
Sustainability
Committee
Helps the Board
oversee the Group’s
integrated approach
to sustainability and
strategies designed
to manage health
and safety and social
and environmental
risks, including
management
processes
and standards.
Chairman’s
Committee
Supports the
functioning of the
Board and will
consider urgent
matters between
Board meetings.
See page 131
See page 128
See page 140
See page 136
Chief
Executive
Has delegated
responsibility for the
executive
management of Rio
Tinto, consistent
with the Group’s
purpose and
strategy, and subject
to matters reserved
for the Board, as set
out in the Schedule
of Matters Reserved
for the Board
(available at
riotinto.com), and in
accordance with the
Group’s delegation
of authority
framework.
The Executive Committee is responsible for the delivery of strategy, annual plans and commercial objectives. It manages the financial and
operational performance of the Group.
The following management committees support the Chief Executive in the performance of his duties:
Investment Committee
Reviews proposals on investments,
acquisitions and disposals. Approves capital
decisions within delegated authority limits, and
otherwise recommends matters for approval to
the Board, where appropriate.
Ore Reserves Steering Committee
Responsible for standards and control
procedures in the ore reserves estimation and
disclosure process. Ensures that these are
effective in meeting internal objectives and
regulatory requirements.
Risk Management Committee
Oversees the management and mitigation of
the principal risks that could materially impact
the Group’s business objectives and
exceed its risk tolerances.
Closure Steering Committee
Oversees the process and controls designed to
manage the material risks related to
rehabilitation, closure and legacy operations.
Disclosure Committee
Reviews and approves the release of all
significant public disclosures on behalf of the
Group. Oversees the Group’s compliance with
its disclosure obligations in accordance with all
relevant legal and regulatory requirements,
including processes to ensure such disclosures
are accurate and timely.
120
Annual Report 2020 | riotinto.com
Matters Discussed in 2020
Matters Discussed in 2020
The Board had seven scheduled meetings in 2020 and six additional meetings were held to discuss matters outside of the
Board’s regular agenda items. During 2020, we have had to adapt to the challenges associated with COVID-19. As a
consequence, all meetings have been held virtually and we have increased the number of Board and committee meetings.
Set out below are some of the matters which the Board has considered during 2020.
At every Board meeting, the Chief Executive and Chief Financial Officer
report on the safety, operating and business performance of the Group
against our Key Performance Indicators, as well as how certain material
stakeholder issues are being managed.
The Board also received detailed reports from management relating to
progress on major growth projects and updates on operations. Examples
in 2020 included:
Growth projects
– In April, the Board received an update on the Simandou project.
The management team presented a revised strategy and requested
approval for funding to cover phase 1 of the work programme.
– In May, management presented a proposal to change the scope of the
Oyu Tolgoi Hugo North Lift 1 underground mine design of Panel 0.
– The Board received a teach-in regarding the undercut criteria relating
to the Oyu Tolgoi underground project. The session provided an
overview of the undercut criteria, highlighting the risks and
dependencies to undercut initiation, and covering the governance
arrangements in place to track progress and to underpin informed
decision-making.
– In October, the Board received a teach-in relating to battery materials/
lithium that analysed demand and supply drivers and options for the
lithium project, as well as a deep dive on the Jadar project.
– The Board also considered and approved a request for almost
$200 million to complete the Jadar feasibility study.
Operational
– The Board considered changes in Australia’s energy policies and the
potential impacts to the Australian smelters.
– In July, the Board received, considered and approved a request for
funding to execute the closure of the Argyle diamond mine, which was
no longer economically viable. A presentation was given covering plans
for demolition, disposal of infrastructure, earthworks and civil works for
waste rock dump reshaping, tailings dam embankment protection and
stability, water management and revegetation. The Board also noted
the extensive stakeholder engagement that had taken place.
ESG
The Board has ultimate oversight of environmental, social and
governance matters working alongside the Sustainability Committee.
During the year, in addition to reviewing its forward agenda of matters to
be discussed, considering its constitution, composition and performance,
and reviewing any new or amended Group policies, the Board considered
the following governance matters:
– The Group’s response to the blasting of the Juukan Gorge rock
shelters, including consideration of the Board Review of the tragedy,
the consequence management, the implementation of the
recommendations for change, stakeholders’ feedback and a meeting
with the PKKP people.
– In February, the Board was updated on plans to publish the Group’s
2020 carbon targets, climate strategy and proposed programme of
engagement to accompany the publication of the company’s second
climate change report, following the methodology of the Task Force
on Climate-related Financial Disclosures. During the update, the
Board considered the approach to the climate change report and
sustainability disclosures in the Rio Tinto Annual Report.
– In July, the Board received an update on the Group’s short-to-
medium-term roadmaps and actions required to achieve the new
2030 climate targets.
– In July, the Board received and noted the findings of the investor
relations perception study. The study was intended to gather the
thoughts of institutional investors with respect to the Group and the
economic environment. The findings provided the Board with insight
into the performance of the company and highlighted focus areas for
improvement.
– In July, the Board received an update on the Group’s ethics and
integrity initiatives, including details of the Group’s whistleblowing
programme which was being updated to be more relevant for our
people working remotely.
– In October, members of the Board met with employees from Oyu
Tolgoi as part of a virtual site visit, and held five virtual ‘town halls’
with different groups of employees drawn from operations and
functions.
People
The Board receives regular updates on our people-related initiatives to
attract, develop and retain the best people, which is crucial to our
success. Some of the topics covered in 2020 are below:
– In December the Board received a presentation on the Group’s
employee engagement survey results, and noted the actions that will
be taken as a result of the findings.
– In April, the Board received an update on the Group’s employee value
proposition. The objective of the initial work was to seek a deeper
understanding of the work culture and employees’ perspectives. This
helps to guide people-related decisions and enables the Group to
connect more purposefully to attract and retain talent.
– In July, the Board received and noted a presentation on technical
capability within the Group and the plans in place to further
strengthen technical proficiency.
Strategy
The Board discussed and confirmed the Group’s strategy in two separate
two-day sessions in May and September 2020.
In May, topics discussed included:
– Strategic context for the business
– Impacts of COVID-19, including our response, recovery scenarios and
commodity prices
– Iron ore – industry and market context
– Aluminium – revised industry perspectives
– Financial resilience and balance sheet strength
In September, the Board considered:
– Industry overviews for iron ore, minerals, aluminium and copper
– An update on Oyu Tolgoi
– Copper growth options
– The Group’s portfolio and strategic options
Annual Report 2020 | riotinto.com
121
Governance Governance
Our Stakeholders
Our business and the decisions that we make affect the lives of many around the world. Understanding the interests of our stakeholders,
as well as our shareholders, and doing our best to take them into account when we make choices, remains a Board priority. In the
following section, we detail our key stakeholders and summarise their interests, how the Board has engaged with them, and how what
the Board has heard has influenced our decision-making. This section serves as our ‘section 172(1) statement’.
Employees
Introduction
We are proud of Rio Tinto’s 45,000* employees, working in 35 countries around the
world, who have demonstrated perseverance and resilience in a difficult year. We are
committed to their health and safety and ensuring that they work in a positive and
respectful environment where they can learn, develop, and feel proud of the work
they do – every shift, every day.
How we engage and communicate
–
Following the success of our ‘employee AGMs’ in past years, we have continued
to engage directly with employees. While the outbreak of COVID-19
unfortunately prevented us holding a similar event this year, we continued to
listen to the views of our employees.
– During November, the Chairman and non-executive directors held informal
How the Board has taken account of these interests
–
The honesty and openness shown by employees in the small group meetings
with the Board provided important insights. We heard employees’
appreciation of the company’s response to COVID-19, their disappointment
and shame regarding the events surrounding Juukan Gorge, their
commitment to safety, wellbeing, inclusion and diversity, and concerns
about fatigue and work-life balance. We heard about difficulties in escalating
unresolved issues, the need for a stronger focus on cultural heritage and
awareness as well as diversity, and employees’ desire to know more about
the future shape and leadership of the organisation. These insights were an
important consideration for the Board as we selected Jakob as our new Chief
Executive and will receive greater focus as we set the agenda for the
company under new leadership.
discussions with five diverse groups, totalling close to 150 employees, across
many time zones and parts of the business. Simon Thompson and Megan Clark
also had a meeting with a small group of employees in our Perth hub to hear their
views and insights on 2020 and beyond. This conversation was recorded and
shared with the Group.
–
The Board was pleased to see the positive response recorded in employee
focus groups and the employee survey to the company’s response to
COVID-19, including its support for our people and the communities from
which they come. Continuing to listen to employees, through focus groups,
surveys and direct leader engagement, provides a wealth of opportunities for
us to learn and improve as we continue to build a truly inclusive workplace
culture. What has come through in all of the conversations the Board has
had this year is how much employees appreciate the opportunity to share
their thoughts. We see great value in these interactions and will continue the
dialogue next year as part of our commitment to engage with Rio Tinto
employees around the world.
– With COVID-19 severely impacting the traditional ways that our Chief Executive and
other leaders engage with employees, we quickly developed new and innovative
ways to remain connected and provide support and reassurance to the workforce
during the pandemic. This included virtual site visits, town halls and team check-ins,
and a number of remote safety engagements with operational site teams. The main
themes and issues from these engagements were regularly reported to the Board
and considered in our decision-making.
– During August and September, the company conducted 66 employee focus groups
to understand how perceptions and expectations have been impacted by COVID-19,
the events at Juukan Gorge, and a number of other global events. These sessions
also explored experiences and expectations relating to inclusion, diversity and
sustainability. The findings were reviewed in detail by the Board, together with the
results of our employee survey which was held in October and November. This
survey measures how people feel about the company and its direction.
Investors
Introduction
Our investors include pension funds, global fund managers, bondholders, employees
and tens of thousands of individuals around the world. They have all put their faith in
Rio Tinto to provide them with a financial return and expect us to allocate capital with
discipline to create superior value. They are also increasingly focused on how that
return is made. Our investors are closely interested in our strategy, the culture of the
Group, sustainability, including cultural heritage, and our operational and financial
performance as well as the threats and opportunities which could affect our business.
How we engage and communicate
– We hold two AGMs each year, in Australia and in the UK. The format of these, as
both countries faced significant COVID-19-related restrictions on travel and
gatherings, required a move to online events during 2020. By providing these
online events, we ensured that investors were still able to engage with the Board
and management.
– We also maintain a comprehensive programme of engagement with investors
and analysts to ensure both current and potential new investors have the
opportunity to hear from executives, the Chairman and subject matter experts
from across the business. We held an online seminar in April in which the Chief
Executive and experts from across the Group provided investors and analysts
with an overview of our climate change strategy and approach to water
management. This reflects growing investor interest in environmental, social and
governance (ESG) issues.
–
The Investor Forum in the UK and Australian Council of Superannuation Investors
in Australia hosted meetings with the Board and investors to talk about the events
of the year, with a focus on Juukan Gorge and the lessons learned. The agenda
and Q&A sessions focused on Board effectiveness, oversight and accountability, as
well as the Group’s licence to operate. The meetings were well received,
complementing direct investor engagement through the year and setting out a
framework to allow investors to assess action in the early part of 2021.
*
This is the average employee headcount during 2020, including contractors.
122
Annual Report 2020 | riotinto.com
How the Board has taken account of these interests
–
In responding to feedback from investors, the Board has continued to deliver
a strategy of maximising shareholder returns while allocating capital with
discipline for future growth and sustained operational performance through
the macroeconomic and commodity cycles.
– Given investor interest in ESG issues, including climate change and our work with
communities around the world, the Board considers these during its strategy
sessions when assessing our portfolio positions.
–
The Chairman engaged extensively with investors across multiple markets
following the events at Juukan Gorge to understand their perspectives.
Following the release of the Board Review, further engagements took place.
The broad spectrum of opinion that was garnered from these engagements
was important in helping the Board’s decision-making that led to
management changes.
– During 2020, the Remuneration Committee reviewed the effectiveness of our
Remuneration Policy, which is due for renewal at the 2021 AGMs. The
Committee Chair, Sam Laidlaw, consulted with shareholders and proxies
during 2020 and this consultation supported the Committee’s view that the
current policy has served our stakeholders well. Notwithstanding this, the
Committee felt there was scope for simplification and an opportunity to align
certain aspects more closely to shareholder and broader stakeholder
expectations, most notably on pensions and by increasing the weighting of the
ESG-related component in the short term incentive plan. These changes to the
policy will be considered at the 2021 AGMs as part of the Committee’s focus
on ensuring that remuneration structure and policies reward fairly and
responsibly with a clear link to corporate and individual performance
that aligns remuneration outcomes with the delivery of long-term value
for shareholders.
Our Stakeholders
Communities and governments
Introduction
The interests of the communities and governments that host our operations
around the world are vital to our success. We recognise that our business has
the potential to impact them significantly in a number of ways; they, in turn,
expect us to commit to high standards in managing our environmental footprint
and respecting community and human rights. Our impacts can be both positive
and negative and require a proactive approach to building trust and partnership.
This trust can be easily lost, as the events at Juukan Gorge have shown, and it
therefore requires constant focus and careful management to maintain. The
economic impact of our business through the taxes we pay and the jobs that we
create has remained important while our support for managing the impact of
COVID-19 and direct involvement in protecting the health of our communities
have become critical.
How we engage and communicate
–
In light of the events at Juukan Gorge, and following the release of the Board
Review, the Board engaged extensively with stakeholders including Traditional
Owners and Indigenous leaders. This provided an opportunity to apologise
in person to the PKKP people and to see and feel their pain. As a Board,
we are committed to learning from this event to ensure that the destruction
of heritage sites of such exceptional archaeological and cultural significance
never occurs again.
– We consult with our communities regularly, and always aim to do so in good
faith, and in ways that are transparent, inclusive, and culturally appropriate.
This covers every stage of the life of our assets. We strive to ensure that our
engagement is participatory and representative of the community, including
women, youth and vulnerable people. We recognise that our engagement
processes can be further strengthened and have taken a number of actions
to do so following the publication of our Board Review into cultural
heritage management.
– Governments, at all levels, are critical stakeholders for our business and we
regularly engage on matters including how we explore, mine and process ore,
the conditions of land tenure, and health, safety and environmental
requirements, as well as how we operate as a company in relation to securities,
taxation, intellectual property, competition and foreign investment, provisions to
protect data privacy, conditions of trade and export, and infrastructure access.
– We also engage with international organisations such as the World Bank and
International Finance Corporation and actively participate in international forums
like the Extractive Industries Transparency Initiative and the International
Council on Mining and Metals.
Customers and suppliers
Introduction
We want to build long-term relationships with our customers and suppliers
based on trust and mutual benefits. Transparency and ensuring that we deliver
on our promises are critical in maintaining this trust and we focus on both.
Through the volatility of 2020, customers and suppliers worked with us to safely
maintain our operations and the uninterrupted flow of materials and products
through the value chain, enhancing the integration between our markets
and assets.
How we engage and communicate
–
The inability to exchange physical documentation during COVID-19 was a
catalyst for us to expand on our digital interfaces with customers and
suppliers in 2020. We completed the industry’s first end-to-end blockchain
transaction in Renminbi, with the China Baowu Steel Group and will continue
to pilot and adopt new digital tools to improve the experience of our
customers and suppliers.
– We have extended our value chain and expanded our commercial activities
into new areas to meet customer needs. This includes the expansion of our
portside sales presence to nine ports in China, meeting demand from more
than 80 new iron ore customers, and the expansion of bonded warehouse
sales in our alumina business.
– We continue to focus on strategic partnerships as our customers become
more concerned about how their products are produced. This includes
partnering to develop new products such as with AB InBev to produce
beverage cans made from low-carbon aluminium that meets industry-
leading sustainability standards.
How the Board has taken account of these interests
– While COVID-19 has significantly impacted plans for 2020, we have
–
–
continued direct engagement between directors and those who advocate on
behalf of communities around the world. The Chairman held a ‘virtual
roundtable’ with civil society organisations, where the discussions focused
on our response to Juukan Gorge, climate change and continuing concerns
about industry lobbying.
The Board has unreservedly apologised to the PKKP people for the destruction
of the rock shelters at Juukan Gorge. The Board and senior leadership team
have taken decisive action to implement the recommendations set out in the
Board Review and the Interim Report of the Parliamentary Inquiry. Details of
these changes can be found on pages 114 to 115.
The Board recognises the need to further increase its engagement with
stakeholders close to our operations, including communities and
governments. The appointment of Simon McKeon as Senior Independent
Director for Rio Tinto Limited, as well as Kellie Parker as Chief Executive of
the business in Australia, will increase engagement in Australia and the full
Board will continue to prioritise engagement with local communities when
interacting with Rio Tinto sites remotely or in person. We are consulting with
Traditional Owners to create an Indigenous Advisory Group (IAG), intended
to bring Indigenous voices into the senior leadership and oversight of the
business in Australia. Through our annual Board level engagements with
civil society organisations, we listen, learn and look at ways we can improve
on a number of issues of interest to our stakeholders.
– With COVID-19 impacting communities worldwide, we have an important
role to play in keeping our communities safe while ensuring we can continue
to keep our operations running safely. We have taken extensive measures
across the business to help protect our communities, and have increased
these as the pandemic has spread, in line with guidance or directives from
governments and advice from international health organisations.
How the Board has taken account of these interests
– Building on our first customer survey in 2019, the Commercial team
expanded the exercise in 2020, receiving feedback from more than 400
customers and suppliers across our products and major markets. The survey
tested Rio Tinto’s performance against more than 40 attributes, from
product quality to technology. The high-level results of the survey were
shared with the Board through regular updates provided by the Chief
Executive in 2020. Key insights from the 2020 survey included the
importance of digital capability to customers and improvements in areas
such as collaboration and responsiveness.
– Amongst the Group’s suppliers, the baseline provided by this first survey in
2020 will allow us to continue to shape these important relationships,
building on general satisfaction and areas of focus. Both surveys will be
repeated in 2021.
–
The Board will begin to track progress in customer and supplier satisfaction
from the baselines developed in the 2019 (customers) and 2020 (suppliers)
surveys, and identify any additional areas for focus.
– As with our other stakeholders, the events of 2020 required the Board to
adjust its engagement methods. Planned physical visits by the Board to
major customers and suppliers in Asia were postponed and will be held as
soon as the global situation allows. In the meantime, we are exploring how
members of the Board can engage remotely with a number of key customer
and supplier representatives.
Annual Report 2020 | riotinto.com
123
Governance OT has such a strong story on
performance – particularly the
safety ethos and enthusiasm for
continuous improvement – that
shines through from everyone.
We really get the feeling you
have developed a great culture
on site, which is hugely impacted
by the high and increasing local
capability. A great example to
others, and your pride in this is
understandable – and tangible to
the entire Board.
Simon Henry
Non-executive director
Governance
Board Insights
Board tours Oyu Tolgoi in first virtual site
visit: adapting to COVID-19
Site visits are an important part of the annual calendar
for our Board – a chance for directors to deepen their
understanding of our operations, and to meet with
employees. This year, COVID-19 restrictions meant
that plans for a physical visit to Mongolia had to be
reconsidered – and the Oyu Tolgoi team were determined
to give the Board a virtual tour that would be as close as
possible to being there in person.
With exceptional planning, innovative use of technology,
and the team’s hard work and enthusiasm, they were able
to create a four-hour interactive experience for the Board
members, who joined from their respective homes.
Plan, test and plan some more
The Oyu Tolgoi team used elements of live video,
3D transition and pre-taped news style footage to
showcase the different areas of our business.
The Board virtually visited open pit operations, the
concentrator and the underground development. They
heard from subject matter experts from across Oyu Tolgoi
about the environmental, social and governance aspects
of the business, including our water recycling activities,
local procurement and, community partnerships.
The team tried something new with the background
reading material sent to the Board members before the
event too, and created an interactive book instead of the
more usual PDF.
To complement the virtual site visit and ahead of key
investment and project decisions regarding the OT
underground project, including the approval of the OT
Hugo North Lift 1 (HNL1) Panel 0 mine design feasibility
study and underground project 2020 estimate, the Board
received a teach-in providing an overview of the undercut
criteria relating to the Oyu Tolgoi underground project.
The Board discussed and agreed the criteria that would be
developed for further Board review to manage the key
risks to undercut initiation, including mine design,
development and construction, power certainty, funding,
and sovereign risk. The Board noted that Rio Tinto Copper
& Diamonds and the Oyu Tolgoi joint venture would
manage other aspects such as business readiness,
technical assurance, permitting, and access to market.
124
Annual Report 2020 | riotinto.com
Board Insights
The time I spent with each of
more than 30 senior leaders
in the company enabled me
to learn about each of the
different businesses of
Rio Tinto, as well as to begin
to understand the different
geographies within which
Rio Tinto operates.
Ngaire Woods
Non-executive director
NED inductions
We have developed comprehensive induction processes
for new Board members which aim to provide a broad
introduction to the Group, and enable new directors to
contribute to the Board’s deliberations from the outset.
We appointed three new non-executive directors this year,
Hinda Gharbi, Jennifer Nason and Ngaire Woods. Each
received a tailored programme comprising one-to-one
meetings with Board directors, Executive Committee
members and senior leaders across the business. This
was supported by a comprehensive library of internal and
external reports, memos and presentations covering the
key commercial, operational and functional areas of the
Group. Ordinarily, visits to mine sites and operations form
an important part of induction but, due to the COVID-19
related restrictions, this has not been possible during
2020. We very much hope to reintroduce site visits for
directors during 2021 as restrictions ease. The absence of
face-to-face engagement was reflected in feedback from
new directors on the effectiveness of the induction
process, but this was otherwise positive.
Employee engagement
As we have mentioned elsewhere in this report, the
COVID-19 pandemic challenged us to rethink in 2020 how
the Board engages with employees. Restrictions on
international travel, and on social gathering, meant that
our usual large-scale events such as ‘employee AGMs’
and town halls were not possible in 2020. Instead, we
developed a series of smaller-scale engagements,
primarily in virtual formats, to ensure that the Board
continued to engage with employees and hear their
views directly.
The events included five informal discussions.
The Chairman and a number of non-executive directors
attended each event and employee attendance was
limited to between 15 and 35 employees per event
to maximise the opportunity for active participation.
By mixing time zones and participants, these sessions
managed to include representatives from almost all
product groups and Group functions.
The induction sessions for
new directors were extremely
thorough and comprehensive,
covering all product groups
and major functions.
Jennifer Nason
Non-executive director
In addition, in November, Simon Thompson and Megan
Clark met in person with a group of five employees in our
Perth hub to understand their thoughts on 2020 and
beyond. That conversation was recorded, and the video
was shared with all employees via the Group intranet to
give everyone an opportunity to hear the reflections from
colleagues and from the Board.
We sought feedback from participants after each of these
events. It was good to see that employees were very
positive about the format and conduct of the discussions
and welcomed the opportunity to engage with the Board
in this way. At each of the sessions employees were
clearly very engaged and not afraid to ask difficult
questions on sensitive topics.
The questions and comments raised covered a very wide
range of topics including, among others, the events at
Juukan Gorge and the Group’s response, the desired
credentials for the new Chief Executive (as the search was
ongoing at that time) and the direction and culture of the
organisation. The questions also reflected a clear interest
in safety, work-life balance and inclusion and diversity.
These questions, feedback and insights from employees
are hugely valuable to the Board. They have already been
factored into discussions around the Board table and will
continue to influence our decision-making and the
monitoring of how culture is embedded under our new
Chief Executive and the new Executive Committee team.
Whilst we all hope it will soon be possible to ease the
current COVID-19 restrictions and return to some form of
normality, the emergence and establishment of these new
formats and channels of employee/Board engagement
have been a positive development in 2020. We will
continue to develop them, in addition to more traditional
forms of face-to-face engagement as we continue in
consultation with our newly designated non-executive
director for workforce engagement, Simon McKeon, to
make sure the voice of our employees is heard in the
boardroom.
Annual Report 2020 | riotinto.com
125
Governance Governance
Evaluating our Performance
An effective Board depends on the personal development of individual directors
and continuous improvement in the operation of the Board as a whole.
We measure our performance each year by carrying out a formal annual
review of the Board, its committees and the Chairman. Every third year
we engage a professional external adviser to carry out the Board review
to obtain an independent evaluation. In 2020 we carried out an internal
Board evaluation, with the process overseen by the Group Company
Secretary. The evaluation is based on a questionnaire to all directors and
the views of directors are consolidated into a formal report which is
discussed by the Board and the relevant committees.
One area where some Board members felt more could have been done was
engagement with stakeholders, which is a reflection of the events at
Juukan Gorge. A clear theme that emerged was the importance of the
transition to a new Chief Executive in 2021 and supporting them in evolving
Rio Tinto’s culture and rebuilding trust, notably in Australia. The Board’s
monitoring of the culture and behaviours throughout the organisation was
identified as an area of focus. The need for the new Chief Executive to
prioritise alignment of organisation culture with our values was stressed.
The Board evaluation process identified some areas of strength. This notably
included the way in which Rio Tinto had responded to COVID-19, with the
Chief Executive able to adjust priorities across the business to focus on
responding to the immediate issues. The Board felt that it had adapted to the
new way of working and that there was greater opportunity to use virtual
meetings and site visits in the future. The atmosphere in the boardroom was
rated highly and the Board felt that it had worked coherently and well during
recent challenges, albeit the lack of informal time for the Board was noted
and the importance of engagement with senior leadership was also stressed.
Feedback on the skills and experience of the Board identified a need to bring
a better understanding of China into the boardroom.
Individual assessments
The Chairman is responsible for evaluating the performance of non-executive
directors. In 2020, he met each non-executive director to review their views
on and contribution to the Board, as well as their training requirements.
The non-executive directors, led by Sam Laidlaw, senior independent
director, Rio Tinto plc, are responsible for the performance evaluation of
the Chairman. The senior independent director met with the non-executive
directors and, separately, the executive directors to gather feedback to
provide to the Chairman on his performance. This review concluded that
the Chairman had led the Board effectively during a very challenging year.
2020 progress on 2019 actions
Board composition/dynamics
Actions for 2021
In April 2020, we appointed Hinda Gharbi and Jennifer Nason to the Board.
Professor Ngaire Woods joined us in September. All three new directors bring
relevant experience of championing inclusion, diversity, cultural change and
governance. The appointment of Jakob Stausholm as our new Chief Executive
represents an important milestone as we continue the process of rebuilding
trust and, as an internal successor, he can apply his existing knowledge and
understanding of the Group to some of the key investment and growth decisions
arising in the shorter term.
We currently have a search underway for a new NED, to replace David Constable.
Among our selection criteria will be their ability to help lead cultural change, and
experience of one of our key countries of operation.
An appointment process for the permanent role of executive director and Chief Financial
Officer is underway.
With the global pandemic in 2020, it has been difficult to preserve more time for informal
debate and discussion. We are exploring ways to achieve this in what is likely to remain a
virtual environment for at least part of 2021.
Strategy
The various aspects of the Board’s oversight of strategy were rated positively overall in
the Board evaluation, although the importance of growth options was stressed. Greater
follow-through in terms of analysis and conclusions reached was requested. The Board
was seen to have a good understanding of competitors overall. While the effectiveness
with which sustainability is integrated into the company’s business strategy and
operations was highly rated, it was noted that Rio Tinto’s reputation in the area of
‘social’ has been severely damaged as result of Juukan Gorge.
The Board will continue to focus on the following strategic priorities in 2021: i. China relations;
ii. growth; iii. ESG performance and licence to operate; iv. Australian stakeholder relations;
v. critical decisions regarding iron ore and copper; and vi. culture.
The Chief Executive and interim Chief Financial Officer will continue to consider an
enhanced framework of financial metrics against which the Board can analyse and
stress-test strategic options, new investments and business plan scenarios.
Further involvement of the executive team in strategic discussions will be considered.
Board management and reporting
Overall, the quality of Board documentation received a positive rating, although
a few felt that papers could be crisper, and point more clearly to the decision/
risk/input sought.
Stakeholders
The oversight of stakeholder views was considered somewhat mixed, although
investor and regulatory understanding were identified as relative strengths.
Understanding of China could improve, with China remaining a key stakeholder
as a partner, customer and shareholder. Increased engagement and
understanding of community issues was also highlighted.
The Board’s monitoring of the culture and behaviours throughout the
organisation drew a mixed rating and the need for the new CEO to prioritise
aspects of culture was stressed.
126
Annual Report 2020 | riotinto.com
The management of Board meetings was rated highly, although the impact of COVID-19
on discussions was highlighted. It was felt the Board should spend more time on i. culture
and people; ii. strategic choices; iii. external stakeholders; iv. engagement with leadership,
notably product group heads; and v. technology.
Shorter presentations at Board meetings to allow more time for discussions of key issues
and risks was requested. On key investment decisions, discussion of upside/downside
risks and alternative strategies could be improved.
Engage with customers/suppliers during a Board visit to China.
Increase Board engagement with top talent and senior leadership.
Increase engagement with US investors.
Increase Board awareness of government views in key countries of operation.
Increase engagement with local communities on Board site visits.
The Board and its committees will continue to utilise external speakers and subject matter experts
to enhance understanding, including of China, and of climate change and the energy transition.
Further workforce engagement initiatives will seek to build understanding, across different
jurisdictions, of employee attitudes to work practices and to the company in general.
Evaluating Our Performance
Directors’ attendance at scheduled Board and committee meetings during 20201
Committee appointments
Board
Audit
Nominations
Remuneration
Sustainability
Chairman and executive directors
Simon Thompson
Jean-Sébastien Jacques
Jakob Stausholm
Non-executive directors
Megan Clark
David Constable2
Hinda Gharbi – joined 1 March 2020
Simon Henry
Sam Laidlaw
Michael L’Estrange
Simon McKeon
Jennifer Nason – joined 1 March 2020
Ngaire Woods – joined 1 September 2020
7/7
7/7
7/7
7/7
7/7
6/6
7/7
7/7
7/7
7/7
6/6
3/3
6/6
6/6
4/4
5/6
4/4
6/6
6/6
6/6
5/6
3/43
6/6
6/6
6/6
6/6
4/4
2/2
6/6
6/6
6/6
4/4
2/2
5/5
4/4
4/4
5/5
5/5
4/4
4/4
2/2
1. Outside of the scheduled meetings of the Board and committees for 2020, numerous ad hoc meetings took place to consider more urgent matters, including seven Board meetings, three Nominations
Committee meetings, two Remuneration Committee meetings, and one Sustainability Committee meeting.
2. David Constable was unable to attend an Audit Committee meeting on 14 December 2020 and a Nominations Committee meeting on 29 October 2020 due to unavoidable conflicting commitments
with Fluor Corporation.
3. Hinda Gharbi was unable to attend the Nominations Committee meeting in May 2020 because of an unavoidable commitment that had been agreed prior to Hinda joining the Board in March 2020.
Our plans and priorities for 2021
The Board has identified the following focus areas for 2021:
Strategy and growth
Seek to identify appropriate growth options for the business, while maintaining
the Group’s disciplined approach to capital allocation.
Develop plans to address portfolio concentration risk (geographic/commodity).
Supporting Board dynamics
Ensure balance of face-to-face and virtual Board meetings as the ‘new normal’.
Declutter Board agenda – more items to be taken as read or even offline
between meetings.
Increase Executive Committee participation in Board meetings, including
strategic discussions.
Establish clear and distinguished parameters and metrics for the Chief Executive
Officer and Chief Financial Officer reports.
Focus Board papers and presentations on key issues and key decisions required.
Resume Board site visits as soon as possible.
Support the new Chief Executive Officer in his priorities and continue to enhance
relations between executive and non-executive members of the Board, creating
an informal, challenging but supportive environment.
Convene outside speakers’ expertise on key topics such as sustainability, China
or technology.
Priorities for the new Chief Executive Officer
Build a more collaborative and trusting work environment.
Promote an inclusive and empowered culture that supports raising of concerns.
Re-balance risk aversion and long-term effectiveness versus short-term
efficiency.
Work with the Chairman and Group Company Secretary to enhance the Board’s
oversight of culture and behaviours (including enhanced metrics and qualitative
assessments).
Review the development needs of the senior executive team and finalise the
appointment of a new Chief Financial Officer. Increased Board focus on talent
development and succession planning with a deep dive on Executive Committee
bench strength, development plans and diversity.
Consider appropriate mechanisms to improve the Group’s reputation and
standing in Australia and China, as key business partners.
ESG and stakeholder engagement
Focus on communities and heritage and climate change – conduct a review of
the Board’s response to Juukan Gorge and build resilience for future crises.
Introduce and develop ESG metrics into executive remuneration structures.
Improve the Board’s understanding of key customers and suppliers.
Continue to formalise mechanisms to hear the views of the Group’s workforce,
and to shape decision-making accordingly.
Training and development
Continue to enhance the Board’s knowledge of Asia, and China in particular.
Teach-ins/deep dives will be organised in 2021 in relation to decarbonisation of
the mining sector, technology, ethics and compliance, reserves and resources,
and water management.
Annual Report 2020 | riotinto.com
127
Governance
Governance
Nominations Committee Report
The Nominations Committee seeks to ensure that the Board
has the requisite mix of skills, views, experience and expertise
to provide robust oversight, and to identify and respond
effectively to current and future opportunities and challenges.
In our approach to succession planning and appointments, we are committed to building an effective, diverse,
knowledgeable Board that can provide robust oversight, encourage differing perspectives, promote collaboration, fairness
and inclusion, and convene expertise effectively to help it navigate the increasingly complex opportunities and threats
facing the Group.
2020 was a year that tested many parts of our business. Our response to COVID-19 in many ways showed the Group at
its best, with fast, delegated decision-making within a clear values-based framework that put the safety of our employees,
contractors and local communities first, while allowing our operations to keep running and delivering for customers.
The events at Juukan Gorge, however, were a sobering reminder that, no matter how sophisticated our risk management
processes, in cases like this, the effectiveness of Board oversight is ultimately dependent upon the recognition of risk and
escalation of decision-making by front-line operational staff. Increasing cultural awareness and understanding of
community, heritage and other social risks, and ensuring that operational management has access to the information it
needs to support good decision-making, will be a key focus for the Board and the senior executive team in 2021.
With the departure of three of the most senior executives in the Group as a result of Juukan Gorge, the Nominations
Committee was extremely busy in the latter part of 2020. Our top priority was the appointment of a new Chief Executive.
Drawing upon our existing internal succession planning and an external search, in December 2020, we announced the
appointment of Jakob Stausholm as Chief Executive. Jakob has made a significant contribution to the performance and the
strategy of the Group since joining as CFO two years ago and his appointment represents an important milestone as we
start the process of rebuilding trust. With strong values and an inclusive, collaborative leadership style, we are confident
Jakob will provide clear leadership of our efforts to re-establish Rio Tinto’s leadership in environmental and social
performance. Further details of the appointment process and the selection of Jakob are set out on the following page.
In November, David Constable announced he would be stepping down from the Board to concentrate on his appointment
as the Chief Executive of Fluor Corporation. On behalf of the Board, I would like to thank David for his significant
contribution to our Board discussions. A search for David’s replacement is underway as we seek to further strengthen
representation on the Board from our key countries of operation.
Simon Thompson
Nominations Committee Chairman
22 February 2021
Nominations Committee members
Simon Thompson (Chairman)
Sam Laidlaw
Megan Clark
David Constable*
Hinda Gharbi
Simon Henry
Michael L’Estrange
Simon McKeon
Jennifer Nason
Ngaire Woods
*
A member during 2020, stood down at the end of 2020.
128
Annual Report 2020 | riotinto.com
Appointments to the Board – our policy
We base our appointments to the Board on merit, and on objective
selection criteria, with the aim of bringing a range of skills, knowledge,
and experience to Rio Tinto. This involves a formal and rigorous process
to source strong candidates from diverse backgrounds and conducting
appropriate background and reference checks on the shortlisted
candidates. We aim to appoint people who will help us address the
operational and strategic challenges and opportunities facing the
company and ensure that our Board is diverse in terms of gender,
nationality, social background and cognitive style. As such, we only
engage recruitment agencies that are signed up to the Voluntary Code of
Conduct on diversity best practice.
We believe that an effective Board combines a range of perspectives with
strong oversight, combining the experience of directors who have
developed a deep understanding of our business over several years with
the fresh insights of newer appointees. We aim for our Board composition
to reflect the global nature of Rio Tinto’s business. We currently have six
different nationalities (including dual nationalities) on a Board of 11.
The key skills and experience of our Board are set out on the table at the
end of this report.
Nominations Committee Report
Our diversity and inclusion policy sets out our expectations around the
behaviours needed for an inclusive and diverse workplace. The policy is
co-owned and supported by the Rio Tinto Board and Executive
Committee. At a Group level, we report against gender diversity targets
(see page 76). In addition, each of our operations has local employment
targets; their performance against these targets can be found in our 2020
Sustainability Fact Book.
Read our full policy on our website – riotinto.com/sustainability/policies.
Our key responsibilities
The purpose of the Nominations Committee is to review the composition
of the Board. The Committee leads the process for appointments, making
recommendations to the Board as part of succession planning for both
non-executive and executive directors. It also approves proposals for
appointments to the Executive Committee and monitors the succession
planning and development of a diverse talent pipeline for Executive
Committee members and their direct reports.
Membership of the Committee
All non-executive directors are members of the Nominations Committee.
The Chief Executive and the Chief People Officer are invited to attend all
or part of meetings, as appropriate. The Committee is chaired by the
Chairman of the Board, unless the matter under consideration relates to
the role of the Chairman. During 2020, the Chief Executive did not attend
meetings where his succession was discussed.
Our search process for the Chief Executive appointment
MWM Consulting were appointed to support the search process.
Candidates proposed by MWM were shortlisted by the Nominations
Committee before a series of interviews of the shortlisted candidates
by various non-executive directors and the Chairman. The leading
candidates were also assessed by YSC Consulting. Neither firm has any
connection with Rio Tinto. A final proposal from the Nominations
Committee recommending Jakob was made to the Board in December
2020 and the proposed terms of his appointment were reviewed by the
Remuneration Committee.
Succession planning
In 2021, the Committee will re-focus on broader succession planning for
the Board and Executive Committee. In his first year as Chief Executive,
Jakob’s priorities will include a review of the development needs of the
senior executive team and the appointment of a new Chief Financial
Officer. The Nominations Committee will oversee and recommend
appointments to the Board and support Jakob in other senior
appointments and leadership succession planning.
Changes affecting existing Board members
The role of the Senior Independent Director is well established in the UK.
In 2020, in recognition of Rio Tinto’s DLC structure and the importance of
Australia to the Group’s operations, the Board appointed Simon McKeon
as Senior Independent Director of Rio Tinto Limited to provide an
alternative, Australia-based sounding board for our key stakeholders.
This newly created Board role will complement the existing Senior
Independent Director role, which will continue to be performed by Sam
Laidlaw for Rio Tinto plc.
Since Australia is also the country where our most significant operations
are located, as well as the largest number of employees, Simon McKeon
has also been appointed as the designated non-executive director for
workforce engagement, working closely with the Chairman and Group
Company Secretary.
New appointments – improving diversity
on the Board
Rio Tinto is committed to promoting behaviours that support an inclusive
and diverse workplace and that reflect our values of safety, teamwork,
respect, integrity and excellence. This commitment is set out in our
global code of conduct, The Way We Work.
In 2020, we were pleased to announce the appointment of Hinda Gharbi,
Jennifer Nason and Ngaire Woods as non-executive directors, taking the
proportion of women on the Board to 33.3% (four women and eight men)
as at the end of 2020. Since 1 January 2021, following the departures
of J-S Jacques and David Constable, this has increased to 40%.
Hinda Gharbi has also identified herself as a ‘director of colour’ for the
purposes of the Parker review, which champions greater ethnic diversity
on UK boards.
Appointment of Jakob Stausholm
as our new Chief Executive
In September 2020, we announced that, by mutual
agreement, J-S Jacques would step down from his role as an
executive director and Chief Executive of the Group. A formal
process to identify his successor commenced. J-S agreed to
remain in his role until the appointment of his successor or
31 March 2021, whichever was earlier. This was to ensure
business continuity and, specifically, to maintain the resilient
performance of the Group’s global operations during the
COVID-19 pandemic.
The Nominations Committee oversaw a selection process
that drew upon existing internal succession planning and an
external international search, culminating in the
appointment of Jakob as Chief Executive with effect from
1 January 2021. J-S therefore stepped down from his role as
an executive director and Chief Executive with effect from
1 January 2021 and will leave the Group on 31 March 2021.
Details of the structure of the remuneration package for
Jakob and the leaving arrangements for J-S are disclosed in
the Remuneration Report on pages 140-185.
Jakob has already played a key role in strategy development
and performance management since joining the Group as
Chief Financial Officer, delivering the company’s disciplined
capital allocation strategy, which in turn led the Group to
deliver record shareholder returns. He has a proven track
record as a senior executive with deep industrial and
resources experience spanning strategy and technology as
well as financial and risk management. He has also
demonstrated the ability to build effective relationships,
both internally and in some of our key countries of operation.
This blend of strategic and commercial expertise, taken
together with Jakob’s collaborative leadership style, strong
values and personal commitment to the role of business
in promoting sustainability, make him the ideal choice for
our Chief Executive. A further advantage is that, as an
internal candidate, he will be able to apply his existing
knowledge and understanding of the Group to some of the
key investment and growth decisions arising in the
shorter term.
Annual Report 2020 | riotinto.com
129
Governance Governance
The Committee has engaged Spencer Stuart to support the searches for
recent non-executive director appointments. Spencer Stuart does not
have any other connection with Rio Tinto. When considering candidates,
the Committee has requested that both gender and ethnic diversity be
considered when putting candidates forward.
The Board recognises that it has a critical role to play in creating
an environment in which all contributions are valued, different
perspectives are embraced, and biases are acknowledged and overcome.
The Board shares ownership with the Executive Committee of the
Group’s inclusion and diversity policy, which can be found on the Group’s
website. We also discuss diversity and inclusion in the Sustainability
section of this Annual Report.
Senior leadership – gender diversity
The Group has continued to set measurable gender diversity objectives
for the composition of senior leadership and graduate intake. Progress on
diversity is shown in the Sustainability section on page 76, where we
show a breakdown by seniority. In 2021, we plan to leverage the gains
in 2020 and will expand our gender diversity targets beyond women in
leadership to women at all levels of the organisation.
Focus of the Committee in 2021
In 2021, the Committee will support Jakob as he transitions into his new
role as Chief Executive and fills the senior management vacancies
created by recent departures and promotions. The Committee is
currently conducting a search for a replacement for David Constable and
will continue to review the skills and experience of the directors and the
composition of committees.
Length of tenure of non-executive directors
0 – 3 years: 5
+3 – 6 years: 2
+6 – 9 years: 3
+9 years: 0
Skills and experience of the Chairman and non-executive directors
Board level experience in a major corporation.
Experience of developing large-scale, long-cycle capital projects.
Proficiency in financial accounting and reporting, corporate finance,
internal controls, treasury and associated risk management.
Experience of mergers, acquisitions, disposals and joint ventures.
Work experience in multiple global locations, exposed to a range of
political, cultural, regulatory and business environments.
Experience on the board of a major corporation subject to rigorous
corporate governance standards.
Interaction with governments and regulators or involvement in public
policy development and implementation.
Familiarity with issues associated with workplace health and safety,
asset integrity, environment and social responsibility, and communities.
Knowledge and experience of climate-related threats and opportunities
including climate science, low-carbon transition and public policy.
Experience of working with communities to optimise the benefits and
minimise negative impacts of business activities.
Senior executive experience in marketing, and the development of
product and/or customer management strategies.
Senior executive experience in a large, global mining organisation
involved in the discovery, development, operation and closure of mines.
Experience of talent recruitment, retention, development and incentives.
Experience of managing research, development, and innovation,
including digital technology.
No. of
Directors
7
5
5
5
8
6
4
6
6
6
2
2
4
2
Area of expertise
Business leadership
Capital projects
Financial
Mergers and acquisitions
Global experience
Corporate governance
Government and international relations
HSSE/ESG
Climate change
Communities and social performance
Marketing
Mining
HR/remuneration
Technology/digital
130
Annual Report 2020 | riotinto.com
Audit Committee Report
I am pleased to report on the work of the Audit Committee
(the ‘Committee’) in 2020. This is set out in detail over the
following pages, but in this introduction I would just like to
highlight a few aspects of a quite extraordinary year.
First and foremost, the Group had to respond to the unprecedented challenges of the global COVID-19 pandemic. I have
been hugely impressed with the agility, innovation and tenacity our people have demonstrated to keep assets operating
safely despite the severe restrictions on travel, and the need to socially distance and work remotely. From an Audit
Committee perspective, it has been reassuring to see the organisation adapt to maintain the effectiveness of internal
controls. We have also seen proactive responses to new risks emerging from the COVID-19 environment. While longer term
there is no substitute for ‘boots on the ground’, the Group has embraced new ways of working in 2020 to support the
continued integrity of our control framework.
We changed our external auditor, with the appointment of KPMG at the 2020 AGMs. To change auditors in a large and
complex organisation such as Rio Tinto is a significant undertaking, requiring substantial transition planning and
preparation work. KPMG shadowed PwC through the 2019 audits and engaged extensively with management to build their
knowledge of this company and develop an audit plan. We are also already seeing some of the benefits of periodically
rotating the external auditor as ‘fresh eyes’ suggest potential enhancements and challenge us to reconsider and
substantiate assumptions.
The Audit Committee is acutely aware of the issues arising from the destruction of the Juukan Gorge rock shelters in
May 2020, in particular the weaknesses it exposed in the risk management and internal control framework, and to relevant
culture and behaviours within the company. Looking forward, the lessons learned, and actions now being taken, will form
part of the Committee’s consideration of the effectiveness of the overall control framework.
We welcomed Hinda Gharbi to the Board and as a member of this Committee in March 2020. Hinda has already familiarised
herself with the Group and in just a few short months, this Committee has come to rely upon her experience and insight.
David Constable stepped down as a director at the end of 2020. We will miss his wise counsel, but wish him well as he
embarks on a new role as CEO of Fluor Corporation.
More widely, we continue to monitor developments in the UK audit market following the Brydon, Kingman and CMA
reviews. While the final destination is not yet clear, discussions have continued during 2020 on the direction of travel, and
we continue to play our part in the ongoing consultation process.
As we look to 2021, we see an increased focus on the way companies reflect the potential impact of climate change in financial
reporting. In addition to the usual work of the Committee, this is something we expect to explore further, including appropriate
consideration and assurance around reporting under the Task Force for Climate-related Financial Disclosures framework.
Simon Henry
Audit Committee chairman
22 February 2021
Audit Committee members
Simon Henry (Chairman)
David Constable*
Hinda Gharbi
Simon McKeon
*
A member during 2020, stood down at the end of 2020.
Membership
The members of the Committee are all independent non-executive
directors, and their biographies can be found on pages 116-117.
The Chairman of the Board is not a member of the Committee.
As Rio Tinto’s securities are listed in Australia, the UK and the US,
we follow the regulatory requirements and best practice governance
recommendations for audit committees in each of these markets.
Australian listing requirements
In Australia, the members, and the Committee as a whole, meet the
independence requirements of the ASX Principles. Specifically, the
Committee members between them have the accounting and financial
expertise and a sufficient understanding of the industry in which
the company operates to be able to discharge the Committee’s
mandate effectively.
Annual Report 2020 | riotinto.com
131
Governance Governance
Audit Committee Report
continued
UK listing requirements
In the UK, the members meet the requirements of the FCA’s Disclosure
Guidance and Transparency Rules, and the provisions of the Code
relating to audit committee composition. Simon Henry, the chairman of
the Committee, is considered by the Board to have recent and relevant
financial experience.
Simon Henry and David Constable both have extensive prior experience
of the natural resources sector. Simon McKeon has gained experience of
the mining sector by serving on the Board and on the Committee, and
through regular site visits, reports and presentations. The Committee
as a whole has competence relevant to the sector in which the
company operates.
US listing requirements
In the US, the requirements for the Committee’s composition and role are
set out in SEC and NYSE rules. The Board has designated Simon Henry
as an ‘audit committee financial expert’. The Board also believes that the
other members of the Committee are financially literate by virtue of their
wide business experience.
Induction for new members
New members receive a comprehensive induction. As part of her
induction, Hinda Gharbi met the Group Financial Controller, the heads of
Group Internal Audit, Ethics & Integrity and Investor Relations, and the
lead audit engagement partners in the UK and Australia.
Committee remit
The Committee’s objectives and responsibilities are set out in our terms
of reference (see the Rio Tinto website). These follow the relevant best
practice recommendations in Australia, the UK and the US.
Our main duties are:
Financial reporting – we review the key judgments needed to apply
accounting standards and to prepare the Group’s financial statements.
We also review the narrative reporting that goes with these, with the aim
of maintaining integrity in the Group’s financial reporting. Finally, we
monitor any exclusions made in deriving alternative (non-GAAP)
performance measures such as underlying earnings.
External audit – we oversee the relationship with the external auditors
and review all the non-audit services they provide, and the fees for these,
to safeguard the auditors’ independence and objectivity. We also assess
the effectiveness of the external audit and, when necessary, carry out a
formal tender process to select new auditors.
Framework for internal control and risk management – we monitor the
effectiveness of the Group’s internal controls, including those over
financial reporting. We also oversee the Group’s risk management
framework.
Group Internal Audit (GIA) – we oversee the work of GIA, and its head,
who reports functionally to our Committee chairman.
Ethics and Integrity – we oversee the work of the Group’s Ethics &
Integrity function.
Mineral Resources and Ore Reserves – we oversee the reporting and
assurance of mineral resources, and consider the impact on financial
reporting.
Distributable Reserves – we provide assurance to the Board that
distributable reserves are sufficient, and in the correct corporate entities,
to support any dividend proposals.
These duties feed into an annual work plan that ensures we consider
issues on a timely basis. The Committee has authority to investigate any
matters within its remit. We have the power to use any Group resources
we may reasonably require, and we have direct access to the external
auditors. We can also obtain independent professional advice at the
Group’s expense, where we deem necessary. No such advice was
required during 2020.
132
Annual Report 2020 | riotinto.com
The Committee chairman reports to the Board after each meeting on the
main items discussed, and the minutes of our meetings are circulated to
the Board.
We had six Committee meetings in 2020. Attendance at these meetings
is included in the table on page 127. The Committee has met twice to
date in 2021.
The Chairman of the Board, the Chief Financial Officer, the Group
Financial Controller and the heads of GIA, Ethics & Integrity and Risk
regularly attend our meetings, as do the Group General Counsel and the
Group Company Secretary. We invite other senior executives and subject-
matter experts as needed.
The external auditors were present at all of the Committee meetings
during the year. The auditors review all materials on accounting or tax
matters in advance of each meeting, and their comments are included in
the papers circulated to Committee members. The audit partners also
meet with our Committee chairman ahead of each meeting to discuss key
issues and raise any concerns.
The Committee meets regularly in private session. We also hold regular
private discussions with the external auditors. Management do not
attend these sessions. The Committee chairman also has regular contact
and discussions with these stakeholders outside the formal meetings.
Use of Committee meeting time in 2020
Financial reporting 40%
External audit 15%
Internal control and risk
management 15%
Internal audit 15%
Ethics and integrity 10%
Governance 5%
Other focus areas in 2020
In addition to our scheduled workload, the Committee also considered:
– An annual review and benchmarking of Rio Tinto’s accounting policies
and an overview of newly issued IFRS standards and interpretations
– A summary of the key financial measures relating to the Group’s
pension plans and the factors affecting those figures
– Possible enhancements to the Group’s Long Term Viability
Statement, and the scenario modelling that underpins it, based on the
recommendation in the Brydon Report
– After a robust process, in early 2021 the Committee recommended to
the Board that the draft 2020 Annual Report is, taken as a whole, fair,
balanced and understandable.
We also reviewed the quality and effectiveness of the Group’s internal
control and risk management systems in a joint session with the
Sustainability Committee, which oversees a number of key corporate
risks. This review included the effectiveness of the Group’s internal
controls over financial reporting, and the Group’s disclosure controls and
procedures in accordance with sections 404 and 302 of the US Sarbanes-
Oxley Act 2002. The Committee also considered reports from GIA and
KPMG on their work in reviewing and auditing the control environment.
Audit Committee Report
Significant issues relating to the financial statements
There were six significant issues considered by the Committee in relation to the financial statements:
Matters considered
Conclusion
Review of carrying value of cash-generating units
and impairment charges/reversals
Application of the policy for items excluded from
underlying earnings
Estimate of provision for closure, restoration and
environmental obligations
Climate change
The Group’s tax exposures
Litigation
The Committee assessed management’s determination of cash-generating units, review
of impairment triggers and consideration of potential impairment charges and reversals
over the course of the year. For cash-generating units where impairment indicators were
identified, the Committee considered the key judgments made by management in
relation to discount rates and forecasted commodity prices. For cash-generating units
with recent experience of impairments, the Committee discussed with management the
conclusion supporting no further impairment trigger. Specifically with respect to Oyu
Tolgoi the Committee received an update on the status of the mine design and the
challenges relating to funding. The Committee reviewed disclosures related to
impairment reviews in note 6 and the net impairment charges of $1.2 billion.
The Committee reviewed the Group’s policy for exclusion of certain items from
underlying earnings and confirmed the consistent application of this policy year on year.
The items excluded from underlying earnings comprised a net expense of $2.7 billion.
A reconciliation of underlying earnings to net earnings is presented in note 2.
The Committee reviewed the significant changes in the estimated provision for closure,
restoration and environmental obligations by product group and legacy management.
The Committee received updates on closure studies completed in the period and
discussed with management changes to the discount rate. At 31 December 2020, the
Group’s balance sheet included provision for close-down, restoration and environmental
obligations of $13.3 billion. The Committee was pleased to see the enhanced voluntary
disclosure of closure provisions in note 25.
The Committee received an overview of the work management is undertaking in relation
to climate change and the potential financial reporting implications thereof. The
Committee reviewed the description of the internal price setting process described in
note 1 and discussed with management the three strategic scenarios, the alignment
with the Paris Agreement, and the connection between reserves and resources and
accounting judgments.
The Committee considered management’s assessment of the Group’s tax exposures,
including the recoverability of deferred tax assets which are uncertain due to the timing
of expiry of tax loss carry-forwards in certain jurisdictions. The Committee received
updates on the status of ongoing discussions with the Australian Tax Office relating to
the transfer pricing of certain transactions with the Group’s commercial centre in
Singapore and considered the appropriateness of provisions for uncertain tax positions.
The Committee considered any current or projected litigation and considered
management’s assessment of any financial provisions or contingent liabilities. Provisions
are regularly updated and compared with the track record of settled outcomes.
External auditors
Engagement of the external auditors
For the 2020 financial year, KPMG are serving their first year as our
auditors. The UK entity of KPMG audits Rio Tinto plc, and the Australian
entity audits Rio Tinto Limited. The UK audit engagement partner,
Stephen Oxley, and the Australian partner, Trevor Hart, were appointed
in 2020. Stephen Oxley has announced that he will be retiring from
KPMG to take up an external position after the Rio Tinto 2020 audit and
will hand over to his successor as the UK audit engagement partner
before leaving the firm at the end of March 2021.
We agreed the scope of the auditors’ review of the half-year accounts,
and of their audit of the full-year accounts taking into consideration the
key risks and areas of material judgment for the Group. We also approved
the fees for this work and the engagement letters for the auditors.
Safeguarding independence and objectivity,
and maintaining effectiveness
In our relationship with the external auditor we need to ensure that they
retain their independence and objectivity, and are effective in performing
the statutory audit.
Use of the external auditors for non-audit services
The external auditors have significant knowledge of our business and of
how we apply our accounting policies. That means it is sometimes
cost-efficient for them to provide non-audit services. There may also be
confidentiality reasons that make the external auditors the preferred
choice for a particular task.
However, safeguarding the external auditors’ objectivity and
independence is an overriding priority. For this reason, and in line with
the FRC’s Ethical Standard, the Committee ensures that the external
auditors do not perform any functions of management, undertake any
work which they may later need to audit or rely upon in the audit, or serve
in an advocacy role for the Group.
Annual Report 2020 | riotinto.com
133
Governance Governance
Audit Committee Report
continued
We have a policy governing the use of the auditors to provide non-audit
services. The cap on the total fees that may be paid to the external
auditors for non-audit services in any given year is 70% of the average of
the audit fees for the preceding three years. This is in line with the FRC’s
Ethical Standard. Non-audit assignments fall into two broad categories:
None of the individual non-audit assignments was significant, either in
terms of the work done or the fees payable. We have reviewed the
non-audit work in aggregate. We are satisfied that neither the work done,
nor the fees payable, compromised the independence or objectivity of
KPMG as our external auditors.
– Audit, audit-related or other ‘pre-approved’ services where we believe
there is no threat to auditors’ independence and objectivity, other
than through the fees payable.
– Other services approved under delegated authority.
We apply different approval regimes to these areas of work. Approval
of ‘pre-approved’ services is as follows:
– Up to $50,000 – subject to prior notification to management, this
work can be awarded.
– From $50,001 to $100,000 – requires the Chief Financial Officer’s
approval.
– Over $100,000 and with a tender process – if the external auditors
are successful in the tender, the appointment requires the Chief
Financial Officer’s approval.
– From $100,001 to $250,000 without a tender process – requires
the Chief Financial Officer’s approval.
– Over $250,000, without a tender process – requires the
Committee’s or Committee chairman’s approval.
In each case, the nature of the assignment and the fees payable are
reported to the Committee.
The Chief Financial Officer can approve other services up to the value of
$50,000 and an aggregate value of no more than $100,000. Fees exceeding
$100,000 in aggregate require approval from the Committee or the
Committee chairman.
At the half-year and year-ends, the Chief Financial Officer and the
external auditors report to the Committee on non-audit services
performed and the fees payable. Individual services are also reported
to the Committee at each meeting that have either been approved since
the previous meeting, or that require approval for commencement
following the meeting.
All of the non-audit services provided by KPMG in 2020 were either within
the predetermined approval levels or approved by the Committee. We are
satisfied that the provision of non-audit services by KPMG in accordance
with this procedure is compatible with the general standard of
independence for auditors and the other requirements of the relevant
Australian, UK and US regulations.
Fees for audit and non-audit services
The amounts payable to the external auditors, in each of the past two
years were:
Audit fees
Non-audit service fees:
Assurance services
Taxation services
All other fees
Total non-audit service fees
Non-audit: audit fees (in-year)
For further analysis of these fees, please see note 38.
2020
$m
17.3
2.2
0.0
0.1
2.3
2019
$m
16.4
2.7
0.1
0.0
2.8
13%
17%
Independence of the external auditors
KPMG are required to provide a declaration to the directors in relation to
their compliance with the independence requirements of the Australian
Corporations Act 2001 and the professional code of conduct for external
auditors. A copy of this is on page 311.
No person who served as an officer of Rio Tinto during 2020 was a
director or partner of KPMG at a time when they conducted an audit of
the Group.
Effectiveness of the external auditors
We review the effectiveness of the external auditors each year at our
meeting in June. We consider the results of a survey containing questions
on the auditors’ objectivity, quality and efficiency. The survey is
completed by a range of operational and corporate executives across the
business, and by Committee members. The review in June 2020 related
to the outgoing auditors, PwC, and the overall rating was positive.
The effectiveness of KPMG will be reviewed in June 2021.
In addition in 2020 the outgoing auditors PwC provided additional
feedback to the Committee on the operation of financial processes and
the internal control framework within the company, based on recent
years’ audit experience.
Appointment of the auditors
The Committee has reviewed the independence, objectivity and
effectiveness of KPMG as external auditors in 2020 and in the year to
date. We have recommended to the Board that KPMG should be retained
in this role for 2021, which the Board supports.
KPMG have indicated that they are willing to continue as auditors of
Rio Tinto. A resolution to reappoint them as auditors of Rio Tinto plc will
therefore be proposed as a joint resolution at the 2021 AGMs, together
with a separate resolution seeking authority for the Committee to
determine the external auditors’ remuneration.
Subject to the approval of the above resolution, KPMG will continue in
office as auditors of Rio Tinto Limited.
Risk management and internal controls
We review Rio Tinto’s internal control systems and the risk management
framework. We also monitor risks falling within our remit, especially
those relating to the integrity of financial reporting. A summary of the
business’s internal control and risk management systems, and of the
principal risks and uncertainties we face, is in the Strategic Report on
pages 92-95.
Importantly, responsibility for operating and maintaining the internal
control environment and risk management systems sits at asset level.
Leaders of our businesses and functions are required to confirm annually:
that adequate internal controls are in place; that these are operating
effectively and are designed to identify any failings and weaknesses that
may exist; and that any required actions are taken promptly.
Two management committees, the Executive Committee and the
Disclosure Committee, review reports on the Group’s control framework.
The work they do satisfies the relevant requirements of the Code,
the ASX Principles, the NYSE Standards and section 404 of the US
Sarbanes-Oxley Act 2002.
134
Annual Report 2020 | riotinto.com
Audit Committee Report
The Audit Committee also regularly monitors our risk management and
internal control systems (including internal financial controls). We aim to
have appropriate policies, standards and procedures in place, and ensure
that they operate effectively.
As part of considering the risk management framework, the Committee
receives regular reports from the Group financial controller, the General
Counsel and the Head of Tax on material developments in the legal,
regulatory and fiscal landscape in which the Group operates.
The Board, supported by the Audit Committee, has completed its
formal annual review of the effectiveness of our risk management and
internal control systems. This review included consideration of our
material financial, operational and compliance controls. The Board
concluded that the Group has an effective system of risk management
and internal control.
Internal control over financial reporting
The main features of our internal control and risk management systems
in relation to financial reporting are explained on pages 189-190.
Internal audit programme structure
GIA provides independent and objective assurance of the adequacy and
effectiveness of risk management and internal control systems. It also
may recommend improvements.
While the head of GIA reports administratively to the Chief Financial
Officer, appointment to, or removal from, this role requires the consent of
the Audit Committee chairman. The head of GIA is accountable to the
chairs of both the Audit and the Sustainability Committees,
communicates regularly with both, and attends all regular committee
meetings. Our GIA team therefore operates independently of
management. Their mandate is set out in a written charter, approved by
the Audit Committee. GIA uses a formal internal audit methodology,
which is consistent with the Institute of Internal Auditors’ (IIA’s)
internationally recognised standards.
When needed, the team brings in external partners to help achieve its
goals. There is a clear policy to address any conflicts of interest, which
complies with the IIA’s standards on independence. This policy identifies
a list of services which need prior approval from the head of GIA.
Governance of the annual plan
Each year’s internal audit plan is approved by the Audit Committee and
the Sustainability Committee. The plan is focused on higher-risk areas
and any specific areas or processes chosen by the committees. It is also
aligned with any risks identified by the external auditors. Both committees
are given regular updates on progress, including any material findings,
and can refine the plans as needed.
Effectiveness of the internal audit programme
The Audit Committee monitors the effectiveness of the GIA function
throughout the year, with updates on performance at every meeting.
We are satisfied that the quality, experience and expertise of GIA
is appropriate for the business and that GIA was objective and performed
its role effectively. We also monitored management’s response to
internal audits during the year. We are satisfied that improvements
are being implemented promptly in response to internal audit findings,
and believe that management supports the effective working of the
internal audit function.
Ethics, integrity and the whistleblowing programme
The business has a long-established ethics programme, known as
The Way We Work, supported by a business integrity standard and our
whistleblowing programme. The business integrity standard requires
employees, core contractors and associates acting for and on behalf of
the company to not commit, authorise or be involved in bribery,
corruption, fraud and other economic crimes. The whistleblowing
programme enables employees, in confidence, to raise concerns about
possible improprieties.
The head of Ethics & Integrity reported to the Committee on these
matters during 2020. His reports covered a broad range of areas,
including ethics, regulatory and compliance issues, and where applicable,
any material breaches of The Way We Work, the business integrity
standard, and our whistleblower programme.
Committee effectiveness
The Committee reviews its effectiveness annually. In 2020, this was
accomplished through an internally facilitated evaluation of the Board
and its committees.
The performance of the Audit Committee was highly rated, with no areas
of concern raised and no significant changes recommended. In terms of
improvements, it was agreed that the Committee’s programme should
continue to develop to ensure an appropriate focus on risk management
and risk appetite.
Climate change-related financial reporting
The Directors have considered the relevance of the risks of
climate change and transition risks associated with
achieving the goals of the Paris Agreement when preparing
and signing off the company’s accounts. The Audit
Committee reviews and approves all material accounting
estimates and judgments relating to financial reporting,
including those where climate issues are relevant.
Climate change risk is embedded in our central case
commodity price forecasts which underpin our accounting
judgments and are particularly important in respect to
impairment testing and our assessment of mineral reserves
and resources. The central case forecasts include carbon
price assumptions that are derived from our three scenarios
(Realpolitik 2.0, Society 3.0 and Technology 4.0). As only
one of these scenarios is aligned with the goals of the Paris
Agreement, our central case carbon prices are not
consistent with the expectation of climate policies required
to meet those goals. Currently, the pace of decarbonisation
across the global economy is uncertain and existing climate
policies in many countries are not aligned with stated
ambitions. The narrative reporting on climate-related
matters is consistent with the accounting assumptions and
judgments made in this report.
Annual Report 2020 | riotinto.com
135
Governance Governance
Sustainability Committee Report
We must deliver strong performance, and do so
sustainably, while earning the trust of our employees
and contractors, partners and host communities –
and society at large.
The Sustainability Committee helps oversee the sustainable
development of Rio Tinto through the three pillars of its sustainability
framework: running a safe, responsible and profitable business;
collaborating with stakeholders to build respectful partnerships and
enable long-term benefits where we operate; and producing
materials essential for human progress, contributing to some of the
greatest challenges facing society.
As we look back across 2020, we are deeply sorry and ashamed of the incalculable loss and pain caused by the damage
to the Juukan Gorge rock shelters. We did not live up to our values and standards and we must listen and learn from this
incident. We are committed to ensuring such an incident never happens again and to rebuilding respectful partnerships
with the Traditional Owners of the land on which we operate.
At our best, we come together as a company to navigate the most significant challenges successfully. During the
COVID-19 pandemic the response of our teams and communities was outstanding. When the pandemic emerged, in early
2020, our management team and our many thousands of employees mobilised to keep our operations running, safely
and reliably. We changed rosters, shifts and safety protocols – including instituting rapid testing at key airports in
Western Australia – at times, in a matter of days. Our employees and their families received ongoing health and mental
health support. We instituted strict protocols to keep vulnerable communities safe. And through it all, we kept our
customers supplied with the high-quality products they have come to expect from Rio Tinto.
This year we also recorded our second straight year of zero fatalities, which is an important milestone in our nearly
150-year history. This Committee commends our thousands of employees and contractors who worked hard to achieve
this shared goal. I am also pleased to report that the number of potentially fatal incidents and occupational health
illnesses decreased, year over year, and the number of people injured on the job fell by nearly 12%.
While we are proud of the safety performance of our teams, we are also focused on continuous improvement. We
continue to analyse and learn from actual and potential significant incidents to prevent them happening again, and our
critical risk management (CRM) programme – in which frontline teams verify that fatality prevention controls are in place
before starting work – continues to be a key focus in our efforts to prevent an incident or injury occurring. This year over
one million verifications of controls were made.
We must deliver strong business performance and earn the trust of our people, the trust of our stakeholders and partners
and the trust of society by helping to address global challenges. We are committed to building this trust and will dedicate
the required time and resources to achieve this goal.
The destruction of the rock shelters at Juukan Gorge was, for me, profoundly affecting and shameful. I offer my heartfelt
apologies to the Puutu Kunti Kurrama and Pinikura (PKKP) people as well as to the many others affected, including
Traditional Owners and other Indigenous and First Nations people in Australia and globally. I join the Board, the
management team and the employees of Rio Tinto in my dedicated commitment to ensure something like this does not
happen again.
We are redoubling our efforts to better manage our relationships with our host communities around the world, and
particularly with Traditional Owners in Australia. In November, the Chairman and I met with the board of the PKKP people
as well as nine Traditional Owners groups on whose land we operate across the Pilbara, in Western Australia. We listened
to the hurt and pain that had been caused by Juukan Gorge and where our partnership relationships needed to be
improved. The Board and this Committee are both committed to continuing this dialogue so that the voice and guidance
of the Traditional Owners is reflected in the actions we take to improve, and regain the trust we have lost.
136
Annual Report 2020 | riotinto.com
Sustainability Committee Report
Those actions have already begun. This Committee continues its oversight of the implementation of the recommendations
made in the Board Review (available in its entirety on riotinto.com). These changes include modernising our agreements
with Traditional Owners, increasing the responsibility of our operating units for our Communities and Social Performance
(CSP) partnerships and engagement, and establishing a CSP Area of Expertise to support the product groups, and to deliver
a more rigorous assurance of our standards across operations. We have also enhanced the controls and governance at our
Pilbara iron ore business for the management of activities with potential to impact cultural heritage sites. You can read
more about our actions on cultural heritage on pages 10-11.
Another important change needed, also identified in the Board Review, is culture. By and large, our employees tell us they
enjoy their work and their workmates, and the result over the past few years has shown a consistently improving trend in
many areas. However, the company would benefit from fostering more inclusivity – a culture that is more accepting of
challenge and different perspectives from all levels, and importantly, one in which a wider range of voices is at the table,
and heard. In this context, we have committed $50 million to develop the required skills and capabilities to increase
Indigenous representation and leadership across our business in Australia. We are committed to doing more, and will
continue to report on actions and progress.
With regard to other risks, this year, the Sustainability Committee studied control frameworks that govern risk
management for major underground events, major slope geotechnical events and mine closure. We oversaw a review of
risk management at joint venture operations not managed by Rio Tinto.
We also oversaw a review of our control framework for tailings dams and water storage and continued to monitor updates
to the Rio Tinto standard and procedure for management of tailings and water storage facilities, as well as updates to the
Global Industry Standard for Tailings Management, published in August by the Global Tailings Review.
Climate change remains a pressing global challenge, and Rio Tinto remains committed to being part of the transition to a
low-carbon future. The Committee supports the Board in its strategic response to climate change and in monitoring the
Group’s performance against our targets and aspirations. We oversee the work being done with our customers and
suppliers, across the value chain, to manage emissions through innovative and focused partnerships.
Finally, as you will see on page 65, this year this Committee oversaw the selection of goals to focus our company’s
contribution towards achieving the United Nations Sustainable Development Goals (SDGs). Our new approach will allow
better understanding of how our business can have the most meaningful impact on the biggest challenges faced by society.
As we look to the future, the Sustainability Committee is committed to provide governance and oversight as Rio Tinto, its
management team, employees, contractors and partners together make strides to strengthen the company’s sustainability
performance, build trust with our people, our partners and stakeholders and build trust with society. As a result we look
forward to making an even greater contribution to the health and strength of the countries and communities so many of us
call home.
Megan Clark
Sustainability Committee chair
22 February 2021
Annual Report 2020 | riotinto.com
137
Governance Governance
Sustainability Committee Report
continued
Sustainability Committee members
Megan Clark (Chair)
Michael L’Estrange
David Constable*
Hinda Gharbi
Simon Henry
Sam Laidlaw
Jennifer Nason
Simon Thompson
Ngaire Woods
*
A member during 2020, stood down at the end of 2020.
Our key responsibilities
The purpose of the Sustainability Committee is to help the Board oversee
the sustainable development of Rio Tinto as a business, as well as
Rio Tinto’s contribution to the sustainable development of the
communities and countries in which we operate, and to global
sustainable development.
The Committee does this by overseeing, on behalf of the Board, key areas
of sustainable development: health and safety, environment (including
climate change, and closure and legacy management) and asset security.
The Committee also oversees Rio Tinto’s relationships with communities
and its social performance, including cultural heritage management and
relationships with Traditional Owners, the economic and social
development of the communities in which we operate, and sustainable
development issues as they relate to suppliers and supply chains. In
relation to these important areas we oversee company performance,
monitor compliance with company responsibilities and commitments,
and review the effectiveness of controls designed to manage the
associated risks.
The Committee has the authority and ability to investigate all matters
falling within its terms of reference. These terms of reference are
published on the Rio Tinto website, and feature a full list of our
responsibilities, which include:
– Reviewing the Group’s relevant policies, and overseeing the
management processes designed to ensure compliance with them.
– Monitoring management’s commitment to the behaviours required by
those policies and standards.
– Assessing the Group’s health, safety, security, environment and
Communities and Social Performance framework.
– Reviewing reports from management on fatalities and other serious
incidents, considering recommendations for improvement, and
receiving follow-up reports on their implementation.
– Making recommendations to the Board’s Remuneration Committee in
relation to appropriate metrics for incentive plans for the executive
team relating to safety and other applicable sustainable development
matters, and the annual performance against those applicable metrics.
– Reviewing and approving the proposed annual plan for independent
audit and assurance projects within our scope, and reviewing their
outcomes and recommendations.
– Carrying out a formal review each year of the role and responsibilities
of our Committee, its organisation and effectiveness, and its terms
of reference.
Our year in review
We met six times in 2020, covering a wide range of activities, which are
summarised below. In addition, we participated in six roundtables with
civil society organisations and investors on sustainability issues. These
meetings provided valuable feedback to Rio Tinto.
138
Annual Report 2020 | riotinto.com
Health and safety
The Committee receives regular updates through the year in relation to
the Group’s safety performance across a range of key indicators.
Recognising that we must continue to learn from both actual and
potential significant incidents to prevent them happening again, in 2020
the Committee examined the circumstances leading to, and key learnings
from, the following incidents:
– A potentially fatal incident involving two AutoHaulTM trucks in
December 2019 at Yandicoogina, Western Australia;
– A potentially fatal underground rock fall in August at the Diavik
diamond mine, in the Northwest Territories, Canada; and
– An incident in October at Richards Bay Minerals, South Africa, in which
an employee suffered a permanent disabling injury.
Other work relating to health and safety undertaken by the Committee
this year included:
– Receiving regular updates on the steps being undertaken to ensure
Rio Tinto’s employees and contractors remained safe from COVID-19.
– Reviewing comparative safety performance data across peer companies.
– Receiving a report on Rio Tinto’s control framework in relation to
underground hazards, including observed incident trends from the
major hazard incident tracking programme, and the development of
remote assurance capability for the control framework in light of the
impacts from COVID-19.
– Receiving a report on Rio Tinto’s slope geotechnical hazard
management and the Group’s governance and assurance framework
for these risks.
Environment, including climate change
Our work supporting the Board on environmental and climate change
issues has included the following:
– Reviewing and approving the Group’s report ‘Our approach to climate
change’, released in February 2020.
– Oversight of the review of our control framework for tailings dams and
water storage, and receiving an update on the new Global Industry
Standard for Tailings Management.
– An update on the Group approach to environmental stewardship,
risk-based improvement work and the underlying strategic plan that
considers the changing operating environment.
– Monitoring progress against our climate change targets, and related
projects, partnerships, and physical resilience work.
– A briefing on a Process Safety Management incident involving
a caustic spill at Yarwun Alumina Refinery, in Queensland, Australia.
Communities and Social Performance
The Committee approves annually the Group’s Communities and Social
Performance plan and priorities, and receives annual updates of progress
against the Group’s CSP targets.
Following the destruction of the rock shelters at Juukan Gorge in
May 2020, the Committee has undertaken the following activities:
– Monitored the work undertaken for the independent Board Review
into the destruction of the rock shelters and oversaw the
implementation of the recommendations of the Board Review.
– Oversaw a review of the controls in place within Rio Tinto Iron Ore for
the management of activities with potential to impact cultural
heritage sites.
– Monitored the joint process to work together with the Puutu Kunti
Kurrama and Pinikura People (PKKP) to repair, improve and grow
the relationship.
Sustainability Committee Report
The Committee also oversaw changes to the Group’s Communities
and Social Performance function, and the establishment of the
CSP Area of Expertise within the Safety, Technical and Projects function.
We have fully integrated responsibility for management of cultural
heritage into our mining operations so that our product groups will have
primary responsibility for our Communities and Social Performance
partnerships and engagement. This means that our mine management in
the Pilbara will now be responsible for the relationships with the relevant
Traditional Owners. The Area of Expertise team will own the relevant CSP
standards and procedures, including in relation to cultural heritage, to
ensure our best practices are consistent globally. The Area of Expertise
team will also provide the second line of assurance on CSP performance
and risks and ensure we have the right people with the right skills in the
right locations. In addition, our Internal Audit team will provide the third
level of assurance in relation to our CSP performance and risks, reporting
directly to the Committee.
The Committee is also receiving ongoing updates on a continuing
qualitative review of major CSP risks across the Group.
We continued to provide oversight of the Group’s CSP strategy
and performance.
The Committee has overseen a review of CSP metrics and targets and has
reviewed the proposed approach for new targets to be adopted in 2021
and subsequently for 2022-26.
We supported the Board in its review of the Group’s 2019 modern
slavery statement.
Some of the initiatives we have overseen in relation to human rights, and
the work being done to contribute to our local communities, are set out in
the Sustainability section on pages 72-74 and 78 of this report.
Closure and remediation
We oversaw a review of the Group’s closure strategy, the 2020 closure
work plan and the control framework for the management of the risks
associated with mine closure planning and implementation.
The Committee has also reviewed plans for the closure and rehabilitation
of the Ranger uranium mine in Northern Territory, Australia, following the
cessation of mining and processing activities in January 2021.
Security
The Committee’s oversight of security included receiving reports on the
various security incidents affecting operations at Richards Bay Minerals
between November 2019 and January 2020.
United Nations Sustainable Development Goals (SDGs)
This year we decided to focus our future contribution on two leading
SDGs: responsible consumption and production, and decent work and
economic growth. The continual update of our sustainability metrics and
targets will help communicate our global support.
Governance, risk, assurance, executive incentives, and disclosure
Each year, in a joint session with the Audit Committee, we review the
Company’s risk management and internal controls systems to support the
Board’s risk disclosures in the Annual Report.
We also review a selection of the Group’s key risks associated with health,
safety, security, environment, and Communities and Social Performance.
In February, the Committee received a report on a review of the
effectiveness of Rio Tinto’s operating model for the health, safety,
environment and security functions implemented through 2018 and 2019.
The review included internal stakeholder feedback from site management
on the model’s implementation. Following further development and
refinement of the operating model during 2020, the Committee received a
further presentation in October on the updated model, implementation of
which was completed in December.
The Committee sees transparency as an important part of
Rio Tinto’s approach to sustainability, and we encourage disclosure
of sustainability–related information both proactively and in response
to regulatory requirements.
We reviewed and approved an assessment of the Group’s most material
sustainability topics to be reported on in the 2020 Annual Report and the
Sustainability section of our website. This assessment combines feedback
from internal leaders and subject matter experts, and considers stakeholder
expectations as well as an analysis of the external environment.
Our other work included:
– Reviewing the impact of the COVID-19 pandemic for assurance across
the Group’s technical risk areas due to the restrictions on travel and
on the ability to do assurance on-site.
– The management of material risks at Rio Tinto’s non-managed joint
venture sites.
– Receiving a report on assurance process for Major Hazards reviews
across the Rio Tinto Group.
– Reviewing the 2019 Sustainability Report, the Sustainable
development sections of the 2019 Annual Report, and Rio Tinto’s
2019 slavery and human trafficking statement.
– Reviewing the performance outcomes under the Group’s 2019 short
term incentive plan in relation to safety, and the design for the 2020
safety targets.
– Reviewing the approach to short-term incentive ESG and safety
targets for 2021.
– Receiving a report on the external assurance programme in relation to
the Group’s external sustainability reporting, and in relation to the
safety performance data supporting the safety performance
outcomes under the short term incentive plan.
– Reviewing the Committee’s scope and responsibilities as reflected in
its terms of reference.
The Committee participated in a virtual site visit to the Oyu Tolgoi mine
and development project in Mongolia, in which we reviewed our
community engagement and partnerships.
In addition, the Committee conducted an evaluation of its processes and
performance. Following this review, areas of focus going forward include
increasing the number of meetings per year, managing the size of the
Committee’s agenda to allow due consideration of key issues, and an
increased focus on cultural heritage.
Use of Committee meeting time in 2020
Health and safety 32%
Environment, including
climate change 12%
Governance, assurance
and disclosure 25%
Communities and
Social Performance 24%
Closure and remediation 5%
Other (including
asset security) 2%
This illustration does not include time spent by the Committee on
administrative items or attending site visits.
Our process
The Chief Executive; the Group Executive, Safety, Technical & Projects;
the Chief Legal, Governance & Ethics Officer; the Head of Risk; and the
Global Head of Health, Safety, Environment and Security all regularly
attend our meetings.
The Committee chair reports to the Board after each meeting, and our
minutes are tabled before the Board. All directors have access to the
Committee’s papers.
Our sustainable development strategy and performance are described in
detail on pages 62-91 of this report as well as in our climate change
report, which can be found on our website.
Annual Report 2020 | riotinto.com
139
Governance Governance
Annual Statement by the
Remuneration Committee Chairman
The Committee’s overarching purpose is to
ensure the remuneration structure and policies
reward fairly and responsibly.
In accordance with the triennial policy cycle, we will be submitting our Remuneration Policy (the new Policy)
to shareholders for their approval at our 2021 AGMs.
Changes to our Remuneration Policy (the current Policy) are summarised at the end of this statement on
page 144. The full Remuneration Policy can be found on pages 152-158.
On behalf of the Board, I am pleased to introduce our 2020 directors’ Remuneration Report.
I would like to begin by acknowledging the challenging year we have faced. We deeply regret the events at
Juukan Gorge and have unreservedly apologised to the Puutu Kunti Kurrama and Pinikura (PKKP) people.
The destruction of the rock shelters should not have happened, and we are absolutely committed
to listening, learning and changing.
We have also dealt with the impacts of the COVID-19 pandemic. In the face of these unprecedented
challenges, I am proud of how our employees responded and remained focused on delivering strong
operational performance, and above all, keeping each other safe.
One of the key focus areas for the Committee during 2020 hasbeen a detailed review of our Remuneration
Policy ahead of it being submitted for shareholder approval at our 2021 AGMs. At this stage we are not
proposing significant change, as the Committee believes the current Policy has served our stakeholders
well, a view supported throughout my shareholder consultations over the last 12 months. The Committee’s
overarching purpose remains ensuring our remuneration structure and policies reward fairly and
responsibly with a clear link to corporate and individual performance, aligning our remuneration outcomes
with the delivery of long-term value.
Remuneration Committee members
Sam Laidlaw (Chairman)
Megan Clark
Simon McKeon
Jennifer Nason
Simon Thompson
Ngaire Woods
140
Annual Report 2020 | riotinto.com
Annual Statement by Remuneration Committee Chairman
Juukan Gorge
This year was one of the most challenging in Rio Tinto’s history. The
destruction of the Juukan Gorge rock shelters on the land of the PKKP
people in Australia should not have happened and it does not reflect our
values as a company.
Following the events that occurred at the Juukan Gorge, the Board
conducted a review of our cultural heritage management processes,
procedures, reporting and governance. The Board’s Review published on
24 August 2020 concluded that no single act of commission was
responsible for the tragic events that occurred, rather it was the result of
a series of systemic failures in the heritage management system over a
considerable number of years. The Board concluded that the Chief
Executive, Chief Executive Iron Ore and Group Executive Corporate
Relations were however ultimately responsible for implementing fit for
purpose management systems and would not therefore receive any 2020
short-term bonus. In addition, for the Chief Executive, a further reduction
of £1 million would be applied to the vesting of his 2016 long term
incentive plan (LTIP) award.
Following the publication of the Board Review on 24 August 2020, the
Board engaged extensively with shareholders, Traditional Owners,
Indigenous Leaders and other stakeholders. Despite general support for
the changes recommended in the Board Review, it became clear that a
number of stakeholders felt that the proposed financial penalties, per se,
were insufficient and that to rebuild relationships with the Traditional
Owners and other Australian stakeholders, changes of leadership were
required to move the company forward. At the conclusion of this intense
period of engagement, the Board unanimously concluded that the
positions of the three executives had become untenable and initiated
discussions to agree mutual separation terms, with executives treated as
eligible leavers under the terms of their employment contracts and the
LTIP plan rules.
In making the eligible leaver determination the Board fully recognised the
gravity of the destruction at Juukan Gorge but was mindful that the three
executives did not deliberately cause the events to happen, they did not
do anything unlawful, nor did they engage in fraudulent or dishonest
behaviour or wilfully neglect their duties. Without diminishing the
significance of what occurred it was necessary to balance the findings of
the Board Review, the malus adjustments that had been applied and the
loss of employment for the three individuals, against the considerable
achievements of those executives over many years, in making the final
determination on their separation terms. In this context, the loss of
employment was considered the greater sanction.
The full details of the separation terms for each executive which are in
accordance with the Policy and their contractual terms are included on
pages 169 and 174.
Remuneration Policy
We undertook a thorough review of our current Policy in 2020 as part of
which we revisited the merits of restricted stock. We remain of the view
that for a long-term cyclical business such as ours restricted stock has
some logic. However it was very clear from our discussions with
shareholders across different geographies that a significant proportion
still prefer a performance tested long-term programme. We are therefore
not proposing significant changes to the structure of the current Policy at
this time.
Overall, the current Policy has served us well but the Committee felt there
was scope for simplification and opportunity to align certain aspects
more closely to shareholder and broader stakeholder expectations.
Key aspects reviewed in detail included the overall quantum and the
individual components of the remuneration package in terms of market
positioning, the pay mix, executive pensions in the context of the
provisions applicable to the broader workforce, and the performance
metrics underpinning the short term incentive plan (STIP) and LTIP.
As a result, we are proposing some changes which are outlined on
pages 144-145 which includes an extension of our malus and clawback
provisions to cover events that have a material impact on our social
licence to operate.
On appointment as Chief Executive, Jakob Stausholm’s pension benefit
has been set at 14% of salary, which is in line with our new Policy to
provide retirement benefits consistent with other employees in the
Group. Previously, the maximum pension contribution for new
appointments was 25% of salary. The weighted average contribution rate
for UK and Australian based employees is around 14%. All members of
the Executive Committee will be aligned to this level from 2021, except
for the Chief Operating Officer who will retain the previous contribution
level until his retirement in 2022. The target STIP of the Chief Executive
is also being reduced from 120% of base salary to 100% of base salary
with the removal of the previous 1.2 multiplier.
A key change proposed to our current Policy is to allocate half of the
individual component of STIP (15%) to specific Environmental, Social and
Governance (ESG) metrics. These will represent a bundle of targets
related to our climate change initiatives comprising annual milestones
towards the achievement of our 2030 targets, diversity and inclusion to
reflect the communities in which we operate, and governance of our
cultural heritage management and other risk-related areas. This
proposed change was widely supported in our shareholder consultations
this year. It was also clear from the feedback that shareholders want to
see meaningful, transparent, quantifiable targets which tie to the broader
strategy across the ESG dimensions whilst recognising that there are no
easy solutions that readily tick all these boxes. Whilst the Committee is
fully committed to setting ESG targets that meet most, if not all, of the
above criteria, this will be an aspect that we expect to evolve over time.
Our 2021 approach to ESG is set out on page 145.
While our policy review has confirmed the appropriateness of our current
approach, we will continue to monitor the executive pay debate, as our
shareholders would expect. We remain keen to explore any alternate
arrangements that simplify remuneration, drive a balanced focus on the
short and long-term, align outcomes with Group performance, drive the
right behaviours, limit the potential for excessive outcomes, and deliver
our objective to attract, retain and appropriately reward talented
executives and will continue to engage with shareholders on this subject.
Chief Executive succession
The Committee’s work this year was also focused on the remuneration
implications of our Chief Executive’s succession. Jakob Stausholm was
appointed Chief Executive effective 1 January 2021. The terms of his
appointment announced in December 2020 reflected the rules of our
incentive arrangements and the new Policy that is being put to
shareholders at the 2021 AGMs. Fixed pay on appointment was set at
£1.311 million per annum, inclusive of base salary of £1.15 million per
annum and a pension contribution of 14% base salary. This level of fixed
pay will be a reduction of more than 10% from Jean- Sébastien Jacques’
fixed pay of £1.467 million per annum. Further information in respect of
Jakob Stausholm’s remuneration is provided on page 169.
New executive appointments
The executives appointed into new roles on the Executive Committee set
out on pages 118-119 have all been appointed on terms aligned with the
new Policy set out in this Report.
COVID-19
Like all organisations, Rio Tinto was faced with navigating the COVID-19
pandemic. We could not have foreseen the challenges that would arise in
2020, but we continued to perform well and deliver to plan. Our executive
team managed a rapid and effective response to COVID-19, without
needing to furlough any employees without pay, seeking any government
assistance, or cancelling dividends. We were fortunate to remain
operating as an essential industry and continued to make a valuable
contribution to the communities and economies in which we operate.
Thanks to the collective hard work of the entire organisation, we
remained focused on our core priorities – the health and safety of our
people and communities, the safe running of our operations to serve our
customers, the focus on keeping our business and profits strong,
maintaining positive partnerships with communities and governments,
and above all, staying resilient.
Annual Report 2020 | riotinto.com
141
Governance Governance
Annual Statement by the Remuneration Committee Chairman
continued
The portion of the award relating to TSR vested on 18 February 2021.
The Committee will make a final determination of the relative improvement
in the EBIT margin measure when the final EBIT margin performance
of the comparator group companies becomes available in May 2021.
If applicable, this portion of the award will vest on 31 May 2021.
Notwithstanding the substantial malus adjustment applied to
Jean-Sébastien Jacques which includes a £1 million reduction to his 2016
LTIP vesting, his 2020 single total figure of remuneration is higher than
2019. This is due to the significant share price appreciation since grant of
the 2016 LTIP and it being the first award he received in his capacity as
Chief Executive. No LTIP award is due to vest for Jakob Stausholm who
received his first award in 2018.
Pay in the broader context
Each year, the Board looks forward to engaging with our employees all
over the world. Over the last several years, the Board has held events
with employees across each of our major geographies, complemented by
smaller town halls in more remote operating locations to ensure there
remains widespread engagement. Much has changed over the past year,
but as we respect travel restrictions, physical distancing and other safety
measures, the Board’s enthusiasm to engage with employees remains as
strong as ever. The COVID-19 pandemic has challenged all of us to think
and do things differently. The Board has adapted its style of engagement
to virtual discussions across a broad range of topics including pay.
The Committee remains cognisant of executive pay in the broader
context of a post COVID-19 world, ensuring the new Policy reflects the
desired attributes of fairness, transparency, simplicity, proportionality,
and alignment to broader organisational culture.
The CEO pay ratio of 81:1 is primarily driven by the LTIP vesting which
ties closely to the shareholder experience over the relevant period which
saw TSR increase by 210%.
Fairness and genuine care for the health and wellbeing of employees are
key pillars of our approach to reward and benefits across the Group.
These have underpinned the Group-wide response to the pandemic and
continue to guide us. Pages 148-149 provide more insight into our
approach to reward applicable to the broader employee population.
Our focus on pay equity is evident in our gender pay metrics on which we
continue to make progress. Pay equity is a key pillar of our annual
remuneration approach. The gender diversity in senior management
roles also remains a key aspect of our broad agenda on diversity and
inclusion. Further details of both equal pay and the gender pay gap,
together with a wider discussion on diversity and inclusion, are provided
in the Sustainability Report on pages 75-76.
As always, I welcome shareholder feedback and comments on the 2020
Remuneration Report.
Yours sincerely
Sam Laidlaw
Remuneration Committee Chairman
22 February 2021
During 2020 we have seen outstanding examples of collaboration, speed
and agility as our employees came together to tackle the complex issues
of COVID-19 and overcome these hurdles to keep our operations running
safely. We now look to the future to use the challenges presented by
COVID-19 as an opportunity to strengthen our company and our position
in the market even further.
2020 remuneration outcomes in the context of broader business
performance
Short term incentive plan
Financial performance
In our At a glance section on page 146, and on page 163, we retrospectively
disclose the financial STIP targets set by the Board for 2020.
To remind you, in considering financial performance against the annual
plan, we measure half against the original plan; the other half is “flexed”
to exclude the impact of fluctuations in exchange rates, and quoted metal
and other prices during the year, which are outside management’s
control. We have used this approach consistently since 2005 for
measuring our earnings performance, and have flexed the cash flow
outcomes since the introduction of this measure in the STIP in 2009.
When commodity prices rise, or there are favourable exchange rate
variations, we protect shareholders by ensuring that 50% of the STIP
opportunity (as relates to financial performance) is denied the benefit of
that rise. When the reverse happens, and commodity prices fall or there
are negative exchange rate variations, that STIP opportunity is
safeguarded (as to 50%) against the fall. Our view is that this approach
maintains appropriate incentive for executives, even in times of
significant market volatility.
Notwithstanding the unprecedented challenges posed by the pandemic,
the Group’s overall financial performance was very strong, substantially
aided by a favourable pricing environment for key commodities. On a
flexed basis, earnings were just below and cash flow results were above
target, while on an unflexed basis both earnings and cash flow results
exceeded the outstanding range. Together, the outcomes resulted in an
unadjusted Group performance against the financial targets of 77% of
maximum. As in prior years the Committee considered whether any
adjustments were warranted to ensure the outcome was a fair reflection
of underlying performance. The Committee noted the COVID-19 related
expenditure incurred in ensuring our operations continued to run safely
which reduced the Group result by 2% but determined not to make any
related adjustments or any other adjustments, recognising the impact of
the pandemic on business and society globally.
Safety performance
In 2020 Rio Tinto achieved its second successive fatality free year. This
achievement has been accomplished through leadership commitment to
safety, implementation of critical risk management across our operations,
increased sharing and analysis of incidents that have the potential to
result in a fatality, and the continued implementation of the safety
maturity model with its focus on leadership and coaching. Overall, the
combined performance against our safety measures meant that the
Group’s STIP safety result was above target at 74% of maximum and the
STIP safety results for all executives were above target.
2020 STIP awards
The 2020 STIP award for Jakob Stausholm is 71.3% of maximum. This
includes a personal performance score of 60%, which balances strong
leadership and contribution during the year with the events that occurred
in 2020. As a result of the malus adjustment, Jean-Sébastien Jacques will
not receive a 2020 STIP award.
Long term incentive plan
The estimated vesting for the 2016 award, combining the two TSR and
EBIT margin portions, is 66.7% of maximum. In the context of the Group’s
overall performance during the five-year performance period and the
shareholder experience over that timeframe, the Committee concluded
that the vesting of awards was justified. Given Rio Tinto’s strong share
price performance since the grant of this award, 47% of the estimated
vesting value relates to share price appreciation.
142
Annual Report 2020 | riotinto.com
Annual Statement by the Remuneration Committee Chairman
Frequently asked questions
How does the new Policy ensure remuneration
has a strong link to performance?
What changes have you made
to incentive metrics?
Outstanding business and individual performance are required to achieve
the maximum level of remuneration. This comprises:
– outstanding performance against financial, health and safety, and
individual STIP measures; and
– TSR outperformance against both the EMIX Global Mining and
MSCI World indices, currently 6% per annum over five years.
The Committee believes that if these levels of performance are achieved, shareholders
will benefit over time from superior returns.
How does the new Policy safeguard against
reward for failure?
The Committee retains discretion in relation to all incentive outcomes and can therefore
adjust payouts to ensure alignment to performance and shareholder experience.
Incentive awards are also subject to a broad malus, clawback, and suspension policy
that provides the Committee with the ability to ensure that there is no payment for
failure. We have further expanded this in our new Policy to cover events that materially
impact our social licence to operate.
How did you arrive at a 14% pension
contribution level for executives?
The 14% pension contribution rate is reflective of the average contribution rate received
by our UK and Australian employees.
How will you ensure that the ESG measures
are appropriate?
The Board is clear on ESG factors that are material to the creation of shareholder value
– climate change, cultural heritage and diversity and inclusion. We have identified
measures for each of these, but acknowledge that as we undertake this journey, they
are likely to be refined and improved with experience and adjustments to strategy, as
we do with all incentive measures.
What penalties were applied to executives for
the Juukan Gorge event?
As a consequence of the event, the Chief Executive, Chief Executive Iron Ore and Group
Executive Corporate Relations left the company. In addition, the entire 2020 STIP was
forfeited by the three executives. The Chief Executive also had a malus adjustment of
£1 million applied to his 2016 LTIP.
The key change for 2021 has been the introduction of
ESG measures into the STIP. These targets are related to
our climate change initiatives towards the achievement
of our 2030 targets, diversity and inclusion to reflect our
external partnerships and the communities in which we
operate, and governance of our cultural heritage
management and other risk-related areas.
When considered alongside the existing STIP and LTIP
measures, the Committee remains satisfied that the
measures are closely aligned with our strategy and meet
the criteria of simplicity and fairness.
In future years, the focus of the measures may need to
be adapted to ensure they continue to support long-term
value creation. The new Policy therefore enables the
Committee to vary metrics for future awards. We would
undertake appropriate consultation with our major
shareholders prior to making any material changes in
our approach.
Are overall pay levels
appropriate?
The Committee is mindful of setting pay at an
appropriate level and continues to be thoughtful in its
approach to pay.
The company operates in a highly competitive and global
talent market, and we need to set pay at a level which
enables the company to attract and retain high quality
people who are capable of managing and growing the
business. This is essential to generate superior returns
for our shareholders.
We remain committed to aligning pay with performance.
Remuneration levels towards the upper-end of the
payout scale are only delivered when justified by
outstanding performance. The Committee pays close
attention to pay practices in the wider Group, to ensure
fairness and consistency in decision making. The
Committee also retains the discretion to vary incentive
outcomes (including negative adjustments) where they
do not fairly reflect performance.
Overall, the Committee remains comfortable that a fair
balance has been struck between pay and performance.
Annual Report 2020 | riotinto.com
143
Governance Governance
Remuneration at a Glance
Summary of remuneration changes for 2021
Our current Policy was approved by shareholders at our 2018 AGMs and is binding for executive directors.
Overall, the current Policy has served us well and we are not proposing changes to the underlying architecture of the Policy. However, we have taken the
opportunity to simplify and align certain aspects more closely to the evolving governance and socio-economic landscape, as well as investor and broader
stakeholder expectations. The key changes to the new Policy and its implementation for executive directors are summarised in the table below. For the
full detail of the new Policy see pages 152-158.
Element
2018 Policy
Base salary
– Base salaries are reviewed annually by the Committee.
– Any increase is normally aligned with the wider workforce.
– Maximum individual increase of 9%, or inflation if higher, per annum.
Pension or
superannuation
Rio Tinto may choose to offer:
– Participation in a pension plan, superannuation fund or cash payments in lieu of pension contributions.
–
For appointments made from 1 June 2018, the maximum level of company contribution to an
executive director’s scheme annually is 25% of base salary.
Benefits
Executive directors are eligible to receive benefits which may include healthcare, allowance for
professional tax services, company car or car allowance, and international relocation allowance
and benefits.
Proposed changes
for 2021
– Maximum individual base
salary increase to be 5% plus
CPI per annum.
–
Jakob Stausholm’s salary has
been set at £1.15 million.
– Pension benefit reduced to
14% of base salary for new
appointments to align more
closely with the broader employee
population. Applies to Jakob
Stausholm from 1 January 2021.
– Company car or car allowance to
be removed for new appointments.
Removed for Jakob Stausholm
from 1 January 2021.
– At least 50% of the measures will relate to financial performance and a significant component will
– Removal of 1.2 multiplier on STIP.
Short term
incentive
plan (STIP)
including
Bonus Deferral
Award (BDA)
Performance Share
Awards (PSA)
under the long
term incentive plan
(LTIP)
relate to safety performance.
–
–
–
25% of maximum is awarded for threshold performance; 50% for target; and 100% for outstanding.
Between threshold and target, and between target and outstanding, the award is pro-rated on a
straight line basis. The percentage award is multiplied by 1.2 subject to the 200% cap although
this was not applied to Jakob Stausholm on appointment to Chief Financial Officer.
The Committee retains the right to exercise discretion, both upwards and downwards, to ensure
that the level of award payable is appropriate.
50% of the STIP is delivered in shares that are deferred for three years as a BDA with the
remainder of the STIP delivered in cash with no deferral.
– Maximum opportunity is capped at 200% of salary for each executive.
– Malus, clawback and suspension provisions apply to the STIP and BDA.
Annual awards are made under the LTIP. Performance is measured against total shareholder return
(TSR) relative to the EMIX Global Mining Index (50%) and to the MSCI World Index (50%).
– Awards have a maximum face value of 438% of base salary (excluding dividend equivalents).
–
–
The awards have an expected value of approximately 50% of face value.
The maximum threshold value is 98.6% of base salary (being 438% x 22.5%).
– How performance is generated is as important as what level of performance is delivered. Before
vesting, the Committee will satisfy itself that relative TSR is an appropriate measure of the
underlying performance of the business, and may adjust vesting accordingly.
– Malus, clawback and suspension provisions apply.
Shareholding
guidelines
Executive directors should build up a shareholding in Rio Tinto equivalent in value to:
– Chief Executive: four times base salary.
– Other executive directors: three times base salary.
–
–
Introduction of an ESG component
with a 15% weighting.
Extended the malus and
clawback provisions to include
material impacts on our social
licence to operate.
– Reduce the payment at threshold
to zero and balance the range
between threshold and
outstanding, removing the cliff
edge effect of the current Policy.
– Maximum LTIP award to be
reduced to 400% (excluding
dividend equivalents).
–
Extended the malus and
clawback provisions to include
material impacts on our social
licence to operate.
–
TSR to remain a key
performance metric.
– Other performance conditions
may be incorporated in
alignment with the company’s
strategic objectives.
–
Executive directors will be
required to retain their minimum
shareholding (or their holding
on termination, if lower) for two
years after leaving the Group.
Other Executive Committee members
The Remuneration Policy is broadly applied to other members of the Executive Committee who are not directors. Potential variations in implementation
may include lower shareholding requirements and STIP deferrals.
144
Annual Report 2020 | riotinto.com
Remuneration at a Glance
Incorporation of ESG into the Remuneration Policy
The social and environmental challenges facing the world and our business, together with investor and broader societal
expectations and the events at Juukan Gorge, have highlighted the need for Rio Tinto to fully integrate environmental,
social and governance (‘ESG’) performance management into the way we operate across our business.
A key enabler for success is a clear focus on the objectives that directly drive performance across each pillar and we believe
that by linking pay outcomes to the achievement of these objectives this focus will be further strengthened. In addition
to safety, which makes up 20% of the STIP, from 2021 15% of the STIP will be focused on specific E, S and G objectives.
Set out below is the rationale for this change and the broader context within which the 2021 targets (see pages 172-173)
have been set.
E
S
G
Environment
Climate change is one of the key long-term environmental challenges facing us as well as a source of
potential opportunities. We must and want to be part of the solution. The targets set are driven from
our roadmap to execute against our climate change ambitions. As we are neither able to control nor
accurately measure scope 3 emissions, our strategy remains to impact positive change in this area
through partnerships focused on the decarbonisation of the value chain.
In support of the four pillars of our climate change strategy, our focus is on three key dimensions:
– Strengthen our overall strategic approach to climate change including developing a carbon offset
strategy and review of design standards for new projects.
– Progress on our emissions and abatement projects.
– Progress on our partnerships strategy across our value chain to ensure alignment with our climate
change ambition.
Please refer to “Our Approach to Climate Change 2020” for more detail.
We will focus our 2021 ‘E’ component on progressing our emissions and abatement projects
and partnerships.
Social
The need for us to be reflective and representative of the communities in which we operate has never
been more important. Alongside this, it is imperative that the work environment is one where everyone
feels included, respected and heard.
Our aspiration is to have an environment where all aspects and dimensions of diversity are represented
and celebrated but we need to focus our efforts to have an impact. Local and indigenous employment
is a key priority in each of the countries in which we operate and we continue to have local targets and
investment. The nationality diversity of our leadership teams will also become a greater priority.
We will continue to measure how we evolve our culture and improve inclusion through multiple
channels, including our regular people survey. In addition, we are finding meaningful ways of
measuring how the communities in which we operate, our customers and broader stakeholders see us
to provide another lens on culture and organisational health.
We will focus the 2021 ‘S’ component on improving the representation of women. This is a visible
diversity that represents half of the population and is currently significantly underrepresented.
Increasing female representation will help create an environment that is better prepared to welcome
all other forms of diversity.
Governance
Following publication of the Board Review on Cultural Heritage Management, we developed an action
plan (the Trusted Partnership Program – TPP) to address the specific findings and implement the
recommendations of the Board Review. The actions map across a number of topic areas and groupings.
Although the TPP seeks to address specifically the learnings from Juukan Gorge, with a clear and
important focus on Australia, it is part of a Group-wide focus on rebuilding trust and strengthening our
communities, partnerships and heritage function and engagement across all of our operations.
For 2021, we will measure under the ‘G’ component progress made on a Group level in the social
performance function, on assurance and organisation alignment.
Annual Report 2020 | riotinto.com
145
Governance Governance
Remuneration at a Glance
continued
2020 remuneration outcomes
2020 short term incentive plan
Executive director remuneration (£’000)
The charts below set out the maximum and actual executive
remuneration, as calculated under the UK regulations. As explained on
page 150, there are differences in both reporting and methodology for
measuring remuneration under the Australian regulations.
Actual
Maximum
14.8%1
20%
Actual
Maximum
18%1
30%
Actual
Maximum
38.5%1
50%
Chief Executive
Jean-Sébastien Jacques
2020 Actual remuneration (percentage of maximum)
(100%)
(57%)
£1,496
£5,728
Safety performance
Financial performance
Individual performance
1. Chief Financial Officer
£7,224
Safety performance is measured in three areas:
Binary fatality measure 100%
2020 Threshold remuneration (percentage of maximum)
(100%)
(30%)
(22.5%)
£1,496
£697
£2,271
2020 Maximum remuneration
(100%)
(100%)
£1,496
£2,324
(100%)
£10,092
Fixed
STIP
LTIP
Chief Financial Officer
Jakob Stausholm
2020 Maximum remuneration
(100%)
£1,046
(100%)
£1,582
Fixed
STIP
146
Annual Report 2020 | riotinto.com
£4,464
All injury frequency rate (AIFR) 50%
Implementation of safety maturity model (SMM) 60%
£13,912
For 2020, the total assessment for the Group’s safety performance was
above target, at 74% of maximum. In 2020 there were zero fatalities
across the Group, which meant that performance against the binary
fatality measure was therefore maximum. AIFR performance was at
target and SMM was just above target.
Financial performance
Two measures are used to assess financial performance, with both
unflexed and flexed targets (adjusted for commodity prices) for each
measure. We also adjust for exceptional and non-controllable items. An
item is considered exceptional or non-controllable when it is not included
in the target which is set at the start of the financial year. Overall, the
Group financial STIP outcome was 77% of maximum. Actual performance
against threshold, target, and outstanding performance for each measure
is set out in the charts below:
Unflexed
10.6bn
15.7bn
Target: 12.7bn
Flexed
£2,628
Actual: 12.4bn
STIP free cash flow target range
(threshold to outstanding) – US$
5.5bn
10.8bn
Target: 7.8bn
Unflexed
9.7bn
16.5bn
Target: 12.6bn
Flexed
Actual: 13.4bn
2020 Actual remuneration (percentage of maximum)
(100%)
£1,046
(71%)
£1,129
£2,175
2020 Threshold remuneration (percentage of maximum)
Underlying earnings target range
(threshold to outstanding) – US$
(100%)
£1,046
(25%)
£396
£1,442
6.6bn
10.2bn
Target: 8.2bn
Remuneration at a Glance
This section sets out key elements of our performance and remuneration
outcomes for 2020.
2016 – 2020 LTIP
Share ownership requirements
Actual
Maximum
33.3%
33.3%
Estimate
Maximum
0%
33.3%
Actual
Maximum
33.3%
33.3%
Jean-Sébastien Jacques meets his share ownership target and will be
required to maintain shares to a value equivalent to his minimum
requirement for two years from his termination date. In his prior role as
Chief Financial Officer, Jakob Stausholm was on target to reach his share
ownership requirement within five years of appointment as an executive
director. On appointment to Chief Executive, his minimum holding
requirement increased to 4x base salary. Consistent with our Policy,
he will be given one additional year to meet his higher new requirement.
TSR relative to
EMIX Global
Mining Index
TSR relative
to MSCI World
Index
Relative financial performance –
EBIT margin improvement versus
sector peers
LTIP
Performance is measured against TSR relative to the EMIX Global Mining
Index (33.3%) and to the MSCI World Index (33.3%). In addition, for PSAs
granted from 2013 to 2017, there was an additional performance
condition of improvement in EBIT margin relative to global mining
comparators (33.3%).
Rio Tinto outperformed against the EMIX Global Mining Index and the
MSCI World Index, resulting in a vesting of 66.7% under these two
components, out of a maximum of 66.7%.
Jean-Sébastien Jacques
Appointed July 2016
2020
Target
4.0x
Jakob Stausholm
Appointed September 2018
2020
Target
2.7x
3.0x
x gross base salary
8.2x
x gross base salary
Total shareholder return
250
200
150
100
50
2015
2016
2017
2018
2019
2020
Rio Tinto
EMIX Global Mining
MSCI World
The estimated performance against the EBIT margin measure is that Rio Tinto is ranked sixth against a comparator group of 11, which would
result in a vesting of nil out of a maximum 33.3% for this measure. The estimated performance will be recalculated following the actual EBIT
margin outcome in May 2021.
Annual Report 2020 | riotinto.com
147
Governance Governance
Remuneration at a Glance
continued
How is the Policy applied to the wider employee population?
The remuneration standard applied to the wider employee population is inspired by and consistent with the
Policy applicable to the executives. This allows the total reward offering to employees to be competitive and
strongly linked to performance whilst maintaining alignment with the company culture.
Fairness
Facilitating the achievement of equal pay for equivalent roles, contribution and performance.
Pay equity is closely scrutinised and monitored through different lenses:
– In-depth pay equity analysis in the remuneration review process feeds into managing pay
gaps from multiple perspectives including gender (see page 75).
– Minimum global standards apply (e.g. parental leave and life assurance) that ensure the
foundations of our total reward offerings align to our values and support our employee value
proposition irrespective of local market practices.
c.1% Gender pay gap
in favour of women
c.2% Equal pay gap
in favour of men
Ownership
– Promoting material participation in our global employee share plan (myShare) to
create employee ownership and alignment with shareholders.
– As at 31 December 2020, approximately 22,000 of our employees across more than
30 countries were shareholders in the company.
– Employees invest approximately US$14 million in Rio Tinto shares every quarter through
myShare.
22,000 employee shareholders
Consistency
– Consistency in implementation of the Policy allows for more uniform approaches to
remuneration across the Group, enabling a more consistent employee experience and
enhancing transparency.
– A good example is the incentive plans applicable to executives that are cascaded to the
broader employee population.
19,000 STIP participants
1,700 LTIP participants
Wellbeing
– Leading benefits programmes, focused on holistic and
integrated support for physical, mental and financial wellbeing.
– Flexible benefits that can be tailored to suit different needs and life stages, including
employee assistance, minimum insurance standards for life, accident and disability,
medical plans and virtual care, health screening and prevention and subsidised health and
wellbeing services.
– Understanding life is about more than work, we offer family-friendly leave provisions and
are proud to have established global family and domestic violence support.
Security
– Reward principles that protect employee purchasing power globally.
– Payroll governance that promotes accurate and timely payment of remuneration.
– Balance between fixed and variable pay at all levels.
Timely and accurate
payroll
Inflation focused
annual reviews
Competitive pay and
benefits
R
e
m
u
n
e
r
a
t
i
o
n
p
r
i
n
c
i
p
l
e
s
Competitive
reward
Reward
performance
Recognise
potential
Focus on
wellbeing
Retain
talent
148
Annual Report 2020 | riotinto.com
Remuneration at a Glance
Application to wider employee population
The application of the Policy to the broader employee population can be further illustrated
as below.
Remuneration
arrangements
Fixed
Base salary
– The base salary approach and
review process for employees is
consistent with that applied
to executives.
– Focus on maintaining purchasing
power, equity and market
competitiveness.
Pension or superannuation
– Retirement benefits available
to employees are market
competitive.
– The reduction in the pension
benefit for our executives
provides increased alignment
with the broader employee
population.
Other benefits
– Our employee benefit offerings
are broadly aligned with those
offered to executives in similar
locations supporting the focus
on wellbeing and market
competitiveness.
Remuneration
arrangements
Performance-
related (At risk)
Short term incentive plan
A significant number of our
employees have a short term
incentive based on a similar structure
to executives with three components
of financial, safety and personal.
The maximum opportunity varies by
employee grade and performance
metrics are weighted more towards
individual performance at lower
grades. The incentive plans available
to other employees are based on
structures more applicable to their
particular business unit.
Bonus deferral
Bonus deferral is applied only to our
most senior management
population with the STIP for the
broader employee population being
paid fully in cash.
Long term incentive plan (LTIP)
– The senior management
population participates in the LTIP.
– Performance share awards are
granted at senior levels, based
on the same performance
criteria as executives.
– A restricted share award is
operated for roles below the
Executive Committee.
Shareholding guidelines
Shareholding requirements apply to the senior management population at
lower multiples of base salary than those applied to executives.
Annual Report 2020 | riotinto.com
149
Governance Governance
Remuneration at a Glance
continued
About our reporting
As our shares are listed on both the Australian and London Stock
Exchanges, the information provided within our Remuneration Report
must comply with the reporting requirements of both countries.
Our regulatory responsibilities impact the volume of information we
provide, as well as the complexity. In Australia, we need to report on a
wider group of executives, as described in the following paragraph. In
addition, as set out in the summary table below, the two reporting
regimes follow different methodologies for calculating remuneration.
In the UK, disclosure is required for the Board, including the executive
directors. The Australian legislation requires disclosures in respect of
“key management personnel” (KMP), being those persons having
authority and responsibility for planning, directing and controlling the
activities of the Group. For the reporting period ended 31 December
2020, our key management personnel are, in addition to the Board, all
members of the Executive Committee. This includes the Chief Executive
Iron Ore Chris Salisbury who stepped down on 11 September 2020;
Ivan Vella (acting Chief Executive Iron Ore) from 15 September 2020,
and Steve McIntosh (Group Executive Growth and Innovation) who retired
on 30 September 2020.
Consistent with our efforts to simplify and align activities across the
Group, and to coincide with the review of our Policy ahead of it being
submitted for shareholder approval at our 2021 AGMs, after due
consideration the Board has determined effective 1 January 2021 that
aside from the Board, including the Chief Executive, our key management
personnel comprises the interim Chief Financial Officer, all Product Group
Chief Executives, the Chief Commercial Officer and the Group Executive
Strategy & Development.
Throughout this Remuneration Report, the members of the Executive
Committee are collectively referred to as “executives”. They are listed on
pages 118-119, with details of the positions held during the year and
dates of appointment to those roles.
Structure of our Remuneration Report
We have included an At a Glance section that summarises key
information in one place, resulting in our Remuneration Report being
organised into the following parts:
The differing approaches explained
As well as the difference in methodology for measuring remuneration,
there are also key differences in how remuneration is reported in the UK
and Australia.
UK
– For reporting purposes, remuneration is divided into fixed and variable
elements.
– We report remuneration in the currency it is paid, for example, where
a UK executive is paid in pound sterling, remuneration is reported in
pound sterling.
Australia
– For reporting purposes, remuneration is divided into short and
long-term elements.
– All remuneration is reported in US dollars, so using the previous
example, the UK executives’ remuneration would be converted to US
dollars using the average exchange rate for the financial year (except
STIP, which is converted at the year end exchange rate).
– The table below summarises the elements of each component of
remuneration, as well as the significant differences in the approaches
to measurement.
UK
Fixed
Base salary
Benefits
Pension
The value of the pension
contribution and payment in lieu of
pension paid during the year.
Australia
Short-term
Base salary
STIP – cash element
Cash benefits
Non-monetary benefits
Annual statement by the Remuneration
Committee Chairman
Remuneration at a Glance
Remuneration Policy, which sets out the policy that will
apply from 2021 onwards if approved by shareholders at
our AGMs
Implementation Report, which shows how the current Policy
has been applied and new Policy will be applied in 2021,
including tables 1a-3a incorporating additional disclosures
required under the Australian regulations
Variable
STIP – cash element
STIP – deferred share element
140
144
Long-term
STIP – deferred share element
Based on the amortised IFRS fair
value of deferred shares at the time
of grant.
152
LTIP
LTIP
Measured at point of vesting.
159
Based on the amortised IFRS fair
value of the award at time of grant.
Pension and superannuation
Accounting basis.
Total remuneration
Shareholder voting
As required under UK legislation, the new Policy will be subject to a
binding vote at our 2021 AGMs. The Implementation Report, together
with the annual statement by the Remuneration Committee Chairman,
is subject to an advisory vote each year as required by UK legislation.
Under Australian legislation, the Remuneration Report as a whole is
subject to an advisory vote. All remuneration related resolutions will be
voted on at the AGMs as Joint Decision Matters by Rio Tinto plc and
Rio Tinto Limited shareholders.
150
Annual Report 2020 | riotinto.com
Remuneration Policy
Remuneration Policy
Remuneration Policy introduction
This Policy applies to our executive and non-executive directors and to
the Chairman. In accordance with Australian law, it also sets out the
broad policy principles that apply to members of the Executive
Committee who are not directors.
Shareholders should note that our Policy is binding only in so far as it
relates to directors. The implementation of this Policy for executives who
are not directors may therefore vary from that of the executive directors.
In determining the new Policy the Committee followed a robust process
which included multiple discussions regarding the content of the Policy
taking into account the needs of the business and evolving market and
best practice. The Committee considered input from both management
and our independent advisers while ensuring that conflicts of interest
were appropriately managed.
The overall structure of the new Policy remains broadly unchanged from
the Policy previously approved by shareholders in 2018. Updates to the
Policy largely reflect evolving corporate governance and market practice,
with minor changes being made to aid the operation of the Policy.
These changes include a reduction to pension for new executives to
reflect arrangements operated for the wider employee population, the
introduction of an ESG component into STIP and a reduction to the LTIP
maximum award level to 400% of salary (from 438%).
Our remuneration policies, principles and practices
Our values of safety, teamwork, respect, integrity and excellence reflect
who we are and what we stand for as a business. They guide the
Committee in its decision making and are foundational to our
remuneration-related policies, principles and practices.
Our first priority is to allocate remuneration resource wisely. We want our
pay policies to be regarded as fair by employees and shareholders alike to
reward both short and long-term performance and to reinforce the values
and collective individual behaviours that drive sustainable performance.
Although we believe that our Policy is fit for purpose, the Committee
retains the discretion to override unforeseen and inappropriate
mechanistic outcomes.
High-quality people, who are capable of managing and growing the
business, are essential to generate superior returns for our shareholders.
Rio Tinto operates in global and local markets where it competes for a
limited pool of talented executives and our remuneration strategy is
therefore designed to attract and retain the people that we need.
We recognise that remuneration represents just one of the factors that
encourage the attraction and retention of talent. We also seek to engage
our employees over the long-term, to foster diversity, and to provide
challenging work and development opportunities. Our people strategy is
underpinned by our commitment to safety and our other core values of
respect, integrity, excellence and teamwork.
Competitive remuneration linked to performance and
shareholder value creation
Remuneration is linked to performance targets over both the short and
long-term, to ensure that executive rewards are aligned to the delivery
both of short-term priorities and long-term sustainable growth in
shareholder value. In order to assess the competitiveness of the
packages we offer, we benchmark ourselves against other companies in
the FTSE 30 (excluding financial services companies), which typically
have similar global reach and complexity, and other international mining
and natural resources companies. The outcomes of these benchmarking
exercises form just part of our consideration of the appropriate level of
remuneration packages, but we would not expect either base salaries or
the expected outcome of our short and long term incentive plans to
deviate markedly from the median of these comparator groups. The
actual outcome will depend on business and individual performance.
We take salary increases in the broader employee population into
account in determining any change to the base salary of executives and
consult with shareholders on the design of our short and long-term
incentive plans to ensure that they are aligned with shareholder interests
and priorities. We do not formally consult with our employees on the
Policy, but approximately 50% of the workforce are shareholders through
participation in our employee share plans and therefore have the right
to vote on the Remuneration Report. Employees are invited to ask
questions or express opinions through our normal employee
communications channels.
Performance under the STIP is measured over one year based on a
balanced scorecard including safety, financial, individual and from 2021
onwards ESG metrics. We recognise the importance of ensuring targets
are achieved in the right way and are aligned to the company’s values.
Therefore in considering STIP outcomes, we also consider the extent to
which outcomes are in accordance with our values. 50% of the STIP for
executives is delivered in deferred shares that vest after three years.
Performance under the long term incentive plan (LTIP) is measured over
five years and awards are typically delivered in shares together with
cumulative dividends.
Our share ownership policy requires executives to build up and maintain
a material shareholding in the company as described in the
Implementation Report.
Alignment with the UK Corporate Governance Code
The UK Corporate Governance Code principles for developing a remuneration policy have been addressed as follows:
Principle
Remuneration Policy
Clarity
Our Policy is set out in a fully transparent manner. Communications and engagement with stakeholders promotes clarity around all
elements of the Policy.
Simplicity
We have further simplified aspects of the new Policy to enhance transparency and aid understanding.
Risk
The incentive arrangements have been structured to support effective risk management. This includes a strong focus on long-term success.
Risks include non-financial risk, such as safety, the environment and heritage protection.
Malus, clawback and suspension provisions apply to all variable remuneration which allow for performance adjustment in the event of risk
management failures.
Predictability
The remuneration outcomes under the different performance scenarios (threshold, target, and outstanding) are clearly set out with an
estimate of potential maximum outcome if share price increased by 50%. See charts on page 155.
Proportionality
The Policy maintains a strong link to strategy and performance. This is set out in the Policy table on pages 152-154.
The Committee also has discretion over all variable remuneration outcomes.
Alignment to
culture
Our incentive plans are aligned with our strategic focus on long-term sustainable growth and a focus on safety, team work, respect, integrity
and excellence.
Annual Report 2020 | riotinto.com
151
Governance Governance
Remuneration Policy
continued
Executive remuneration structure – Policy table
The Policy set out on the following pages is designed to provide a total remuneration package that is appropriately balanced between fixed and variable
components, with an emphasis on long-term variable pay. The remuneration structure for executives, including the relationship between each element of
remuneration and Group performance, is summarised below.
Further details on the KPIs used to assess Group performance are provided in the Strategic Report.
Any commitment made before this Policy takes effect or before an executive became or becomes a director will be honoured even if it is not consistent
with this or any subsequent Policy.
Remuneration arrangements – Fixed
Base salary
Link to Group performance and strategy
– We pay competitive salaries to hire, motivate and retain highly competent people drawn from a global talent pool.
Operation
– Base salary provides the main fixed element of the remuneration package.
– Base salaries are reviewed annually, with a maximum individual increase of 5% plus CPI per annum. An individual increase may be higher than this in the circumstances
described below.
– Any increase is generally aligned with the average base salary increases applying to the broader employee population unless there were significant changes to an
individual’s role and/or responsibilities during the year. Any increases are determined with reference to underlying Group and individual performance, global economic
conditions, role responsibilities, an assessment against relevant comparator groups and internal relativities.
– An increase above the maximum noted above may be made in the event of promotion or increase in responsibility or where the executive’s base salary is significantly
below market positioning.
– Benchmarking is undertaken periodically but not annually, and our intention is to apply judgment in evaluating market data.
Pension or superannuation
Link to Group performance and strategy
– We provide locally competitive post-employment benefits in a cost-efficient manner in order to hire and retain.
Operation
–
Employment benefits typically include participation in a pension plan, superannuation fund, or a cash allowance to contribute to a personal pension or superannuation
fund, which are aligned with the arrangements for the broader workforce of the country of residence.
–
The maximum annual benefit is set to reflect the pension arrangements for the wider employee population. This is currently capped at 14% of salary but may be
adjusted to reflect changes in arrangements for the wider employee population.
Other benefits
Link to Group performance and strategy
– We provide competitive other benefits in a cost-efficient manner in order to hire and retain.
Operation
– Other benefits may include, but are not limited to, private healthcare cover for the executive and their dependents, life insurance, accident insurance, professional advice,
participation in local flexible benefit programmes and certain other minor benefits (including modest retirement gifts in applicable circumstances, occasional spouse
travel in support of the business, any Rio Tinto business expenses which are deemed to be taxable and any tax the company has paid on their behalf).
–
Secondment, relocation and localisation benefits (for example, housing, tax equalisation, cost of living allowance, periodic visits home for the executive and their family
and where relevant, transfer and localisation payments) may also be made to and on behalf of executives living outside their home country.
– Other benefits are paid at cost and, given the nature and variety of the items, there is no formal maximum level of company contribution.
Remuneration arrangements – Performance-related (At risk)
Short term incentive plan (STIP)
Link to Group performance and strategy
–
STIP focuses participants on achieving demanding annual performance goals, which are based on the Group’s priorities, in pursuit of the creation of sustainable value for
our stakeholders.
– We demand that sustainable business practices are adhered to, particularly in the context of safety and ESG.
– We consider the individual performance of our executives against our values. The way we work outlines how we deliver both our purpose and strategy. It makes clear
how all employees should behave, in accordance with our values of safety, team work, respect, integrity and excellence.
Operation
– Nil award for threshold performance and 100% for outstanding. Between threshold and outstanding, the award is normally pro-rated on a straight line basis between
these points.
–
The maximum award is capped at 200% of base salary for all executives. Any outcome from the formulaic STIP calculation is subject to the exercise of discretion by
the Committee.
– A scorecard based on the Group’s priorities is established for each executive at the commencement of the financial year. The measures and the relative weightings are
selected by the Committee in order to drive business performance for the current year, including the achievement of financial, safety, ESG and other individual business
outcomes that are priorities for the financial year in question. At least 50% of the measures will relate to financial performance and a significant component will relate to
safety performance.
152
Annual Report 2020 | riotinto.com
Remuneration Policy
Remuneration arrangements – Performance-related (At risk) continued
Operation continued
– We expect to disclose the measures, weightings and targets for safety and ESG goals at the beginning of each year. In the area of financial and individual goals, we will,
at the beginning of each year, disclose the measures and weightings only, because we regard the targets as commercially sensitive. However, we intend to disclose these
targets and outcomes retrospectively.
–
In making its year-end determination of STIP awards, the Committee seeks to ensure that actual performance is directly comparable to the targets set at the beginning of
the year. This may result in adjustments to the targets or to the assessed results being made by the Committee (in particular to take account of events outside
management’s control), to ensure a like-for-like comparison. Both upward and downward adjustments can be made, with reference to principles agreed by the
Committee, to ensure the outcomes are fair.
–
Safety KPIs comprise a significant portion of the STIP for executives, and any fatality will have a material impact on the STIP result for all executives.
– Malus, clawback and suspension provisions that apply are set out later in the Policy.
Bonus deferral
Link to Group performance and strategy
–
Ensures ongoing alignment between executives and shareholders through deferral of part of the STIP award into Rio Tinto shares.
Operation
– Normally 50% of the STIP is delivered in bonus deferred shares (known as a Bonus Deferral Award (BDA)) with the remainder delivered in cash with no deferral.
– BDAs normally vest in the December of the third year after the end of the STIP performance year to which they relate.
– Dividends (or equivalents) may accrue in respect of any BDA that vest.
– Where permitted by the plan rules, and where the Committee so decides, awards may be made or satisfied in cash in lieu of shares. Awards are normally, but not
exclusively, granted with an intention to settle in shares.
– BDAs vest on a change of control.
– Malus, clawback and suspension provisions that apply are set out later in the Policy.
Remuneration arrangements – Performance-related (At risk)
Performance Share Awards (PSA) under the long term incentive plan (LTIP)
Link to Group performance and strategy
– PSAs are designed to provide a simple and transparent mechanism for aligning executive reward with the execution of an effective business strategy that delivers
superior long-term shareholder returns.
– Award levels are set to provide substantive focus on and reward long-term performance. PSAs are the most significant component within the remuneration package and
are calibrated so as to ensure the overall competitiveness of the remuneration package.
Operation
– PSAs are conditional share awards (or economic equivalent) that vest subject to the achievement of stretching performance conditions and continued employment.
–
The Committee will set performance conditions aligned with the Group’s long term strategic objectives for each PSA grant. Relative TSR has been chosen as the current
measure of long-term performance as it provides an objective external assessment over a sustained period on a basis that is familiar to shareholders. Whilst we expect
TSR will remain a key performance metric, the Committee retains the discretion to adjust the performance measures and weightings as appropriate. For the 2021 awards,
there is no intention to make any adjustments to the two TSR performance metrics and their weighting.
– PSA are normally only released after five years. Currently awards are subject to a five-year performance period.
– Awards have a maximum face value of 400% of base salary which is currently determined using the average share price of the prior financial year. Actual annual award
levels may vary for each executive.
–
Threshold performance would result in the vesting of up to 22.5% of the face value of an award.
– Dividends (or equivalents) may accrue in respect of any PSA that vest.
– Where permitted by the plan rules, and where the Committee so decides, awards may be made or satisfied in cash in lieu of shares. Awards are normally, but not
exclusively, granted with an intention to settle in shares.
– Awards and performance conditions may be adjusted to take account of variations of share capital and other transactions. Subject to this Policy, performance conditions
may also be amended in other circumstances if the Committee considers that a changed performance condition would be a fairer measure of performance.
–
–
If there is a change of control, awards will vest to the extent performance conditions are then satisfied. Unless the Committee determines otherwise, if the change of
control happens during the first 36 months from the date of grant of the award, the number of shares that can vest will be reduced pro rata. The Committee may,
alternatively, with agreement of an acquiring company, replace a PSA with equivalent new awards over shares in the acquiring company.
The Committee retains the discretion, where circumstances warrant, to amend performance conditions under the relevant plan rules. The Committee will seek to ensure
that outcomes are fair and that they take account of the overall performance of the company during the performance period.
– Malus, clawback and suspension provisions apply (see page 154).
Annual Report 2020 | riotinto.com
153
Governance Governance
Remuneration Policy
continued
Shareholding guidelines
Link to Group performance and strategy
–
Shareholding guidelines align executives’ interests with those of shareholders.
Operation
–
The Group understands the importance of and expects executives to build up and maintain a material shareholding in Rio Tinto. Executives should aim to reach a share
ownership (defined below) in Rio Tinto shares equivalent in value to:
Chief Executive
4 x base salary
Other executives
3 x base salary for the Chief Financial Officer and up to 3 x base salary for other executives.
–
–
–
–
The Committee generally expects executives to build up their shareholding over a five-year period. Longer periods may be accepted for new appointments, given the
five-year vesting period for the PSA.
Shares are treated as “owned” if they are not subject to restriction (e.g. additional performance conditions), which includes shares directly held by an executive and any
shares where there is a beneficial interest. A beneficial interest includes any shares for which an executive receives the benefit of ownership (such as a right to receive
dividends) without directly owning the shares. Given its mandatory nature and the absence of performance conditions, a value for unvested BDA is included with a 50%
discount for the likely effects of taxation.
Executive directors are expected to continue to meet the share ownership policy for two years after stepping down from the Board (or if the holding requirement is not
met at this date, the relevant holding at the time). When considered alongside the existing leaver provisions for share awards, this will ensure that executive directors will
remain aligned with shareholders for an extended period after ceasing employment.
The Committee retains the discretion to enforce shareholding requirements through the application of malus to unvested share awards and/or scale back of future
grants.
Malus, clawback and suspension
“Malus”, “clawback” and “suspension” provisions will apply to STIP and LTIP awards.
Under both the “malus” and “clawback” provisions, where the Committee determines that exceptional circumstances exist, the Committee may, at its discretion, reduce the
number of shares to be received on vesting of an award, or, for a period of two years after the vesting of an award, the Committee can clawback value from a participant.
The circumstances under which the Committee exercises such discretion may include, inter alia:
–
–
any fraud or misconduct by a participant or an exceptional event which has had, or may have, a material effect on the value or reputation of any member of the Group
(excluding an exceptional event or events which have a material adverse effect on global macroeconomic conditions).
an error in the Group’s financial statements which requires a material downward restatement or is otherwise material or where information has emerged since the award
date which would have affected the size of award granted or vested.
– where the Committee determines that the personal performance of a participant, of their product group or of the Group does not justify vesting or where the participant’s
conduct or performance has been in breach of their employment contract, any laws, rules or codes of conduct applicable to them or the standards reasonably expected
of a person in their position.
–
the performance of the company, business or undertaking in which a participant worked or works or for which he or she was or is directly or indirectly responsible is
found to have been misstated or based upon any material misrepresentation and which resulted in the award being granted and/or vesting over a greater number of
shares than would otherwise have been the case.
– where any team, business area, member of the Group or profit centre in which the participant works or worked has been found guilty in connection with any regulatory
investigation or has been in breach of any laws, rules or codes of conduct applicable to it or the standards reasonably expected of it.
– where the Committee determines that there has been material damage to the Group’s social licence to operate.
–
a catastrophic safety or environmental event or events occurring in any part of the Group.
Under the suspension provisions, the Committee may suspend the vesting of an award (for up to five years) until the outcome of any internal or external investigation is
concluded and may then reduce or lapse the participant’s award based on the outcome of that investigation. Note that where suspension applies, the 24-month clawback
period will not extend beyond the period commencing from the original vesting date.
Discretion
The Committee recognises the importance of ensuring that the outcomes of the Group’s executive pay arrangements described in this Policy properly reflect the Group’s
overall performance and risk appetite.
The Committee therefore reserves the right to review all remuneration outcomes arising from mechanistic application of performance conditions and to exercise discretion to
make adjustments where such outcomes do not properly reflect underlying performance or the experience of shareholders or other stakeholders.
The Committee may at its discretion adjust and/or set different performance measures if events occur (such as a change in strategy, a material acquisition or divestment, a
catastrophic safety or environmental incident, a change in control or other unexpected event) which cause the Committee to determine that the measures are no longer
appropriate or in the best interests of shareholders or other stakeholders, and that amendment is required so that the measures, as far as possible, achieve their original
purpose. Such discretion will be exercised judiciously and clearly disclosed and explained in the Implementation Report.
Any discretionary adjustments for directors will be disclosed in the Implementation Report for the relevant financial period.
154
Annual Report 2020 | riotinto.com
Remuneration Policy
Total remuneration opportunity
The following charts provide an indication of the minimum, target and maximum total remuneration opportunity, subject to shareholder approval of the
Remuneration Policy for the executive directors, together with the proportion of the package delivered through fixed and variable remuneration. The STIP
and PSA are both performance-related remuneration.
Potential value of 2021 remuneration package
CEO
(£’000)
Minimum
100%
(xx.x%)
Target
29%
(xx.x%)
Maximum
24%
(xx.x%)
47%
(xx.x%)
17%
(xx.x%)
28%
55%
Maximum + 50% share price growth
£1,394
£4,844
£8,294
(xx.x%)
13%
(xx.x%)
22%
(xx.x%)
43%
22%
£10,594
Fixed pay
STIP
PSA
50% share price growth
The following table provides the basis for the values included in the charts above:
Fixed (stated in £’000)
Jakob Stausholm
Base salary(a)
Pension
Benefits(b)
Total
£1,150
£161
£83
£1,394
(a) Base salary is the latest known salary.
(b) The value of benefits is as per the 2020 benefits figure in the single total figure of remuneration table, as set out in the Implementation Report.
Performance-
related (At risk)
Target STIP and LTIP
performance
– A STIP award of 50% of the maximum award (equates to 100% of base salary)
–
Expected value of 2021 PSA of 50% of face value, calculated as 200% of base salary
Maximum STIP and LTIP
performance
– A maximum STIP award of 200% of base salary
–
Full vesting of 2021 PSA, calculated as 400% of base salary
(a) PSAs granted under the LTIP consist of share awards only, measured at 2021 face value. This does not constitute an estimate of the value of awards that may potentially vest with respect to year-end
31 December 2025. An assumed 50% growth in share price has been included in the final illustration. No assumption has been made for payment of dividends.
(b) Further details of the 2021 PSA are disclosed in the 2020 Implementation Report.
Annual Report 2020 | riotinto.com
155
Governance Governance
Remuneration Policy
continued
Recruitment remuneration
The table below sets out the policy for both internal and external recruitment. No form of “golden hello” will be provided upon recruitment. In the case of
internal appointments, existing commitments will be honoured.
Element
Base salary
Recruitment policy
We aim to position base salary at an appropriate level, taking into consideration a range
of factors including the executive’s current remuneration and experience, internal
relativities, an assessment against relevant comparator groups and cost. If a new
executive director is initially appointed at a lower rate, the Committee retains the ability
to award larger increases in subsequent years in order to realign the salary over time as
the individual develops in the role.
Pension or superannuation
Other benefits
Consistent with Policy table.
Will be established in line with our Policy.
Short term incentive plan (STIP)
Eligible to take part in our STIP with maximum opportunity capped at 200% of salary.
Performance Share Awards (PSA) under long term incentive plan
Maximum face value of 400% of base salary in line with our Policy.
Buy-out awards
Relocation-related support
Any compensation provided to an executive recruited from outside the Group for the
forfeiture of remuneration arrangements on joining is considered separately to the
establishment of forward-looking annual remuneration arrangements. Our policy with
respect to such “buy-outs” is to determine a reasonable level of award, on a like-for-like
basis, consisting primarily of equity-based awards, but also potentially cash, taking into
consideration the quantum of forfeited awards, their performance conditions and vesting
schedules. The Committee will obtain an independent external assessment of the value
of awards proposed to be bought out and retains discretion, subject to the considerations
noted above, to make such compensation as it deems necessary and appropriate to
secure the relevant executive’s employment. The Committee’s intention is that buy-out
compensation should include, where appropriate, performance conditions and equivalent
time frames for release.
If the Committee concludes that it is necessary and appropriate to secure an
appointment, relocation-related support and international mobility benefits may be
provided depending on the circumstances and in line with the Group’s broader approach.
Any relocation arrangements will be set out in the Implementation Report.
Executives’ service contracts and termination
Under normal circumstances, executive directors will be offered service contracts which can be terminated by either party with up to 12 months’ notice in
writing. In exceptional circumstances, an initial notice period of up to 24 months during the first two years of employment, reducing to up to 12 months
thereafter, may be necessary to secure an external appointment. In some circumstances, it may also be appropriate to use fixed-term contracts for
executive directors.
Other executives are offered service contracts which can be terminated by the company with up to 12 months’ notice in writing, and by the employee with either
six or up to 12 months’ notice in writing.
The contracts for executives include appropriate non-compete and restrictive covenants.
The current contract terms of directors and the other executives are included in the Implementation Report. The letters of appointment are available for
inspection at Rio Tinto plc’s registered office, and at its AGM.
Executives may be required to go on “garden leave” during all or part of their notice period and may receive their base salary, STIP and other benefits during the
notice period (or the cash equivalent). Where applicable, tax equalisation and other expatriate benefits will continue in accordance with the executive’s prevailing
terms and conditions.
If termination is a result of redundancy, the terms of the relevant local policy or practice will apply in the same way as for other local employees.
The STIP and LTIP rules govern the entitlements that executives may have under those plans upon termination of employment.
The concept of an “eligible leaver” is defined in the relevant plan rules. In general terms, an eligible leaver is an executive who leaves the Group by reason of
ill-health; injury; disability (as determined by the executive’s employer); retirement with company consent; redundancy; transfer of the undertaking in which the
executive works; change of control of the executive’s employing company; or death. In addition, the plan rules afford discretion to the Committee to award
eligible leaver status in other circumstances.
In the case of dismissal for cause, the company can terminate employment without notice and without payment of any salary or compensation in lieu of notice.
Outstanding awards under any of the Group’s long term incentive plans may be forfeited in these circumstances.
156
Annual Report 2020 | riotinto.com
Remuneration Policy
If an executive resigns or is dismissed for misconduct, or as the result of malus being applied in accordance with the plan rules, share awards will lapse.
The table below sets out the policy on termination for eligible leavers:
Element
Termination policy
Base salary, pension
and other benefits
Pay of base salary in lieu of any unexpired notice which may be paid progressively in instalments over the notice period. The Committee will for
executive directors (to the extent permitted by relevant law) have regard to the executive director’s ability to mitigate his or her loss in assessing
the payment to be made.
Executive directors and their dependants may also be eligible for post-retirement benefits such as medical and life insurance. The company may
also agree to continue certain other benefits for a period following termination where the arrangements are provided under term contracts or in
accordance with the terms of the service contract, for example, payment for financial advice, tax advice and preparation of tax returns for a tax
year. In some cases, they may receive a modest leaving gift.
Short term
incentive plan
If an eligible leaver leaves the Group during a performance year, the Committee may determine in its absolute discretion to award a pro rata
portion of the STIP based on the amount of the year served and based on actual assessment of performance against targets. Any cash payment
will be made at the normal STIP payment date and no portion of the award will be deferred into shares.
If an executive provides the company notice of their resignation during the performance year, but does not leave the Group until after the end of
the performance year, the Committee may determine in its absolute discretion to make an award under the STIP. In these circumstances, the
executive will only be eligible to receive the cash portion of the award and will forfeit the deferred shares portion. Any cash payment will be
made at the normal STIP payment date.
No STIP award will be made where an executive who is not an eligible leaver leaves the Group, resigns or is terminated for cause prior to the end
of the performance year.
Bonus Deferral
Awards (BDA)
BDA will normally vest on the scheduled vesting date. There will be no pro-rating of BDA.
Performance Share
Awards (PSA)
PSA will normally be retained, and vest on the scheduled vesting date, subject to time pro-rating and the satisfaction of any performance
conditions.
PSA will be pro-rated over 36 months from the grant date.
Management Share
Awards (MSA)
Any MSA granted prior to appointment will normally be retained, and vest, at the Committee’s discretion, at the scheduled vesting date
(although awards for US taxpayers may vest on leaving).
MSA will be reduced pro rata to reflect the period of employment between the date of grant of the award and the normal vesting date.
All employee share plans All employee share awards will normally vest on or shortly after leaving. There will be no pro rata reduction of awards.
Dividend shares
Any dividend equivalent shares will be calculated on the vesting of all share awards.
Repatriation
Accrued but
untaken leave
Legal
expenses
On termination, the company will pay relocation or expatriation benefits as agreed at the time of the original expatriation and/or in accordance
with applicable legislation and internal policies on travel and relocation.
Accrued but untaken annual leave and any long service leave will be paid out on termination, in accordance with the relevant country legislation
and applicable practice applying to all employees.
The company may pay reasonable legal and other professional fees (including outplacement support) to or in respect of an executive in
connection with the termination of his or her employment.
Settlement claims
Subject to the approval of the Committee, the company may pay such amount as it determines is reasonable to settle any claims that an
executive may have in connection with the termination of his or her employment.
Restrictive covenants
While our employment agreements include appropriate restrictive covenants as a matter of practice, the Policy provides additional flexibility to
make payments in respect of expanding or enhancing existing covenants to protect Rio Tinto and its shareholders. The amount of such payment
will be determined by the Committee based on the content and duration of the covenant.
Annual Report 2020 | riotinto.com
157
Governance Governance
Remuneration Policy
continued
Chairman and non-executive directors’ remuneration
The table below summarises how the fees are set and our Policy for the Chairman and non-executive directors:
Area
Chairman
Non-executive directors
Setting of fees
Fees
The Committee (excluding the Chairman, if he or she is a member)
determines the terms of service and remuneration of the Chairman.
The Chairman’s fees are set by the Committee.
The non-executive directors’ fees and other terms are set by the Board
upon the recommendation of the Chairman’s Committee (which
comprises the Chairman, Chief Executive and Chief Financial Officer).
It is Rio Tinto’s policy that the Chairman should be remunerated on a
competitive basis and at a level which reflects his or her contribution
to the Group, as assessed by the Board.
The Chairman receives a fixed annual fee and does not receive any
additional fee or allowance either for committee membership or
chairmanship, or for travel. The Chairman does not participate in the
Group’s incentive plans.
Pension and
superannuation
Rio Tinto does not pay retirement or post-employment benefits to
the Chairman.
Benefits
The Chairman may be provided with a car and driver. Any use for
transport between home and the office and other personal travel is a
taxable benefit to the Chairman, and the company pays any tax arising
on the Chairman’s behalf. The Chairman would pay a fixed annual fee
to the company for any personal travel element.
Relocation and localisation benefits in accordance with the Policy for
executive directors (for example, housing, tax equalisation, cost of
living allowance, the payment of school fees, periodic visits home for
the executive and their family and where relevant, localisation
payments) may be made to and on behalf of a Chairman working
outside his or her home country.
Other benefits include accident insurance (note this is neither
contractual nor a taxable benefit), other minor benefits (including
modest retirement gifts in applicable circumstances), occasional
spouse travel in support of the business and any Rio Tinto business-
related expenses which are deemed to be taxable and any tax the
company has paid on his or her behalf.
Non-executive directors receive a base fee with additional fees paid for
further Board responsibilities such as committee membership or
committee chairmanship or taking on the senior independent director
role. Allowances may be paid for attending meetings which involve
medium or long-distance air travel. They do not participate in any of
the Group’s incentive plans.
Fees paid to non-executive directors reflect their respective duties and
responsibilities and the time required to be spent by them so as to
make a meaningful and effective contribution to the affairs of Rio Tinto.
Where the payment of statutory minimum superannuation
contributions for Australian non-executive directors is required by
Australian superannuation law, these contributions are deducted from
the director’s overall fee entitlements.
Non-executive directors may on occasion receive reimbursement for
costs incurred in relation to the provision of professional advice. These
payments, if made, are taxable benefits to the non-executive directors
and the tax arising is paid by the company on the directors’ behalf.
Other benefits provided include accident insurance (note this is neither
contractual nor a taxable benefit), other minor benefits (including
modest retirement gifts in applicable circumstances), occasional
spouse travel in support of the business and any Rio Tinto business
expenses which are deemed to be taxable where the company has paid
the tax on their behalf.
Appointment
The appointment of non-executive directors (including the Chairman) is handled through the Nominations Committee and Board processes. The current
fee levels are set out in the Implementation Report.
The Chairman’s letter of appointment from the company stipulates his or her duties as Chairman of the Group and appointment may be terminated
without liability on the part of Rio Tinto in accordance with the Group’s constitutional documents dealing with retirement, disqualification from office or
other vacation from office. Otherwise, his or her appointment may be terminated by giving 12 months’ notice. Accrued fees will be paid up to the
termination date with the exception of dismissal for cause. The Committee has the discretion to make a payment in lieu of notice if the Chairman is not
required to serve his or her full 12 months’ notice. If the appointment as Chairman is terminated by reason of their removal as a director pursuant to a
resolution of shareholders in general meeting, the company shall be liable to pay any fees accrued to the date of any such removal.
The non-executive directors’ letters of appointment from the company stipulate their duties and responsibilities as directors. Each non-executive director
is appointed subject to their election and annual re-election by shareholders. Non-executive directors’ appointments may be terminated by either party
giving three months’ notice. There are no provisions for compensation payable on termination of their appointment. The letters of appointment are
available for inspection at Rio Tinto plc’s registered office.
The maximum aggregate fees payable to the non-executive directors (including the Chairman) in respect of any year, including fees received by
the non-executive directors for serving on any committee of the Board, will not exceed the limits set out in the Group’s constitutional documents
(currently £3 million).
158
Annual Report 2020 | riotinto.com
Implementation Report
Implementation Report
This Implementation Report is presented to shareholders
for approval at our AGMs. It outlines how our current Policy
was implemented in 2020, and how we intend to operate
the new Policy in 2021.
Introduction
The single total figure of remuneration table on page 161 shows
remuneration for our executive directors, gross of tax and in the relevant
currency of award or payment.
In table 1a on pages 176-177 we report information regarding executives
in accordance with Australian statutory disclosure requirements. The
information is shown gross of tax and in US dollars. The remuneration
details in table 1a include accounting values relating to various parts of
the remuneration package, most notably PSAs granted under the
Group’s LTIP arrangements, and require a different methodology for
calculating the pension value. The figures in the single total figure of
remuneration table are therefore not directly comparable with those in
table 1a. Where applicable, amounts have been converted using the
relevant average exchange rates included in the notes to table 1a.
In table 1b on page 178, we report the remuneration of the Chairman and
the non-executive directors.
Certain information contained within the Remuneration Report is audited,
as outlined on page 185.
Remuneration Committee responsibilities
The Committee’s responsibilities are set out in our terms of reference,
which we review each year, and are published in the corporate
governance section of the Rio Tinto website. Our responsibilities include:
– Determining the Group’s remuneration structure and policies, and
assessing their cost, including pension and superannuation
arrangements for executives.
– Determining the mix and use of short and long-term incentive
plans for executives and ensuring alignment with the company’s
strategic objectives.
– Overseeing the operation of the Group’s short and long-term
incentive plans for executives, including approving awards, setting
performance criteria, and determining any vesting.
– Determining contractual notice periods and termination
commitments, and setting retention and termination arrangements
for executives.
– Determining awards under the Group’s all-employee share plan.
– Monitoring gender pay.
– Determining the terms of service upon appointment for the Chairman
and executives, and any subsequent changes.
We consider the level of pay and conditions for all employees across the
Group when determining executive remuneration.
Committee membership
The members of the Committee during the year and to the date of this
report were:
Sam Laidlaw (Chairman)
Megan Clark
Simon McKeon
Jennifer Nason
Simon Thompson
(from 1 March 2020)
Ngaire Woods
(from 1 September 2020)
How we work
The Group Company Secretary attends meetings as secretary to the
Committee. The Chief Executive, Group Executive Human Resources and
Head of Reward attend appropriate parts of the meetings at the invitation
of the Chairman of the Committee. No individual is in attendance during
discussions about their own remuneration.
Independent advisers
The Committee has a protocol for engaging and working with
remuneration consultants to ensure that “remuneration
recommendations” (being advice relating to the elements of
remuneration for key management personnel, as defined under the
Australian Corporations Act) are made free from undue influence by key
management personnel to whom they may relate. We monitored
compliance with these requirements throughout 2020. Deloitte gave
declarations to the effect that any remuneration recommendations were
made free from undue influence by key management personnel to whom
they related, and the Board has received assurance from the Committee
and is satisfied that this was the case.
Deloitte, the appointed advisers to the Committee, are members of the
Remuneration Consultants’ Group, and voluntarily operate under its Code
of Conduct (the Code) in relation to executive remuneration consulting in
the UK. The Code is based upon principles of transparency, integrity,
objectivity, competence, due care and confidentiality. Deloitte have
confirmed that they adhered to the Code throughout 2020 for all
remuneration services provided to Rio Tinto. The Code is available online
at remunerationconsultantsgroup.com.
Annual Report 2020 | riotinto.com
159
Governance Governance
Implementation Report
continued
The Committee is satisfied that the Deloitte engagement partners and
advisory teams that provided remuneration advice to the Committee do
not have any connections with the company or individual directors that
may impair their independence. During 2020, Deloitte’s services also
included attending Committee meetings, support on the new Policy and
giving advice in relation to management proposals. Deloitte was paid
US$268,394 (2019: US$53,164) for these services. Fees were charged on
the basis of time and expenses incurred, including work done regarding
the new Policy.
Willis Towers Watson provided general and technical executive
remuneration services. These services predominantly related to
remuneration of employees other than key management personnel. We
received other services and publications relating to remuneration data
from a range of sources. During the year Deloitte also provided internal
audit, tax compliance and other non-audit advisory services. These
services were provided under separate engagement terms and the
Committee is satisfied that there were no conflicts of interest.
How the Committee spent its time in 2020
During 2020, the Committee met eight times. We fulfilled our responsibilities as set out in our terms of reference.
Our work in 2020 and in the early part of 2021 included:
January 2020/2021
July 2020
– Reviewing and determining any base salary adjustments and LTIP
– Reviewing and refining the proposed changes in the
grants for executives.
Policy to discuss with shareholders.
– Conclude discussions with shareholders on our new Policy proposals.
– Reviewing progress towards the Group’s share ownership
– Approving appointment terms for the new Executive Committee
members (2021).
February 2020/2021
– Reviewing and determining “threshold”, “target” and
“outstanding” targets for the safety and financial components
of the 2020 STIP.
– Reviewing actual performance against the targets for the
2020 STIP and assessing applicable adjustments.
– Determining the respective ESG and safety targets for the 2021 STIP.
May 2020
– Reviewing and determining the final EBIT margin outcome for
PSA with a performance period ending 31 December 2019.
requirements.
August 2020
– Determining the malus adjustments for the Chief Executive,
Chief Executive Iron Ore, and Group Executive Corporate Relations.
September 2020
– Determining the terms of exit for the outgoing Chief Executive,
Chief Executive Iron Ore, and Group Executive Corporate Relations.
October 2020
– Reviewing the strategy and annual reports on the Group’s
global benefit plans.
– Considering alternative structures for the new Policy.
November 2020
June 2020
– Review and debrief of 2020 AGM season.
– Acting in accordance with the terms of the deferral agreement
for the former Chief Executive, Sam Walsh.
– Commence consultations with shareholders and proxy advisors on
– Determining the terms of appointment for the new
Group Executive, Safety, Technical & Projects and Group Executive,
Strategy & Development.
our new Policy proposals.
December 2020
– Determining the terms of retirement for the outgoing
Group Executive, Growth & Innovation.
– Preparing the Remuneration Report (including this
Implementation Report).
– Approving and recommending to the Board endorsement of the
appointment terms for the new Chief Executive.
Performance review process for executives
Rio Tinto conducts annual performance reviews for all its executives. Our key objectives for the performance review process are to:
– Improve organisational effectiveness by creating alignment between the executive’s objectives and Rio Tinto’s strategy.
– Provide a consistent, transparent and balanced approach to measure, recognise and reward executive performance.
The Chief Executive conducts the review for members of the Executive Committee, and recommends the performance outcomes to the Committee.
The Chief Executive’s performance is assessed by the Chairman of the Board and discussed and debated with the Committee and the full Board.
Performance reviews for all executives took place in 2020 or early 2021.
160
Annual Report 2020 | riotinto.com
Implementation Report
Base salary
STIP
LTIP
Single total figure of remuneration (£’000)
Executive director (£’000)
Year Base salary
Benefits
Pension
Jean-Sébastien Jacques
(Chief Executive)(1)
Jakob Stausholm
(Chief Financial Officer)
2020
2019
2020
2019
1,158
1,133
789
775
51
71
83
62
287
280
174
172
Bonus –
STIP payment
Value of
LTIP awards vesting
Cash
–
850
564
436
Deferred
shares
Face value
Share price
appreciation
–
851
565
437
3,590
2,257
–
–
3,138
557
–
–
Total
fixed
1,496
1,484
1,046
1,009
Other
(1,000)
Total
variable
5,728
4,515
1,129
873
Single
total figure % change
20.4%
15.6%
7,224
5,999
2,175
1,882
1. Malus adjustment applied against 100% of the 2020 STIP and £1 million of the 2016 LTIP vesting.
At the end of the performance period, LTIP values are based on estimates of both the number of shares that will ultimately vest and the share price.
These estimates are restated in the following year, once actual values are known. See LTIP section for further detail.
Jean-Sébastien Jacques
Jakob Stausholm
Key: Percentage of total remuneration earned as:
2020
20.7%
79.3%
2020
48.1%
51.9%
Non-performance related:
Performance related:
2019
24.7%
28.4%
46.9%
2019
53.6%
46.4%
Base salary,
benefits and pension
STIP
LTIP
75.3%
Fixed remuneration
Base salary (2020)
Consistent with prior practice, annual salary increases for executives are generally in line with the base salary increases applying to the broader
employee population. Salaries are reviewed with effect from 1 March.
Executive director
Jean-Sébastien Jacques
Jakob Stausholm
Annual base salary
at 1 January 2020
£’000
Annual base salary
at 1 March 2020
£’000
Total base
salary paid in 2020
£’000
1,138
775
1,162
791
1,158
789
Jakob Stausholm’s salary on appointment as Chief Executive effective 1 January 2021 is £1,150,000.
Benefits (2020)
Includes healthcare, allowance for professional tax compliance services, car and fuel allowances (removed for all new appointments from 1 January 2021),
and non-performance based awards under the all-employee share plans.
Pension (2020)
Pension benefits can either be paid as contributions to Rio Tinto’s company pension fund or as a cash allowance. In line with the applicable UK policy,
cash allowances may be reduced by the value of the employer’s national insurance payable on cash allowances.
In addition to the payments set out in the accompanying table, under Australian Superannuation Guarantee legislation the company pays
superannuation contributions to an Australian superannuation fund in respect of Jean-Sébastien Jacques’ working days in Australia. The pound sterling
equivalent of these superannuation contributions is offset against the cash allowance paid to Jean-Sébastien Jacques.
Executive director
Jean-Sébastien Jacques
Jakob Stausholm
Pension contributions paid to the
Rio Tinto pension fund
£’000
Cash in lieu of pension contributions
paid
£’000
6
6
281
168
(a) Effective 1 January 2021, from appointment to Chief Executive the pension provision is now 14% of base salary.
Total
£’000
287
174
Pension provision as
percentage of base salary
24.8%
22%(a)
Annual Report 2020 | riotinto.com
161
Governance Governance
Implementation Report
continued
STIP (2020)
Outcome for 2020
For an executive’s STIP outcome, the weighted safety, financial and individual STIP results are added to determine the total result. The resultant STIP is
delivered equally in cash and deferred shares.
Weighted result
Delivered in:
Percentage of:
Executive director
Jakob Stausholm
Safety
(20%)
14.8
Financial
(50%)
Individual
(30%)
38.5
18
Total
71.3
Total STIP
(% of base
salary)
Base salary
£’000
Total STIP
£’000
142.6
791
1,128
Cash
564
Deferred
shares
£’000
Max
awarded
Max
forfeited
Target
awarded
565
71.3%
28.7%
142.6%
Following the application of malus, Jean-Sébastien Jacques’ 2020 STIP was nil.
Maximum STIP is capped at 200% of base salary with awards of:
– 25% of maximum for threshold
– 50% of maximum for target
– 100% of maximum for outstanding performance
Half of the STIP award will be paid in cash in March 2021, and the remainder will be delivered in deferred shares as a BDA, vesting in December 2023.
If the executive resigns or is dismissed for misconduct, or for any other reason that the Committee decides, the deferred shares will lapse.
Safety and financial measures for 2020
Performance categories
Weighting
Commentary
Safety
20%
Our goal is zero harm, including, above all, the elimination of workplace fatalities, so we consider safety as a key performance
measure. We include Group safety measures alongside Group financial measures in the STIP for executive directors and
other executives.
Safety measures for all executives in 2020 included a standalone binary fatality measure (40%), with the remainder split
between all-injury frequency rate (AIFR) (20%) and measures relating to our safety maturity model (SMM) (40%).
Introduced in 2019, the Safety Maturity Model (SMM) provides a roadmap to improving safety and enabling comparable
evaluation and learning across the organisation. The model has four categories:
1. Leadership and engagement.
2. Risk management (including Critical Risk Management – CRM).
3. Work planning and execution.
4. Learning and improvement.
The model is assessed across levels of maturity with a scale of 1-9:
Basic (1-3), Evolving (4-6) and Advanced (7-9)
The Safety Maturity Model has been embraced by assets and proven as an effective methodology to drive improvement in
culture and performance. There is a spread in individual asset maturity across the group and there is increased difficulty of
advancing in maturity the more developed the site is. The 2020 Group aspiration for target was for individual assets to
improve by 1 point above the prior year maturity score and for outstanding to improve by 2 points from the prior year
assessment score. An end of year assessment by an independent team to the asset determined progress in maturity from
the prior year baseline. In Q1 2020 seven additional assets joined the SMM programme. The baseline score for these
additional assets was determined in independent assessments completed in H1 2020.
Financial
50%
Our current financial measures are based on KPIs that are used in managing the business.
The first, underlying earnings, gives insight to cost management, production growth and performance efficiency on a
like-for-like basis. This reflects the fact that Rio Tinto is focused on reducing operating costs, increasing productivity and
generating maximum revenue from each of our assets. A reconciliation of underlying earnings to net earnings is provided in
note 2 (Operating segments) on page 226.
The second, STIP free cash flow, is also an important measure to the business. It demonstrates how we convert underlying
earnings to cash, and provides further insight into how we are managing costs and increasing efficiency and productivity.
STIP free cash flow comprises free cash flow (as defined on page 316) adjusted to exclude dividends paid to holders of
non-controlling interests in subsidiaries and development capital expenditure. In 2020, this measure also incorporated an
additional adjustment of US$0.1 billion to account for certain sustaining capital expenditure originally classified as
development capital expenditure in the STIP target.
When we measure financial performance against the annual plan, half is measured against the original plan, and half is
“flexed” to exclude factors that are outside management’s control, such as the impact of fluctuations in exchange rates, or
quoted metal and other prices. “Flexed” financial targets are typically higher than the “unflexed” targets set by the Board
when commodity prices rise and lower when commodity prices fall. Actual underlying earnings and STIP free cash flow
results are compared against equally weighted “flexed” and “unflexed” targets.
The STIP measures for Product Group Chief Executive Officers (PGCEOs) include product group financial and safety measures in addition to Group financial measures.
162
Annual Report 2020 | riotinto.com
Implementation Report
Calculation of total STIP award
The following tables summarise the calculation of STIP award for the executive directors. Below threshold (25% relative performance) payout is nil on the
Group safety and financial measures.
Group safety measures
Weight
(out of
100%)
2020 performance
Result
(% of
maximum)
Weighted
result
Commentary on safety measures
Binary fatality
8.0
Threshold
Actual
Maximum
Target
0
0
Maximum
In 2020 there were zero fatalities across the Group.
Performance against the binary fatality measure was
therefore maximum for all executives.
100
8.0
All-injury
frequency
rate (AIFR)
4.0
0.42
0.37
0.31
50
2.0
Actual: 0.37
Safety maturity
model (SMM)
8.0
4.3
Actual: 5.4
5.2
6.2
6.5
60
4.8
Total Group safety
20.0
74
14.8
Group financial measures
In 2020, we ended the year at target with a Group AIFR of
0.37, which equates to an almost 12% improvement over
the 2019 Group AIFR result of 0.42.
The 2019 end of year SMM scores served as baseline
(threshold) for each individual asset for the 2020
assessments. The average baseline score across the
Group from the 2019 assessments was 4.5. In H1 2020
seven additional assets were added to the programme.
The baseline scores for these added assets was
determined in assessments completed at that time.
The combined average of the baseline scores (threshold)
for all sites (including the seven additional sites) in 2020
was then adjusted to 4.3.
The Group aspiration of improving by 1 point above the
prior year assessment scores was realised in 2020, with a
Group average outcome across all individual assets of
5.4. The Group STIP percentage for SMM is calculated
based on the average of the SMM STIP percentage
outcomes for each individual asset.
Weight
(out of
100%)
2020 performance (US$bn)
Threshold
Target
Maximum
Result
(% of
maximum)
Weighted
result
Commentary on financial measures
Underlying
earnings
12.5
6.6bn
Actual: 12.4bn
8.2bn
10.2bn
100
12.5
Underlying
earnings – flexed
12.5
10.6bn
Actual: 12.4bn
12.7bn
15.7bn
47
5.9
STIP free
cash flow
12.5
5.5bn
Actual: 13.4bn
7.8bn
10.8bn
100
12.5
STIP free cash
flow – flexed
12.5
Actual: 13.4bn
9.7bn
12.6bn
16.5bn
59
7.5
As in prior years the Committee considered whether any
adjustments were warranted to ensure the outcome was
a fair reflection of underlying performance. The
Committee noted the COVID-19 related expenditure
incurred in ensuring our operations continued to run
safely which reduced the Group result by 2% but
determined not to make any related adjustments,
recognising the broader impact of the pandemic on the
Group’s operating and financial performance in the year.
In accordance with our adjustment principles, the
Committee considered the write-down of deferred tax
assets in the Alcan Australia tax group which was
recognised by the Aluminium product group in the year.
The write-down results from a review in the year of the
long term prospects for recovery of these deferred tax
assets and did not result from operating performance or
market conditions in 2020. An adjustment was therefore
proposed to neutralise the impact of this write down on
2020 STIP outcomes.
The Committee determined that the adjustment was
warranted but should only be applied to the Aluminium
product group result, with no impact on the Group
results. Consequently, the Group’s financial results for
the year remained at an unadjusted 77% of maximum.
Total Group
financial
50.0
Individual objectives
77
38.5
Weight
(out of 100%)
Result
(% of maximum)
Weighted result
Commentary on
individual measures
Jakob Stausholm
30.0
60.0
18.0
Refer to page 164.
Annual Report 2020 | riotinto.com
163
Governance Governance
Implementation Report
continued
Commentary on individual performance against personal objectives.
Jean-Sébastien Jacques
Following the Board Review of the destruction of the Juukan Gorge rock shelters in May 2020, the Committee and Board exercised discretion and
cancelled any payout due under the 2020 STIP, as discussed on page 141. For information only, the table below sets out performance against the targets
agreed with Jean-Sébastien Jacques, all of which were set prior to the onset of the COVID-19 pandemic.
Safety
– Outstanding leadership and management response to COVID-19, prioritising the health and safety of employees, contractors and local communities
while maintaining operations at all managed facilities.
–
Led the executive leadership team in delivering the second successive fatality free year in the Group’s 148-year history.
People
–
–
Employee engagement continued to improve, achieving a positive eNPS for the second successive year.
Improvement in female participation amongst senior management roles, but further work required on gender diversity across the workforce.
Cash
– Profitability at record levels with 51% underlying EBITDA margin and 27% ROCE, delivering a strong balance sheet and underpinning the Group’s
resilience in response to COVID-19.
–
TSR of 34%, including a record annual average share price.
Partnership
– Advancement of the sustainability agenda, including the development of the 2030 and 2050 climate change targets.
– Partnership renewed with Tsinghua University and new partnerships confirmed with AB InBev, Paul Wurth and Nippon Steel. Further progress on
climate change partnership with Baowu. Completion of the ELYSIS pilot plant in the Saguenay.
– Agreements finalised with local communities in Canada, including the Cheslatta in British Colombia and Innu communities in Quebec and
Labrador City.
–
–
Successful utilisation of commercial blockchain and development of portside trading and blending initiatives in China.
The relationship with Turquoise Hill Resources and the Government of Mongolia continued to be challenging.
Growth
– Advancement of the Simandou strategy.
– Delivering the Definitive Estimate for Oyu Tolgoi within the previously disclosed range of possible outcomes.
– Declaration of the Jadar maiden ore reserve.
Jakob Stausholm
Safety
– Member of the executive leadership team which delivered the second successive fatality free year in the Group’s 148-year history.
– Contributed to strong management response to COVID-19 challenges across the Group.
People
– Contributed to the continued improvement in employee engagement.
–
Year-on-year improvement in succession planning and leadership development across the Finance function.
– Progress made towards gender and diversity targets, but further improvement needed.
Cash
– Against a backdrop of unprecedented market and economic volatility, continued to deliver a strong balance sheet and improved net debt position.
–
–
–
Strong focus on liquidity risk management against uncertain market backdrop.
Solid management of working capital and increased collaboration with commercial teams.
TSR of 34%, including a record annual average share price.
Partnership
– Active development of relationships with investors, particularly following the Juukan Gorge tragedy.
– Ongoing engagement with ratings agencies and key stakeholders.
– Commenced engagement with civil society stakeholders.
Growth
–
Further progress made on the growth pipeline, with a focus on Tier 1 potential projects.
– Active and disciplined approach to capital allocation decisions.
164
Annual Report 2020 | riotinto.com
Implementation Report
LTIP
PSAs granted in 2016 were based on three performance conditions, all measured over a five-year performance period:
– TSR relative to the EMIX Global Mining Index – one-third.
– TSR relative to the MSCI World Index – one-third.
– Improvements in EBIT margin relative to global mining comparators – one-third.
Performance against the improvement in the EBIT margin measure cannot be finalised until May in the year following the end of the five-year
performance period. This is due to the reporting timeframes for companies in the EBIT margin comparator group and the time taken for the external
source (currently S&P Capital IQ) to report the relevant data.
Accordingly, the value of the shares vesting included in the single total figure of remuneration table for 2020 is an estimate, which is finalised once the
actual figures are known. The original estimate is based on:
– The TSR portion of the award (with estimated associated dividend equivalent shares) which vest in February following the end of the five-year
performance period.
– An estimate of vesting of the EBIT margin portion of the award (with estimated associated dividend equivalent shares) based on the analysis of the
latest available EBIT margin ranking prior to publication of this report.
– The average share prices for Rio Tinto plc and Rio Tinto Limited over the last quarter of the relevant year, as the share price on the date of which all
shares vest is not ascertainable by the date on which the Remuneration Report is approved by the Board.
The actual values associated with the LTIP vesting are determined following the vesting of the EBIT margin portion of the award at the end of the following
May based on the actual share prices on the date of vesting. The estimated LTIP values are then restated, if applicable, in the following Remuneration
Report, as shown below for the 2015 PSA:
Executive director
Jean-
Sébastien
Jacques
Year
included
in single
figure
EBIT margin
rank out
of 11(b)
Award
Overall
vesting %
2020(a) 2016 PSA 6th rank
66.67%
2019
2015 PSA 4th rank
67.9%
Estimated
Shares,
(including
dividend
equivalents)
136,255
(26,942)
62,117
(12,691)
Share
price
LTIP outcome
(£’000)
EBIT
margin
rank out
of 11(c)
Overall
vesting %
Share
price
LTIP
outcome
(£’000)
Actual
£49.38
5,728(d)
Will be determined in May 2021
£42.04
2,611
3rd rank
75.98%
£37.16 for TSR element
£43.72 for EBIT element
2,814
(a) 2016 PSA was granted in two tranches following on 11 March 2016 and 12 September 2016 with share price at grant of £20 and £22.95 respectively.
(b) Estimated vesting of the EBIT margin portion of the 2016 PSA is nil.
(c) Actual vesting of the EBIT margin portion of the 2015 PSA was 91.26%. Estimated vesting for 2015 PSA in 2019 was 67.07%.
(d) After application of the malus adjustment of £1 million.
Jakob Stausholm’s first LTIP award was made in September 2018, with a performance period ending 31 December 2022.
Annual Report 2020 | riotinto.com
165
Governance Governance
Implementation Report
continued
Calculation of 2016 PSA vesting
Our remuneration consultants, Deloitte, calculated performance against the TSR measures. The dual TSR measures recognise that the company
competes in the global market for investors as well as within the mining sector, and aligns to the philosophy of rewarding executives for stable returns
over the long-term relative to the broader market and the mining sector.
2020 vesting
Performance
Vesting
Weighting
TSR relative to EMIX Global Mining Index
Threshold
Maximum
Actual
TSR relative to MSCI World Index
Threshold
Maximum
Actual
Improvement in EBIT margin
Threshold
Maximum
Estimate
Overall vesting
Equal to index
22.5%
One third
Outperformance of the index by 6% per annum
6.6% per annum
100.0%
100.0%
Equal to index
22.5%
One third
Outperformance of the index by 6% per annum
9.7% per annum
100.0%
100.0%
Above the sixth ranked company
22.5%
One third
Rank of 1st or 2nd
100.0%
6th
Nil
Weighted
achievement
33.33%
33.33%
Nil
66.67%
PSAs granted in 2020
These awards are subject to TSR performance relative to the EMIX Global Mining Index and MSCI World Index (equal weighting). Target for threshold and
maximum performance are unchanged from prior years.
Executive director
Type of award
Grant date
Face value of
award (% of
base salary)
Face value of
award
(£’000)
% of vesting
at threshold
performance
Grant price(a)
Conditional
shares awarded
Vesting
month
End of the period over which
the performance conditions
have to be fulfilled
Jean-Sébastien
Jacques
Jakob Stausholm
PSA
PSA
16 March
2020
16 March
2020
PSAs to be granted in March 2021
430%
4,997
22.5%
£43.43
115,049
Feb 2025
31 Dec 2024
410%
3,245
22.5%
£43.43
74,711
Feb 2025
31 Dec 2024
Executive director
Type of award
Face value of
award (% of
base salary)
Face value of
award
(£’000)
% of vesting at
threshold
performance
Grant price(a)
Conditional
shares to be
awarded
Vesting month
End of the period over which
the performance conditions
have to be fulfilled
Jakob Stausholm
PSA
400%
4,600
22.5%
£44.44
103,510
Feb 2026
31 Dec 2025
(a) In line with Policy, the grant price for PSA awards is determined by reference to the average share price for the calendar year prior to year of grant.
Executive directors’ shareholding
In line with our share ownership policy, executive directors’ shareholdings are calculated using the closing price of Rio Tinto shares on the latest
practicable date each year before the report is published. For the purposes of this 2020 report, the closing price on 5 February 2021 has been applied.
Executive director
Jean-Sébastien Jacques
Jakob Stausholm
Multiple of base salary
Holding of ordinary shares
31 December
2020
31 December
2019
Guidelines
Year guideline
needs to be met
On target
31 December
2020
31 December
2019
8.2
2.7
4.3
0.9
4.0
3.0
2021
2023
Meets
148,073
Yes
30,280
97,578
15,078
The multiple of base salary shown above includes the value of 50% unvested Bonus Deferred Awards (BDA) held.
Following his appointment as Chief Executive on 1 January 2021, Jakob Stausholm’s shareholding requirement will increase from 3 to 4x base salary
which he will be expected to meet by 31 December 2024.
166
Annual Report 2020 | riotinto.com
Implementation Report
Service contracts
Executive director
Jean-Sébastien Jacques
Jakob Stausholm
Position held during 2020(a)
Date of appointment to position
Chief Executive
2 July 2016
Chief Financial Officer
3 September 2018
Notice period
12 months
12 months
(a) Jean-Sébastien Jacques stepped down as Chief Executive on 1 January 2021 and Jakob Stausholm was appointed Chief Executive on 1 January 2021.
Either party can terminate their contract with notice in writing, or immediately by paying the base salary only in lieu of any unexpired notice.
Executives’ external and other appointments
Our executives may be invited to become non-executive directors of other companies. Our Policy is that such appointments can bring benefits to the Group
by broadening the experience and knowledge of executives. Therefore where there is no likelihood of a conflict of interest, the Board will normally consent.
Our Policy limits each executive’s external appointment to one FTSE 100 company directorship or equivalent. The executive typically retains any fees earned.
Neither of the executive directors currently has an external directorship.
Chief Executive’s remuneration over time: summary
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Chief Executive(a)
Tom Albanese
Tom Albanese
Tom Albanese
Sam Walsh
Sam Walsh
Sam Walsh
Sam Walsh(d)
Jean-Sébastien Jacques
Jean-Sébastien Jacques
Jean-Sébastien Jacques
Jean-Sébastien Jacques(e)
Jean-Sébastien Jacques(f)
Single total figure of remuneration
(’000)
Annual STIP award against maximum
opportunity
£4,256
£4,040
£53
A$9,993
A$10,476
A$9,141
A$5,772
£3,116
£3,821
£4,551
£5,999
£7,224
0.0%
0.0%
0.0%
72.1%
88.4%
81.9%
68.2%
82.4%
73.4%
70.1%
74.8%
0.0%
Long-term incentive vesting
against maximum opportunity
Long-term incentive vesting against
maximum opportunity
(SOP)(b)(c)
100.0%
100.0%
(PSA)(c)
0.0%
61.7%
–
50.0%
49.0%
43.6%
50.5%
50.5%
66.7%
43.0%
76.0%
66.7%
(a) Tom Albanese held the role of Chief Executive until 17 January 2013, and left the Group on 16 July 2013. The single total figure of remuneration for Tom Albanese for 2013 is for the period up until 17
January 2013. Sam Walsh took over as Chief Executive from 17 January 2013, having previously been Chief Executive, Iron Ore and Australia. The single total figure of remuneration for Sam Walsh for
2016 is for the period up until 1 July 2016. Jean-Sébastien Jacques took over as Chief Executive on 2 July 2016, having previously been Chief Executive, Copper & Coal.
(b) In 2011 and 2012, Sam Walsh elected to receive his full LTIP awards under the PSP and as a result he has no options granted in 2011 or 2012 under the SOP and which had performance periods that
ended on 31 December 2013 and 31 December 2014 respectively. The SOP ceased operation from 2013 and LTIP awards from 2013 have been made as PSA.
(c) All outstanding but unvested LTIP awards earned in previous years lapsed and were forfeited when Tom Albanese left the Group.
(d) STIP award and PSA vesting percentages restated following release from the deed of deferral.
(e) The 2019 single total figure of remuneration for Jean-Sébastien Jacques reported in the 2019 Annual Report was £5,796 based on the estimated vesting of the 2015 PSA of 67.9%. The restated 2019
single total figure of remuneration is £5,999 based on the actual vesting of the 2015 PSA of 75.98%.
(f) The 2020 single total figure of remuneration for Jean-Sébastien Jacques reported is based on the estimated vesting of the 2016 PSA of 66.7%.
When remuneration is delivered
The following chart provides a timeline of when total remuneration is delivered, using 2020 as an example
2020 STIP and 2020 PSA performance
measurement commences
Vesting of the TSR portion of the 2015
PSA (5 year performance period)
New base salary effective;
2020 PSA granted (5 year
performance period)
2020 STIP award approved / Vesting of
the TSR portion of the 2016 PSA (5 year
performance period)
2020 STIP cash paid /
Deferred shares allocated
PSA allocated
Vesting of the EBIT margin
portion of the 2015 PSA
Vesting of
2018 BDA
Vesting of the EBIT margin portion of the
2016 PSA (5 year performance period)
PSA
STIP
Base
salary
Performance measured
Five years
Performance measured
Deferred shares
Three years
Jan
2020
Feb
2020
Mar
2020
Apr
2020
May
2020
Jun
2020
Jul
2020
Aug
2020
Sept
2020
Oct
2020
Nov
2020
Dec
2020
Jan
2021
Feb
2021
Mar
2021
Apr
2021
May
2021
Annual Report 2020 | riotinto.com
167
Governance Governance
Implementation Report
continued
TSR
We use relative TSR against the EMIX Global Mining Index and the MSCI World Index as two-thirds of our performance measures when we determine the
vesting of PSA granted in 2016. The remaining third is based on the improvement in EBIT margin relative to the comparator group.
The effect of this performance on the value of shareholdings, as measured by TSR delivered over the past five years, based on the sum of dividends paid
and share price movements during each calendar year, is detailed in the table below.
Year
2016
2017
2018
2019
2020
Dividends paid
during the year
US cents per
share
152.5
235.0
307.0
635.0
386.0
Share price –
Rio Tinto plc pence
Share price –
Rio Tinto Limited A$
1 Jan
1,980
3,159
3,942
3,730
4,503
31 Dec
3,159
3,942
3,730
4,503
5,470
1 Jan
44.71
59.90
75.81
78.47
100.40
31 Dec
59.90
75.81
78.47
100.40
113.83
Total
shareholder
return (TSR)
Group %
41.4%
43.8%
(4.4%)
38.5%
33.9%
The data presented in this table reflects the dual corporate structure of Rio Tinto. We weight the two Rio Tinto listings to produce a Group TSR figure in
line with the methodology used for the 2016 PSA.
The performance conditions for PSA are provided in the notes to table 3 on page 184.
The graph below shows Rio Tinto’s TSR performance for the 2016 PSA. It uses the same methodology as that used to calculate the vesting for the PSA
granted in 2016 with a performance period that ended on 31 December 2020.
Total shareholder return
250
200
150
100
50
2015
2016
2017
2018
2019
2020
Rio Tinto
EMIX Global Mining
MSCI World
(a) TSR for the MSCI and EMIX indices has been calculated using 12 month average Return Index data for the year sourced from DataStream.
(b) Rio Tinto’s Group TSR has been calculated using a weighted average for Rio Tinto plc and Rio Tinto Limited. The weighting is based on the free-float market capitalisation of each entity as at the start
of the period.
The following graph illustrates the TSR performance of the Group against the EMIX Global Mining Index and the MSCI World Index over the ten years to
the end of 2020.
The graph meets the requirements of Schedule 8 of the UK Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008
(as amended) and is not an indication of the likely vesting of PSA granted in 2016.
Total shareholder return
300
250
200
150
100
50
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Rio Tinto
EMIX Global Mining
MSCI World
(a) TSR has been calculated using spot return index data as at the last trading day for the year sourced from DataStream. The indices chosen are those used for measuring PSA performance.
(b) Rio Tinto’s Group TSR has been calculated using a weighted average for Rio Tinto plc and Rio Tinto Limited. The weighting is based on the free-float market capitalisation of each entity as at the start
of the period.
168
Annual Report 2020 | riotinto.com
Implementation Report
The following table summarises the average vesting of PSA for executive directors since 2016. The estimated outcome for the 2015-2019 performance
period, reported in the 2019 Annual Report of 67.9%, has been restated with the actual outcome of 76.0% The overall vesting level for the 2016-2020
performance period is an estimate based on the estimated EBIT margin outcome.
Performance period
2013-16
2013-17
2014-18
2015-19
2016-20
Average vesting
Vesting year
% of award
vested
2017
2018
2019
2020
2021
–
50.5
66.7
43.0
76.0
66.7
60.6
Past-director payments
As previously disclosed, in light of the ongoing investigations by regulators in relation to the Simandou iron ore project in Guinea, a deed of deferral was
mutually agreed between Rio Tinto and the former Chief Executive, Sam Walsh, as a matter of good corporate governance. The principal provision of this
deed was that his incentive plan awards, which would have otherwise vested up to 2021, would be subject to a three-stage deferral.
Following an independent confidential and binding dispute resolution process, a determination was made that the first-stage deferral, which would
have been payable on 31 December 2018 together with associated dividends and interest, should be paid to Sam Walsh. In accordance with this decision,
an amount of A$7,304,309, less statutory deductions, was paid to him on 13 March 2020.
In light of the decision taken under the binding dispute resolution, combined with no further material information having emerged, the Board
concluded that Sam Walsh should receive the second-stage deferral, payable on 31 December 2020 together with associated dividends and interest.
Accordingly, he received payment of a further A$17,574,205, less statutory deductions, on 31 December 2020.
In accordance with the terms of his retirement arrangements and deed of deferral, and continued trailing tax compliance obligations, Sam Walsh
continued to receive personal tax compliance services. The total gross cost of these services in 2020 was A$33,897.
A final disclosure with respect to the third-stage deferral will be made in the 2021 directors’ Remuneration Report.
Loss of office payments
Jean-Sébastien Jacques stepped down from his role as an executive director and Chief Executive on 1 January 2021. He will remain on garden leave until
31 March 2021 and receive his base salary and contractual benefits including benefits-in-kind and pension (contributions or cash allowance in lieu) up to
his termination date. He is eligible to receive payments of £519,000 in lieu of his remaining unworked notice of approximately five months which will be
paid in monthly instalments and remain subject to mitigation. He will also receive payment of £215,000 for statutory accrued and unused annual and long
service leave in line with relevant legislation and policy. Outstanding LTIP awards will be treated in accordance with eligible leaver provisions of each plan and
in accordance with our Policy, with pro-rating for service where applicable, up to 31 March 2021. All LTIP awards will vest on their normal vesting dates
with the PSAs remaining subject to achievement of applicable performance conditions. Under the terms of his settlement agreement, Jean-Sébastien
Jacques must comply with a two year post-employment holding requirement.
Incoming director remuneration
Jakob Stausholm was appointed as the Chief Executive effective 1 January 2021.
The remuneration package offered to the new Chief Executive has been aligned with the new Policy and is comprised of the following elements:
– A base salary of £1,150,000. The next salary review will be in March 2022.
– Target STIP opportunity of 100% of base salary (with a maximum opportunity of 200% of base salary).
– LTIP award of up to 400% of base salary.
– A reduced company pension contribution of 14% of base salary.
– Other benefits include company provided health-care coverage, and continued eligibility to participate in the all-employee share plans.
– A minimum shareholding requirement of 400% of base salary (including a two-year post-employment holding requirement) applies.
Chief Executive pay ratio
The ratio of the total remuneration of the Chief Executive to the median total remuneration of all Rio Tinto employees for 2020 was 81:1 (2019: 68:1,
restated for actual 2015 PSA vesting). This has been calculated using the single total figure of remuneration for the Chief Executive (£7.22 million) and
the median employee in the Group (c.£90,000).
The ratio is primarily driven by the percentage of total remuneration that is performance related and reflects the increased LTIP vesting outcomes
for 2020 compared to 2019. This further demonstrates the alignment to the shareholder experience as measured by total shareholder return.
The Committee continues to be mindful of the relationship between executive remuneration and that of our broader workforce. The Committee’s decision
making will continue to be supported by regular and detailed reporting on these matters.
As the company employs fewer than 250 employees in the UK, this analysis has been provided on a voluntary basis.
Annual Report 2020 | riotinto.com
169
Governance Governance
Implementation Report
continued
Gender pay
Rio Tinto is committed to ensuring that employees with similar skills, knowledge, qualifications, experience and performance are paid equally for the same
or comparable work.
The company’s statement on pay equity, and our approach to diversity and inclusion, are set out on pages 75-76, and on our website.
An additional voluntary disclosure on UK gender pay reporting is set out on our website.
Relative spend on remuneration
The table below shows our relative spend on remuneration across our global employee population and distributions to shareholders in the year. We have
also shown other significant disbursements of the company’s funds for comparison.
Stated in US$m
Remuneration paid(a)
Distributions to shareholders(b)
Purchase of property, plant and equipment and intangible assets(c)
Corporate income tax paid(c)
2020
4,770
6,340
6,189
5,289
2019
4,522
11,886
5,488
4,549
Difference in
spend
248
(5,546)
701
740
(a) Total employment costs for the financial year as per note 5 to the financial statements.
(b) Distributions to shareholders include equity dividends paid to owners of Rio Tinto and own shares purchased from owners of Rio Tinto as per the Group cash flow statement.
(c) Purchase of property, plant and equipment and intangible assets, and corporate income tax paid during the financial year are as per the Group cash flow statement and are calculated as per note 1 to
the financial statements.
Change in director and employee pay
In the table below we compare the changes from 2019 to 2020 in salary, benefits and annual incentives of the directors to that of the Australian
employee population.
Chief Executive
Chief Financial Officer
Non-executive directors
Rio Tinto plc workforce(d)
Australian workforce(d)
Jean-Sébastien Jacques
Jakob Stausholm
Simon Thompson
Megan Clark
David Constable
Simon Henry
Sam Laidlaw
Michael L’Estrange(c)
Simon McKeon
Percentage
change in
salary/fees paid
Percentage
change in
other
benefits paid(a)
Percentage
change in
annual
incentive(b)
2
2
0
1
12
3
8
46
9
n/a
4
(28)
34
3
(54)
(83)
(88)
(87)
(71)
(72)
5
(100)
29
19
(a) The change in non-executive director benefits paid reflects the reduction in travel allowances paid in 2020 as a result of COVID-19 travel restrictions.
(b) The percentage change in annual incentive compares the incentive outcomes for the 2019 performance year to that for the 2020 performance year.
(c) The increase in Michael L’Estrange’s fees includes additional fees for leading the Board Review.
(d) Since Rio Tinto plc, the statutory entity for which this disclosure is required, does not have any employees, we have included voluntary disclosure of the change in employee pay for our Australian
employees which make up more than 40% of our employee population.
What we paid our Chairman and non-executive directors
Positions held
We list the non-executive directors who held office during 2020 below. Each held office for the whole of 2020 unless otherwise indicated. Their years of
appointment are reported in “Board of Directors” on pages 116-117.
Title
Chairman
Non-executive director
Non-executive director
Non-executive director (from 1 March 2020)
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director (from 1 March 2020)
Non-executive director (from 1 September 2020)
Name
Simon Thompson
Megan Clark
David Constable
Hinda Gharbi
Simon Henry
Sam Laidlaw
Michael L’Estrange
Simon McKeon
Jennifer Nason
Ngaire Woods
170
Annual Report 2020 | riotinto.com
Implementation Report
Annual fees payable
The table below shows the annual fees paid in 2020 and payable in 2021, to the Chairman and non-executive directors.
Director fees
Chairman’s fee
Non-executive director base fee
Non-executive director base fee for Australian residents
Senior independent director
Committee fees
Audit Committee Chairman
Audit Committee Member
Remuneration Committee Chairman
Remuneration Committee Member
Sustainability Committee Chairman
Sustainability Committee Member
Nominations Committee Member
Meeting allowances
Long distance (flights over 10 hours per journey)
Medium distance (flights of 5-10 hours per journey)
2021
2020
£730,000
£730,000
£95,000
£95,000
£105,000
£105,000
£45,000
£45,000
£40,000
£25,000
£35,000
£20,000
£35,000
£20,000
£7,500
£10,000
£5,000
£40,000
£25,000
£35,000
£20,000
£35,000
£20,000
£7,500
£10,000
£5,000
The Chairman’s fee is determined by the Committee and was last increased on 1 July 2013. All other fees are subject to review by the Board on the
recommendation of the Chairman’s Committee.
The Chairman’s Committee conducted a review of non-executive director fees in November 2020. Following this review, it was determined that all fees
and travel allowances should remain unchanged.
The additional £10,000 allowance for eligible Australian directors is to compensate them for additional UK National Insurance contributions which, unlike
directors based in other jurisdictions, they are not able to offset against their local tax payments.
We set out details of each element of remuneration, and the single total figure of remuneration, paid to the Chairman and non-executive directors during 2020
and 2019 in US dollars in table 1b on page 178. No post-employment, termination or share-based payments were made. Statutory minimum superannuation
contributions for non-executive directors are deducted from the director’s overall fee entitlements when these are required by Australian superannuation law.
The total fee and allowance payments made to the Chairman and non-executive directors in 2020 are within the maximum aggregate annual amount
of £3 million set out in the Group’s constitutional documents, approved by shareholders at the 2009 AGMs.
Share ownership policy for non-executive directors
Rio Tinto has a policy that encourages non-executive directors to build up a shareholding equal in value to one year’s base fee within three years of their
appointment. Details of non-executive directors’ share interests in the Group, including total holdings, are set out in table 2 on page 179.
Non-executive directors’ share ownership
The non-executive directors’ shareholdings are calculated using the market price of Rio Tinto shares on the latest practicable date before this report was
published (5 February 2021):
Director
Simon Thompson
Megan Clark
David Constable
Hinda Gharbi
Simon Henry
Sam Laidlaw
Michael L’Estrange
Simon McKeon
Jennifer Nason
Ngaire Woods
Share ownership level at
31 December 2020 as a multiple of
base fee (or Chairman’s fee)
Share ownership level at
31 December 2019 as a multiple of
base fee (or Chairman’s fee)
4.4 (0.6)
3.3 (0.4)
3.9
1.5
0.9
0.9
4.4
1.9
6.1
1.1
–
2.9
1.1
–
0.2
3.3
1.5
5.0
–
–
Annual Report 2020 | riotinto.com
171
Governance Governance
Implementation Report
continued
STIP
Overview of STIP weightings and measures for 2020
The following table shows the measures and weightings used to determine STIP awards for executives in 2020.
Weighting for executive directors
and Group executives
Weighting for PGCEOs
Safety – split between standalone binary measure for fatality, AIFR and SMM
Financial measures split equally between underlying earnings and STIP free cash flow for the Group
Financial measures split equally between underlying earnings and STIP free cash flow for the relevant product group
Individual measures based on key strategic initiatives of each role and contribution to overall company performance
20%
50%
0%
30%
20%
20%
30%
30%
The Group safety result was 74% of maximum and the average performance against safety goals for executives was above “target”.
Detailed commentary on the performance of each product group is on pages 43-61. Average performance against the individual product group financial
goals was above “target”.
The Committee reviewed the individual performance of executives who are not executive directors and who are eligible for a 2020 STIP payout and
approved individual performance scores ranging from “target” to above “target” performance.
The 2020 STIP awards are detailed in the table below.
(000’s)
Bold Baatar
Alfredo Barrios
Mark Davies(b)
Vera Kirikova
Barbara Levi
Stephen McIntosh(c)
Simone Niven
Chris Salisbury
Arnaud Soirat
Peter Toth(b)
Simon Trott
Ivan Vella(d)
2020 STIP
award
(% of salary)(a) 2020 STIP award
Maximum STIP
awarded
Maximum STIP
forfeited
Target STIP
awarded
Percentage of:
136.0%
147.0%
136.6%
142.6%
142.6%
141.0%
0%
0%
144.2%
136.6%
142.6%
132.8%
£767
C$1,535
A$316
£643
£627
A$1,116
£0
A$0
£814
£151
S$1,390
A$224
68.0%
73.5%
68.3%
71.3%
71.3%
70.5%
0%
0%
72.1%
68.3%
71.3%
66.4%
32.0%
26.5%
31.7%
28.7%
28.7%
29.5%
100%
100%
27.9%
31.7%
28.7%
33.6%
136.0%
147.0%
136.6%
142.6%
142.6%
141.0%
0%
0%
144.2%
136.6%
142.6%
132.8%
(a) Results out of 100% have been rounded to one decimal place and STIP awards have been rounded to the nearest thousand units. As the actual STIP awards do not use rounding conventions, small
rounding variances may occur.
(b) STIP award for the period 1 October to 31 December 2020.
(c) STIP award for the period 1 January to 30 September 2020.
(d) STIP award for the period 15 September to 31 December 2020.
STIP measures, weightings and targets for 2021
The STIP measures and weightings for executives will be 50% for financial, 20% safety (both unchanged from 2020), 15% for ESG and 15% for individual.
Some ESG-related aspects were previously embedded within the 30%-weighted individual component. From 2021 onwards, this has been split into a
standalone ESG component of 15% and a reduced individual component of 15%. The individual component will continue to reflect key objectives set
across our strategic pillars, which for the Chief Executive will include objectives related to evolving the organisational culture.
The financial and individual targets that have been set for 2021 are considered by the Board to be commercially sensitive. As such, the specific targets for
these measures, and the performance against them, are expected to be described retrospectively in the 2021 Implementation Report. The Group financial
targets relate to underlying earnings and free cash flow.
2021 ESG measures, weightings and targets
The ESG challenge is complex and evolving. The insight gained during the consultations with investors on the Policy and via other channels on this topic
was helpful in finalising our approach for 2021. Given the long-term nature of many of the ESG challenges and the focus and stability needed to mobilise
our company and teams effectively across the different aspects of ESG, the Committee considered carefully whether to incorporate ESG metrics into the
long-term incentives. In the context of evolving expectations as to what good looks like and the desire to set meaningful, transparent and measurable
targets, on balance, the Committee decided to further embed ESG in the short-term incentive.
As we gain experience and improve our ability to set targets across the three ESG pillars and measure progress, we may replace and/or amend ESG
metrics and targets included in the STIP in future years. Other ESG related objectives outside of STIP will continue to be actively managed and may form
part of business leaders’ individual performance objectives. In selecting the focus areas and metrics for the ESG component, we have been conscious and
mindful of the need to set credible stretch targets aligned to our strategic agenda that are transparent and measurable whilst recognising some inevitable
limitations of what is possible.
172
Annual Report 2020 | riotinto.com
Implementation Report
The ESG metrics and targets for 2021 set out below were considered and approved by the Remuneration Committee and the Sustainability Committee.
Group STIP metrics
Environment (‘E’)
– Approve 0.22Mt CO2e of abatement projects1
Target
Outstanding
0.22Mt CO2e
0.37Mt CO2e
– Delivery of goals to progress scope 3 partnership strategy
3 out of 4
4 out of 4
Social (‘S’)
– Percentage point increase of women in the overall workforce against 2020 baseline2
2%
3%
Weighting
out of 100%*
2.5%
2.5%
5%
Governance (‘G’)
–
Support delivery of Group Communities and Social Performance improvements and
cultural awareness training
(GIA review)3
(GIA review)3
2.5%
–
Improved assurance and risk management processes
(GIA review)3
(GIA review)3
2.5%
15.0%
1. Excludes closures and in addition of abatements already approved in 2020, which include the 0.08Mt CO2e Pilbara solar project and the 0.14Mt CO2e Kennecott RECs, for a combined 0.5Mt CO2e of
approved abatement projects over 2020 and 2021.
Improvement measured against a baseline of 20.1% for the total workforce based on managed operations as of 31 December 2020. Employees in operations and general support make up almost
60% of our workforce and the representation of women has remained constant at around 14%. Any improvement in the overall gender balance will require a significant improvement in this category.
Improvement to get to target will require the recruitment of 889 women.
2.
3. Group Internal Audit (GIA) will perform an end of year certification of performance for each objective against a detailed baseline plan set out in the Trusted Partnership Program (TPP). The TPP was
established in response to the Board Review which identified six priorities which have been mapped to a number of topic areas across three groupings: the Iron Ore product group, Australia and Group.
Within each topic area there are multiple workstreams that cover the specific requirements contained in the Board Review and other activities identified through the engagement to date, each with
an accountable lead. Progress is reported to the Board Sustainability Committee on a regular basis. The TPP is a multi-year effort requiring substantive change and focus at all levels of the Group
and across multiple dimensions. The 2021 ‘G’ objectives are part of the Group wide topic area of Social Performance, Function, Assurance and Organisation Alignment. We believe that achieving
outstanding across all priorities and focus areas of the TPP would be industry leading.
*
No payout below target. Payout of 50% of maximum for achieving target, going up in a straight line to outstanding.
2021 safety measures, weightings and targets
Threshold
Target
Maximum
Fatality(1)
AIFR
If a fatality occurs, there is no payment
made in relation to this measure
An outcome of outstanding is paid if no fatality
occurs.
0.4
0.33
0.3 (with zero permanent disabling injuries (PDI))
SMM (basic and evolving assets)(2)
Sustained end of year 2020 score
Improvement of 1 point
Improvement of 2 points or achieve 7.5,
whichever is less
SMM (advanced assets)(2)
Sustained end of year 2020 score
Improvement of 0.5 or achieve a total
score of 7.4, whichever is less
Improvement of 1.5 or achieve a total score of
8.4, whichever is less
1. The metric will apply equally across all executives, regardless of the location of any fatality.
2. The 2020 SMM assessment outcomes at each individual asset of 5.4 will serve as the baseline scores for 2021. In the course of the year, as part of the continued embedding of SMM, further sites will
be added and baseline assessment completed at each individual asset. This will be fully disclosed in the 2021 director’s Remuneration Report.
Share ownership
The following table shows the share ownership level for members of the Executive Committee as a multiple of base salary.
Bold Baatar
Alfredo Barrios
Mark Davies
Vera Kirikova
Barbara Levi
Arnaud Soirat
Peter Toth
Simon Trott
Ivan Vella
Share ownership level at 31 December
2020 as a multiple of base salary
4.1
8.0
2.4
2.2
0.2
3.4
3.0
3.9
1.0
Share ownership level is calculated using the market price of Rio Tinto shares on the latest practicable date before this report was published (5 February
2021), and we define “share ownership” on page 154.
Annual Report 2020 | riotinto.com
173
Governance Governance
Implementation Report
continued
Departures from the Executive Committee
Chris Salisbury
Chris Salisbury stepped down from the Executive Committee as Chief Executive, Iron Ore with effect from 11 September 2020, and left the Group
on 31 December 2020. Until this date, he received his base salary and contractual benefits including benefits-in-kind and pension (contributions or
cash allowance in lieu) up to his termination date. As part of the Juukan Gorge malus adjustment, his 2020 STIP was forfeited (2019: A$1,110,000).
He received his contractual payment of A$718,000 in lieu of his remaining unworked notice of approximately eight months. He also received payment of
A$1,687,000 for statutory accrued and unused annual and long service leave in line with Australian legislation and policy. Outstanding LTIP awards will be
treated in accordance with eligible leaver provisions of each plan and in accordance with our Policy, with pro-rating where applicable, up to 31 December
2020. All LTIP awards will vest on their normal vesting dates with PSA remaining subject to achievement of any applicable performance conditions.
Stephen McIntosh
Stephen McIntosh stepped down from the Executive Committee on 30 September 2020 and left the Group on 31 December 2020. He continued to receive
his normal base salary and other contractual benefits until 31 December 2020. He will remain eligible to receive a STIP award for the period 1 January
2020 to 31 December 2020, which will be calculated on actual business and individual performance and will be paid fully in cash in March 2021.
Outstanding LTIP awards will be treated, where required, in accordance with eligible leaver provisions of each plan with pro-rating, where applicable, up to
31 December 2020. Stephen received a contractual payment of A$ 85,768 in lieu of unused annual leave and long-service leave as at his termination date
in line with Australian legislation and policy.
Simone Niven
The Board Review resulted in recommendations on the structure of cultural heritage management which substantially altered the scope of the Corporate
Relations portfolio. The change to the portfolio meant that the role of Group Executive, Corporate Relations was going to be restructured. As a result,
Simone Niven stepped down from the Executive Committee, and left the Group on 31 December 2020. Until this date, she received her base salary and
contractual benefits including benefits-in-kind and pension (contributions or cash allowance in lieu) up to her termination date. As part of the Juukan
Gorge malus adjustment, her 2020 STIP was forfeited (2019: £525,189). She received her contractual payment of £307,000 in lieu of her remaining
unworked notice of approximately eight months. Consistent with our severance practice in the UK, she received a further severance payment of £448,000
based on her approximately 12 years of service. She also received payment of £49,000 for statutory accrued and unused annual leave in line with UK
legislation and policy. Outstanding LTIP awards will be treated in accordance with eligible leaver provisions of each plan and in accordance with our Policy,
with pro-rating where applicable, up to 31 December 2020. All LTIP awards will vest on their normal vesting dates with PSA remaining subject to
achievement of any applicable performance conditions.
Service contracts
All executives have service contracts which can be terminated by the company with 12 months’ notice in writing, or by the employee with six months’
notice in writing, or immediately by the company by paying base salary only in lieu of any unexpired notice.
Name
Other executives
Bold Baatar
Alfredo Barrios
Mark Davies
Vera Kirikova
Barbara Levi
Arnaud Soirat
Peter Toth
Simon Trott
Ivan Vella
Position(s) held during 2020
Date of appointment to position
Chief Executive Energy & Minerals
1 December 2016
Chief Executive Aluminium
Group Executive Safety, Technical & Projects
Group Executive Human Resources
Group Executive Group General Counsel
Chief Executive Copper & Diamonds
Group Executive Strategy & Development
Chief Commercial Officer
Interim Chief Executive Iron Ore
1 June 2014
1 October 2020
1 January 2017
1 January 2020
2 July 2016
1 October 2020
1 January 2018
15 September 2020
174
Annual Report 2020 | riotinto.com
Implementation Report
Other share plans
All employee share plans
The Committee believes that all employees should be given the opportunity to become shareholders in our business, and that share plans help engage,
retain and motivate employees over the long-term. Rio Tinto’s share plans are therefore part of its standard remuneration practice, to encourage
employee share ownership and create alignment with the shareholder experience. Executives may participate in broad-based share plans that are
available to Group employees generally and to which performance conditions do not apply.
A global employee share purchase plan is normally offered to all eligible employees unless there are local jurisdictional restrictions. Under the plan,
employees may acquire shares up to the value of US$5,000 (or equivalent in other currencies) per year, or capped at 10% of their base salary if lower.
Each share purchased will be matched by the company, providing the participant holds the shares, and is still employed, at the end of the three-year
vesting period.
Approximately 22,000 (50%) of our employees are shareholders as a result of participating in these plans. In the UK, these arrangements are partially
delivered through the UK Share Plan which is a UK tax approved arrangement. Under this plan, eligible participants may also receive an annual award of
Free Shares up to the limits prescribed under UK tax legislation.
Management Share Awards (MSA)
The MSA are designed to help the Group attract the best staff in a competitive labour market, and to retain key individuals as we deliver our long-term
strategy. MSA are conditional awards that are not subject to a performance condition. They vest at the end of three years subject to continued
employment. Shares to satisfy the awards are bought in the market or re-issued from treasury. Executive Committee members are not eligible for the
MSA after appointment.
Dilution
Awards under the 2013 Performance Share Plan, the 2018 EIP and all employee plans may be satisfied by, in the case of Rio Tinto plc, treasury shares or
the issue of new shares or the purchase of shares in the market. In the case of Rio Tinto Limited, the plans are satisfied by the purchase of shares in the
market and can be satisfied by the issue of new shares.
In the UK, the Investment Association has issued corporate governance guidelines in relation to the amount of new shares that may be issued having
regard to the total issued share capital. Under the guidelines, the rules of a scheme must provide that commitments to issue new shares or reissue
treasury shares, when aggregated with awards under all of a company’s other schemes, must not exceed 10% of the issued ordinary share capital
(adjusted for share issuance and cancellation) in any rolling ten-year period.
Furthermore, commitments to issue new shares or reissue treasury shares under executive (discretionary) schemes should not exceed 5% of the issued
ordinary share capital of a company (adjusted for share issuance and cancellation) in any rolling ten-year period. This may be exceeded where vesting is
dependent on the achievement of significantly more stretching performance criteria. Rio Tinto plc is in compliance with these guidelines. As at
31 December 2020 these limits had not been exceeded.
In Australia, as a condition of relief from prospectus requirements, the Australian Securities and Investments Commission has imposed a cap on the issue
of shares to employees of 5% of issued capital during a three-year period. As Rio Tinto Limited satisfies awards by market purchase, Rio Tinto Limited is in
compliance with this requirement.
All other share awards are satisfied by shares that are purchased in the market. Further information in respect of the share plan arrangements and
outstanding balances under each plan can be found in note 41 to the financial statements.
Shareholder voting
In the table below, we set out the results of the remuneration-related resolutions approved at the Group’s 2020 AGMs and the Group’s 2018 AGMs for the
current Policy. Our meetings with shareholders in 2020 were well attended and provided an opportunity for the Committee Chairman to discuss
remuneration-related topics with shareholders.
Resolution
Total votes cast
Votes for
Votes against
Votes
withheld(a)
Approval of the Directors’ Remuneration Report: Implementation Report
1,137,495,323 1,062,225,236
75,270,087
26,050,466
Approval of the Directors’ Remuneration Report
Approval of the Remuneration Policy (2018)
93.4%
6.6%
1,145,929,618 1,062,051,718
83,877,900
17,616,089
1,209,963,085 1,157,103,709
52,859,376
37,598,712
92.7%
7.3%
95.6%
4.4%
(a) A vote “withheld” is not a vote in law, and is not counted in the calculation of the proportion of votes for and against the resolution.
Annual Report 2020 | riotinto.com
175
Governance Governance
Implementation Report
continued
Table 1a – Executives’ remuneration
Stated in US$‘000(a)
Executive directors
Jean-Sébastien Jacques
Jakob Stausholm
Other executives
Bold Baatar
Alfredo Barrios
Mark Davies(f)
Vera Kirikova
Barbara Levi
Stephen McIntosh(g)
Simone Niven
Chris Salisbury(h)
Arnaud Soirat
Peter Toth(f)
Simon Trott
Ivan Vella(i)
Short-term benefits
Other
cash-based
Non-
monetary
Base salary
Cash bonus(b)
benefits(c)
benefits(d)(e)
Total short-term
benefits
1,487
1,447
1,012
989
719
683
777
769
159
573
536
565
544
717
573
536
509
717
719
683
141
704
691
117
–
1,118
768
573
522
398
601
383
121
437
312
427
857
414
–
345
–
387
553
465
103
525
416
129
366
350
235
223
162
148
249
247
627
144
129
114
84
150
132
124
134
179
162
148
17
26
26
49
40
64
79
57
36
56
106
123
74
31
19
76
70
81
18
17
50
53
60
61
7
53
23
12
1,893
2,979
2,094
1,842
1,439
1,285
1,733
1,522
981
1,185
996
1,182
1,555
1,362
723
1,022
693
1,336
1,494
1,357
268
1,308
1,156
307
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
Notes to table 1a – Executives’ remuneration
(a) “Table 1a – Executives’ remuneration” is reported in US$ using A$1 = US$0.69082; £1 = US$1.28379; C$1 = US$0.74644; S$1 = US$0.72538 (2020 average rates), except for cash bonuses which use
A$1 = US$0.76820; £1 = US$1.36027; C$1 = US$0.78342; S$1 = US$0.75537 (2020 year-end rates).
(b) “Cash bonus” relates to the cash portion of the 2020 STIP award to be paid in March 2021.
(c) “Other cash-based benefits” typically include cash in lieu of a car and fuel and, where applicable, cash in lieu of company pension or superannuation contributions.
(d) “Non-monetary benefits” for executives include healthcare coverage, provision of a car, professional tax compliance services/advice and flexible perquisites.
(e) “Non-monetary benefits” for executives living outside their home country include international assignment benefits comprising, where applicable, housing, education, relocation expenses, tax
equalisation and related compliance services, assignee and family home leave trips and international assignment payments made to and on their behalf.
(f) The details for 2020 reflect remuneration for the period 1 October to 31 December 2020.
(g) The details for 2020 reflect remuneration for the period 1 January to 30 September 2020.
(h) The details for 2020 reflect remuneration for the period 1 January to 11 September 2020.
(i) The details for 2020 reflect remuneration for the period 15 September to 31 December 2020.
176
Annual Report 2020 | riotinto.com
Implementation Report
Stated in US$’000(a)
Executive directors
Jean-Sébastien Jacques 2020
Jakob Stausholm
Other executives
Bold Baatar
Alfredo Barrios
Mark Davies
Vera Kirikova
Barbara Levi
Stephen McIntosh
Simone Niven
Chris Salisbury
Arnaud Soirat
Peter Toth
Simon Trott
Ivan Vella
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
Long-term benefits: Value of shared-based awards(j)
Post-employment benefits(n)
BDA(l)
PSA
MSA
Others(m)
Pension and
superannuation
Other
post-
employment
benefits
Termination
benefits
Total
remuneration(o)
Currency of
actual payment
1,661
1,047
362
174
396
327
466
472
42
331
242
100
639
398
514
270
592
389
457
402
42
328
211
26
9,732
3,028
808
491
1,549
1,071
2,209
1,675
57
1,087
713
86
3,605
1,070
2,808
794
3,761
1,149
1,597
1,117
105
969
694
79
–
–
–
–
–
6
–
–
38
–
3
354
–
7
–
3
–
8
–
8
51
6
48
50
11
8
3
1
4
8
3
4
1
5
8
–
8
4
5
5
–
–
1
5
1
3
4
1
22
27
7
15
7
13
21
21
4
7
13
17
72
47
19
18
13
17
7
13
1
168
165
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59
–
1,054
–
1,676
–
–
–
–
–
–
–
13,319(k)
7,089
3,274
2,523
3,395
2,710
4,432
3,694
1,123
2,615
1,975
1,739
5,938(k)
2,888
5,123(k)
2,112
6,735(k)
2,899
3,556
2,902
468
2,782
2,278
467
£
£
£
£
£
£
C$
C$
A$
£
£
£
A$
A$
£
£
A$
A$
£
£
£
S$
S$
A$
(j) The value of share-based awards has been determined in accordance with the recognition and measurement requirements of IFRS2 “Share-based Payment”. The fair value of awards granted as
Management Share Awards (MSA), Bonus Deferral Awards (BDA) and Performance Share Awards (PSA) have been calculated at their dates of grant using valuation models provided by external
consultants, Lane Clark and Peacock LLP, including an independent lattice-based option valuation model and a Monte Carlo valuation model which take into account the constraints on vesting
attached to these awards. Further details of the valuation methods and assumptions used for these awards are included in note 41 (Share-based Payments) in the financial statements. The fair value
of other share-based awards is measured at the purchase cost of the shares from the market. The non-executive directors do not participate in the long-term incentive share plans.
(k) This includes an accelerated accounting charge under IFRS 2 for unvested share based awards that are retained on termination of employment, which remain subject to performance testing and
pro-ration, as applicable. This does not reflect amounts actually paid in 2020 or the value of the share awards that will ultimately vest. Excluding this accelerated accounting charge, the total
remuneration figure for 2020 would have been US$7,105 for Jean-Sébastien Jacques, US$3,728 for Chris Salisbury, US$3,087 for Stephen McIntosh and US$3,233 for Simone Niven (all figures stated
in US$’000).
(l) “BDA” represents the portion of the 2017 – 2020 STIP awards deferred into Rio Tinto shares.
(m) “Others” includes the Global Employee Share Plan (myShare) and the UK Share Plan.
(n) The costs shown for defined benefit pension plans and post-retirement medical benefits are the service costs attributable to the individual, calculated in accordance with IAS 19. The cost for defined
contribution plans is the amount contributed in the year by the company.
(o) “Total remuneration” represents the disclosure of total emoluments and compensation required under the Australian Corporations Act 2001 and applicable accounting standards.
Further details in relation to aggregate compensation for executives, including directors, are included in note 37 (Directors’ and key management remuneration).
Annual Report 2020 | riotinto.com
177
Governance Governance
Implementation Report
continued
Table 1b – Non-executive directors’ remuneration
Stated in US$‘000(a)
Chairman
Simon Thompson
Non-executive directors
Megan Clark
David Constable
Hinda Gharbi(e)
Simon Henry
Sam Laidlaw
Michael L’Estrange
Simon McKeon
Jennifer Nason(e)
Ngaire Woods(f)
Fees and
allowances(b)
Non-monetary
benefits(c)
Post-
employment
benefits
Single total
figure of
remuneration(d)
Currency of
actual payment
937
932
210
240
196
252
157
209
241
260
270
208
172
233
228
152
60
2
2
10
21
5
23
5
5
4
4
3
4
13
5
14
1
–
–
–
20
23
–
–
–
–
–
–
–
15
16
1
22
–
–
939
934
240
284
201
275
162
214
245
264
273
227
201
239
264
153
60
£
£
A$
A$
£
£
£
£
£
£
£
A$
A$
A$
A$
£
£
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
(a) The remuneration is reported in US$. The amounts have been converted using the relevant 2020 average exchange rates of £1 = US$1.28379 and A$1 = US$0.69082 (1 January to 31 December 2020
average).
(b) “Fees and allowances” comprises the total fees for the Chairman and all non-executive directors, and travel allowances for the non-executive directors (other than the Chairman). The payment of
statutory minimum superannuation contributions for Australian non-executive directors is required by Australian superannuation law. These contributions are included in the “Fees and allowances”
amount disclosed for Australian non-executive directors.
(c) “Non-monetary benefits” include, as in previous years, amounts which are deemed by the UK tax authorities to be benefits in kind relating largely to the costs of non-executive directors’ expenses in
attending Board meetings held at the company’s UK registered office (including associated hotel and subsistence expenses) and professional tax compliance services/advice. Given these expenses are
incurred by directors in the fulfilment of their duties, the company pays the tax on them.
(d) Represents disclosure of the single total figure of remuneration under Schedule 8 of the Large- and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) and
total remuneration under the Australian Corporations Act 2001 and applicable accounting standards.
(e) The amounts reported for Hinda Gharbi and Jennifer Nason reflect the period of active Board membership from 1 March 2020 to 31 December 2020.
(f) The amounts reported for Ngaire Woods reflect the period of active Board membership from 1 September 2020 to 31 December 2020.
Further details in relation to aggregate compensation for executives, including directors, are included in note 37 (Directors’ and key management remuneration).
178
Annual Report 2020 | riotinto.com
Implementation Report
Table 2 – Directors’ and executives’ beneficial interests in Rio Tinto shares
Directors
Megan Clark
David Constable(g)
Hinda Gharbi(g)
Simon Henry
Jean-Sébastien Jacques(g)
Sam Laidlaw
Michael L’Estrange
Simon McKeon
Jennifer Nason(g)
Jakob Stausholm
Simon Thompson
Ngaire Woods(g)
Executives
Bold Baatar
Alfredo Barrios
Mark Davies(g)
Vera Kirikova
Barbara Levi
Stephen McIntosh(g)
Simone Niven(g)
Chris Salisbury(g)
Arnaud Soirat
Peter Toth(g)
Simon Trott
Ivan Vella(g)
Rio Tinto plc(a)
Rio Tinto Limited
Movements
01 Jan
2020(b)
31 Dec
2020(c)
05 Feb
2021(d)
01 Jan
2020(b)
31 Dec
2020(c)
05 Feb
2021(d) Compensation(e)
Other(f)
–
2,547
–
500
97,578
7,500
–
–
–
15,078
7,458
–
28,920
38,812
257
6,788
–
2,673
10,077
–
2,380
20,407
169
–
–
2,547
1,400
1,500
143,073
7,500
–
–
1,765
30,280
7,458
–
34,096
78,137
1,708
11,999
1,768
2,807
17,776
–
6,798
21,624
1,731
–
–
–
1,400
1,500
7,500
–
–
1,765
30,298
7,458
–
34,127
78,160
1,729
12,024
1,768
6,816
21,649
1,731
–
5,770
6,370
6,370
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,103
10,000
3,103
10,000
3,103
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,002
18,008
18,016
–
–
–
–
–
–
28,748
36,167
–
38,188
27,393
–
18,391
3,554
–
35,484
14,875
–
24,730
5,222
14,875
–
24,751
5,249
–
–
–
–
600
–
1,400
1,000
96,087
(45,592)
–
–
–
–
209
–
–
23,553
76,600
2,001
9,407
3,380
10,730
12,815
15,016
24,070
2,251
10,850
1,621
–
–
–
1,765
15,011
–
–
(18,346)
(37,252)
(515)
(4,171)
(1,612)
(3,177)
(5,116)
(17,720)
(32,152)
(1,009)
(2,928)
74
(a) Rio Tinto plc ordinary shares or American Depositary Receipts.
(b) Or date of appointment, if later.
(c) Or date of retirement / date stepped down from the Executive Committee, if earlier.
(d) Latest practicable date prior to the publication of the 2020 Annual Report.
(e) Shares obtained through awards under the Rio Tinto UK Share Plan, the Global Employee Share Plan and/or vesting of the Performance Share Awards (PSA), Management Share Awards (MSA) and
Bonus Deferral Awards (BDA) granted under the Group’s long term incentive plan (LTIP) arrangements.
(f) Share movements due to the sale or purchase of shares, or shares received under dividend reinvestment plans.
(g) Hinda Gharbi and Jennifer Nason joined as non-executive directors on 1 March 2020 and Ngaire Woods joined as a non-executive director on 1 September 2020 . David Constable retired as a
non-executive director on 31 December 2020 and Jean-Sebastien Jacques stepped down as Chief Executive on 1 January 2021. Chris Salisbury, Stephen McIntosh and Simone Niven stepped down
from the Executive Committee on 11 September 2020, 30 September 2020 and 31 December 2020 respectively. Ivan Vella joined the Executive Committee in an acting capacity on 15 September 2020,
Mark Davies and Peter Toth joined the Executive Committee on 1 October 2020.
Interests in outstanding awards under LTIPs are set out in table 3 (see pages 180-184).
Annual Report 2020 | riotinto.com
179
Governance Governance
Implementation Report
continued
Table 3 – Plan interests (awards of shares under long-term incentive plans)
1 January
2020
Awarded
Lapsed/
cancelled
Dividend
units
31 December
2020
5 February
2021
Vesting period
concludes
Vested
Date
of release
Market price
at release
Market
value of
award at
release US$(d)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,330
8,719
–
–
–
–
1,817
11,914
–
–
–
–
296
1,942
–
–
–
–
3,852
25,253
–
5,205
9,329
–
6,715
8,724
–
1,534
2,269
–
– 1 Dec 2020
1 Dec 2020
£49.79
557,320
5,205 1 Dec 2021
9,329 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020
£49.79
761,545
6,715 1 Dec 2021
8,724 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020
£49.79
124,133
1,534 1 Dec 2021
2,269 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020
£49.79 1,614,177
–
–
–
–
18,681
26,234
18,681 1 Dec 2021
26,234 1 Dec 2022
–
–
–
–
–
–
1,135
7,443
–
–
–
–
1,204
8,773
–
–
–
–
1,208
7,921
–
–
–
–
1,356
9,881
–
–
–
–
1,139
7,467
–
–
–
–
–
–
–
–
333
2,184
–
–
–
–
236
1,549
–
–
–
–
214
1,561
–
–
–
–
–
4,581
7,317
–
6,467
7,291
–
5,766
8,097
–
5,214
6,819
6,328
8,913
– 1 Dec 2020
1 Dec 2020
£49.79
475,758
4,581 1 Dec 2021
7,317 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020 A$102.55
621,509
6,467 1 Dec 2021
7,291 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020
£49.79
506,312
5,766 1 Dec 2021
8,097 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020 A$102.55
700,003
5,214 1 Dec 2021
6,819 1 Dec 2021
–
–
–
–
–
–
6,328 1 Dec 2020
1 Dec 2020
£49.79
477,292
8,913 1 Dec 2021
10,920
10,920 1 Dec 2022
3,022
3,022 1 Dec 2021
13,454
13,454 1 Dec 2022
–
–
–
–
–
–
–
–
–
–
–
–
–
1,759
2,096
–
6,140
9,615
–
1,046
1,201
– 1 Dec 2020
1 Dec 2020
£49.79
139,602
1,759 1 Dec 2021
2,096 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020
£49.79
99,012
6,140 1 Dec 2021
9,615 1 Dec 2022
–
–
–
–
–
–
– 1 Dec 2020
1 Dec 2020 A$102.55
110,586
1,046 1 Dec 2021
1,201 1 Dec 2022
–
–
–
–
–
–
Name
Award/grant date
Bonus Deferral Awards
Bold Baatar
15 May 2018
18 Mar 2019
16 Mar 2020
Alfredo Barrios
15 May 2018
18 Mar 2019
16 Mar 2020
Mark Davies
15 May 2018
Jean-Sébastien
Jacques
18 Mar 2019
16 Mar 2020
15 May 2018
18 Mar 2019
16 Mar 2020
Vera Kirikova
15 May 2018
18 Mar 2019
16 Mar 2020
Market
price
at award(a)(b)
£42.30
£42.67
£33.58
£42.30
£42.67
£33.58
£42.30
£42.67
£33.58
£42.30
£42.67
£33.58
£42.30
£42.67
£33.58
7,389
5,205
–
–
–
9,329
10,097
6,715
–
–
–
8,724
1,646
1,534
–
–
–
2,269
21,401
18,681
–
–
–
26,234
6,308
4,581
–
–
–
7,317
Stephen
McIntosh
15 May 2018 A$83.61
18 Mar 2019 A$93.17
7,569
6,467
–
–
16 Mar 2020 A$77.65
–
7,291
Simone Niven
15 May 2018
18 Mar 2019
16 Mar 2020
£42.30
£42.67
£33.58
Chris Salisbury
15 May 2018 A$83.61
18 Mar 2019 A$93.17
6,713
5,766
–
–
–
8,097
8,525
5,214
–
–
16 Mar 2020 A$77.65
–
6,819
Arnaud Soirat
15 May 2018
Jakob
Stausholm
Peter Toth
18 Mar 2019
16 Mar 2020
18 Mar 2019
16 Mar 2020
15 May 2018
18 Mar 2019
16 Mar 2020
Simon Trott
15 May 2018
18 Mar 2019
16 Mar 2020
£42.30
£42.67
£33.58
£42.67
£33.58
£42.30
£42.67
£33.58
£42.30
£42.67
£33.58
Ivan Vella
15 May 2018 A$83.61
18 Mar 2019 A$93.17
6,328
8,913
–
–
–
10,920
3,022
–
–
13,454
1,851
1,759
–
–
–
2,096
1,313
6,140
–
–
–
9,615
1,347
1,046
–
–
16 Mar 2020 A$77.65
–
1,201
180
Annual Report 2020 | riotinto.com
Implementation Report
Name
Award/grant date
Management Share Awards
Market
price
at award(a)(b)
1 January
2020 Awarded
Lapsed/
cancelled
Dividend
units
31 December
2020
5 February
2021
Vested
Performance /
vesting (MSA) period
concludes
Date of release
Market price
at release
Market
value of
award at
release US$(d)
Mark Davies
9 Mar 2017 A$60.14
15 May 2018
18 Mar 2019
16 Mar 2020
Barbara Levi
16 Mar 2020
Peter Toth
16 Mar 2020
16 Mar 2020
9 Mar 2017
15 May 2018
18 Mar 2019
16 Mar 2020
£42.30
£42.67
£33.58
£33.58
£33.58
£33.58
£32.03
£42.30
£42.67
£33.58
Simon Trott
9 Mar 2017 A$60.14
Ivan Vella
9 Mar 2017 A$60.14
15 May 2018 A$83.61
18 Mar 2019 A$93.17
2,638
3,017
2,669
–
–
–
–
5,669
3,991
3,582
–
–
–
3,186
3,380
5,070
8,450
–
–
–
–
4,099
2,695
2,716
3,344
2,856
–
–
–
–
16 Mar 2020 A$77.65
–
1,931
Performance Share Awards(c)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
386
3,024
–
–
–
–
–
–
–
–
–
3,380
–
–
1,084
6,753
–
–
–
–
–
–
405
397
3,100
3,113
–
–
–
–
–
–
Bold
Baatar
23 Mar 2015
11 Mar 2016
9 Mar 2017
15 May 2018
18 Mar 2019
16 Mar 2020
Alfredo Barrios
23 Mar 2015
11 Mar 2016
9 Mar 2017
15 May 2018
18 Mar 2019
16 Mar 2020
£29.43
£20.00
£32.03
£42.30
£42.67
£33.58
£29.43
£20.00
£32.03
£42.30
£42.67
£33.58
14,954
17,270
85,174
63,039
51,752
–
–
–
–
–
–
53,272
(3,594)
3,160
14,520
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
66,390
73,140
91,721
66,050
57,011
–
–
–
–
–
53,236
– (15,951) 14,037
64,476
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,017
2,669
3,186
–
5,070
8,450
–
3,991
3,582
4,099
–
–
3,344
2,856
1,931
–
17,270
85,174
63,039
51,752
53,272
–
73,140
91,721
66,050
57,011
53,236
–
17 Feb 2020
17 Feb 2020
A$97.88
204,475
3,017
2,669
3,186
18 Feb 2021
21 Feb 2022
20 Feb 2023
–
–
–
–
–
–
–
–
–
–
1 Sep 2020
1 Sep 2020
£45.88
199,084
5,070
8,450
1 Sep 2021
1 Sep 2022
–
–
–
–
–
–
–
17 Feb 2020
17 Feb 2020
£42.06
364,638
3,991
3,582
4,099
–
–
3,344
2,856
1,931
18 Feb 2021
21 Feb 2022
20 Feb 2023
–
–
–
–
–
–
–
–
–
27 Feb 2020
27 Feb 2020
A$90.12
192,995
17 Feb 2020
17 Feb 2020
A$97.88
210,492
18 Feb 2021
21 Feb 2022
20 Feb 2023
–
–
–
–
–
–
–
–
–
–
31 Dec 2019
27 Feb 2020/
1 Jun 2020
£37.16 /
£43.72
411,801/
330,452
17,270
85,174
63,039
51,752
53,272
31 Dec 2020
31 Dec 2021
31 Dec 2022
31 Dec 2023
31 Dec 2024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31 Dec 2019
27 Feb 2020/
1 Jun 2020
£37.16 /
£43.72
1,828,441/
1,467,558
73,140
91,721
66,050
57,011
53,236
31 Dec 2020
31 Dec 2021
31 Dec 2022
31 Dec 2023
31 Dec 2024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Annual Report 2020 | riotinto.com
181
Governance Award/grant
date
Market
price at
award(a)(b)
1 January
2020
Awarded
Lapsed/
cancelled
Dividend
units
31 December
2020
5 February
2021
Vested
Performance
period concludes Date of release
Market price
at release
Market value
of award at
release US$(d)
(662)
456
2,546
–
–
31 Dec 2019
17 Feb 2020/
1 Jun 2020
A$97.88/
A$95.75
101,629/
68,990
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(17,483)
15,385
70,670
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(424)
348
1,682
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,747)
1,927
10,609
–
–
(7,096)
(19,993)
(1,212)
1,065
4,894
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,153
3,153
31 Dec 2020
10,555
10,555
31 Dec 2021
9,051
8,008
6,373
–
84,005
79,966
9,051
31 Dec 2022
8,008
31 Dec 2023
6,373
31 Dec 2024
–
31 Dec 2019
84,005
31 Dec 2020
79,966
31 Dec 2020
184,994
184,994
31 Dec 2021
139,995
139,995
31 Dec 2022
125,665
125,665
31 Dec 2023
115,049
115,049
31 Dec 2024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27 Feb 2020/
1 Jun 2020
£37.16 /
£43.72
2,004,096/
1,608,538
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,636
66,803
45,219
40,591
42,576
37,992
–
13,093
79,152
50,944
29,696
11,159
–
9,109
66,803
43,396
26,523
11,315
–
31 Dec 2019
5,636
31 Dec 2020
66,803
31 Dec 2021
45,219
31 Dec 2022
40,591
31 Dec 2023
42,576
31 Dec 2024
37,992
31 Dec 2024
–
31 Dec 2019
13,093
31 Dec 2020
79,152
31 Dec 2021
50,944
31 Dec 2022
29,696
31 Dec 2023
11,159
31 Dec 2024
–
31 Dec 2019
9,109
31 Dec 2020
66,803
31 Dec 2021
43,396
31 Dec 2022
26,523
31 Dec 2023
11,315
31 Dec 2024
27 Feb 2020/
1 Jun 2020
£37.16 /
£43.72
47,754/
38,220
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27 Feb 2020/
1 Jun 2020
A$90.12/
A$95.75
390,597/
286,742
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27 Feb 2020/
1 Jun 2020
£37.16 /
£43.72
138,778/
111,404
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Governance
Implementation Report
continued
Name
Mark
Davies
Jean-Sébastien
Jacques(e)(g)
23 Mar 2015 A$58.21
11 Mar 2016 A$44.57
2,752
3,153
9 Mar 2017 A$60.14
10,555
15 May 2018
£42.30
18 Mar 2019
£42.67
9,051
8,008
–
–
–
–
–
16 Mar 2020
£33.58
–
6,373
23 Mar 2015
£29.43
11 Mar 2016
£20.00
12 Sep 2016
£22.95
72,768
84,005
79,966
9 Mar 2017
£32.03
184,994
15 May 2018
£42.30
139,995
18 Mar 2019
£42.67
125,665
–
–
–
–
–
–
16 Mar 2020
£33.58
–
115,049
Vera Kirikova
14 Sep 2015
£23.98
11 Mar 2016
£20.00
9 Mar 2017
£32.03
15 May 2018
£42.30
18 Mar 2019
£42.67
16 Mar 2020
£33.58
Barbara Levi
16 Mar 2020
£33.58
1,758
5,636
66,803
45,219
40,591
–
–
–
–
–
–
–
42,576
37,992
Stephen
McIntosh(f)
23 Mar 2015 A$58.21
11 Mar 2016 A$44.57
9 Mar 2017 A$60.14
15 May 2018 A$83.61
18 Mar 2019 A$93.17
11,429
13,093
79,152
58,040
49,689
–
–
–
–
–
16 Mar 2020 A$77.65
–
41,989
(30,830)
Simone Niven(f)
23 Mar 2015
£29.43
11 Mar 2016
£20.00
9 Mar 2017
£32.03
15 May 2018
£42.30
18 Mar 2019
£42.67
5,041
9,109
66,803
49,440
44,379
–
–
–
–
–
–
–
(6,044)
(17,856)
16 Mar 2020
£33.58
–
42,576
(31,261)
182
Annual Report 2020 | riotinto.com
Implementation Report
Name
Award/ grant date
at award(a)(b)
Market price
1 January
2020
Awarded
Lapsed/
cancelled
Dividend
units
31 December
2020
5 February
2021
Performance
period concludes
Vested
Date of release
Market
value of
award at
release
US$(d)
Market
price at
release
Chris
Salisbury(f)
23 Mar 2015
A$58.21
11 Mar 2016
A$44.57
9 Mar 2017
A$60.14
15 May 2018
A$83.61
18 Mar 2019
A$93.17
16,175
13,898
79,152
63,457
49,689
–
–
–
–
–
–
–
(7,758)
(19,993)
16 Mar 2020
A$77.65
–
41,989
(30,830)
–
–
–
–
–
–
–
–
–
–
(3,887)
2,728
15,016
Arnaud
Soirat
23 Mar 2015
A$58.21
11 Mar 2016
A$44.57
9 Mar 2017
15 May 2018
18 Mar 2019
16 Mar 2020
10 Sep 2018
18 Mar 2019
16 Mar 2020
23 Mar 2015
11 Mar 2016
9 Mar 2017
15 May 2018
18 Mar 2019
16 Mar 2020
£32.03
£42.30
£42.67
£33.58
£35.16
£42.67
£33.58
£29.43
£20.00
£32.03
£42.30
£42.67
£33.58
23 Mar 2015
A$58.21
11 Mar 2016
A$44.57
9 Mar 2017
A$60.14
15 May 2018
18 Mar 2019
16 Mar 2020
£42.30
£42.67
£33.58
Jakob
Stausholm
Peter
Toth
Simon
Trott
Ivan
Vella
17,658
20,230
85,174
57,657
56,582
–
–
–
–
–
–
53,272
29,886
79,609
–
–
–
74,711
12,217
14,808
22,677
7,982
10,747
–
–
–
–
–
–
8,199
8,216
9,412
8,085
57,188
50,598
–
–
–
–
–
–
52,838
23 Mar 2015
A$58.21
11 Mar 2016
A$44.57
9 Mar 2017
A$60.14
15 May 2018
A$83.61
18 Mar 2019
A$93.17
4,023
3,072
8,149
13,376
8,570
–
–
–
–
–
16 Mar 2020
A$77.65
–
3,862
(4,243)
2,979
16,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,936)
2,529
11,810
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,975)
1,385
7,626
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(968)
667
3,722
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,898
79,152
55,699
29,696
11,159
–
20,230
85,174
57,657
56,582
53,272
29,886
79,609
74,711
–
14,808
22,677
7,982
–
31 Dec 2019
13,898
31 Dec 2020
79,152
31 Dec 2021
55,699
31 Dec 2022
29,696
31 Dec 2023
11,159
31 Dec 2024
–
31 Dec 2019
20,230
31 Dec 2020
85,174
31 Dec 2021
57,657
31 Dec 2022
56,582
31 Dec 2023
53,272
31 Dec 2024
29,886
31 Dec 2022
79,609
31 Dec 2023
74,711
31 Dec 2024
–
31 Dec 2019
14,808
31 Dec 2020
22,677
31 Dec 2021
7,982
31 Dec 2022
10,747
10,747
31 Dec 2023
8,199
8,199
31 Dec 2024
–
9,412
8,085
57,188
50,598
52,838
–
3,072
8,149
–
31 Dec 2019
9,412
31 Dec 2020
8,085
31 Dec 2021
57,188
31 Dec 2022
50,598
31 Dec 2023
52,838
31 Dec 2024
–
31 Dec 2019
3,072
31 Dec 2020
8,149
31 Dec 2021
13,376
13,376
31 Dec 2022
8,570
3,862
8,570
31 Dec 2023
3,862
31 Dec 2024
27 Feb 2020/
1 Jun 2020
A$90.12/
A$95.75
552,775/
405,937
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27 Feb 2020/
1 Jun 2020
A$90.12/
A$95.75
603,514/
443,177
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17 Feb 2020/
1 Jun 2020
£42.06/
£43.72
377,892/
270,007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27 Feb 2020/
1 Jun 2020
A$90.12/
A$95.75
280,777/
206,110
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17 Feb 2020/
1 Jun 2020
A$97.88/
A$95.75
148,623/
100,806
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) Awards denominated in pounds sterling were for Rio Tinto plc ordinary shares of 10 pence each and awards denominated in Australian dollars were for Rio Tinto Limited shares. All awards are granted
over ordinary shares.
(b) The weighted fair value per share of Bonus Deferral Awards and Management Share Awards granted in March 2020 was £32.74 for Rio Tinto plc and A$81.08 for Rio Tinto Limited and for Performance
Share Awards was £13.54 for Rio Tinto plc and A$33.56 for Rio Tinto Limited. Conditional awards are awarded at no cost to the recipient and no amount remains unpaid on any shares awarded.
Annual Report 2020 | riotinto.com
183
Governance Governance
Implementation Report
continued
(c) For awards granted from 2013, for the TSR component (constituting two-thirds of the award for awards granted until 2017 and constituting 100% for awards granted from 2018), where TSR
performance is measured against both the EMIX Global Mining Index and the Morgan Stanley Capital World Index, the award will vest as follows:
Out-performance of the index by 6% per annum
100% award vests
Performance between equal to the index and 6% per annum out-performance
Proportionate vesting between 22.5% and 100% vesting
Performance equal to the index
Performance less than index
22.5% award vests
Nil vesting
For awards granted prior to 2018, one-third of the award is subject to an EBIT margin condition measuring the change in the EBIT margin of Rio Tinto and each of the comparator companies (measured
on a “point-to-point” basis using the last financial year in the performance period and the financial year prior to the start of the performance period). This will be calculated using independent third-
party data. Vesting will be subject to Rio Tinto’s interpolated ranking position using the following schedule.
Equal to or greater than 2nd ranked company
Between the 5th and 2nd ranked companies
Above the 6th ranked company
Equal to the 6th ranked company or below
100% award vests
Proportionate vesting between 22.5% and 100% vesting
22.5% award vests
Nil vesting
The TSR performance condition (two-thirds of the award) vests in February with the EBIT performance condition (one-third of the award) vesting in May. Due to the phased vesting nature of the award,
details of each vest are displayed separately side by side within the table.
For awards granted from 2018 the EBIT performance condition does not apply. Instead the award is subject to the TSR measures described above, with each applied to 50% of the award.
If vesting is achieved, participants will be entitled to receive a number of additional shares whose market value reflects the aggregate cash amount of dividends that would have been received had the
number of shares which have vested at the end of the performance period been held throughout the period.
(d) The amount in US dollars has been converted at the rate of US$1.28379 = £1 and US$0.69082 = A$1, being the average exchange rates for 2020.
(e) In addition to adjusting Jean-Sébastien Jacques’ 2016 PSA to take account of applicable performance conditions, this award will be further adjusted on vesting to lapse such number of shares as is
equal to £1 million in line with the Board Review of cultural heritage management published on 24 August 2020.
(f) For Chris Salisbury, Stephen McIntosh and Simone Niven, the change in position of their Performance Share Awards to 31 December 2020 is a result of their termination on 31 December 2020 and the
pro-rating their remaining unvested awards in line with normal eligible leaver rules reflecting the time employed from the date of grant up to the date of leaving, as a proportion of the first three years from
the date of grant.
(g) For Jean-Sébastien Jacques, his PSA awards will be pro-rated on his termination date of 31 March 2021, resulting in the lapse of 120,882 shares representing approximately 21% of his holding of PSA
at the date of termination. The outstanding awards remain fully subject to performance testing, representing approximately 222,400 shares on a 50% expected value basis.
(h) For the Performance Share Awards granted on 11 March 2016 with a performance period that concluded on 31 December 2020, 100% of the award vested in relation to the TSR portion of the award.
The remaining performance condition of relative EBIT margin will be assessed later in 2021.
(i) The closing price at 31 December 2020 was £54.70 for Rio Tinto plc ordinary shares and was A$113.83 for Rio Tinto Limited ordinary shares. The high and low prices during 2020 of Rio Tinto plc and
Rio Tinto Limited shares were £57.71 and £29.54 and A$118.60 and A$72.77 respectively.
(j) As of 5 February 2021, members of the Executive Committee (excluding Jean-Sébastien Jacques, Chris Salisbury, Stephen McIntosh and Simone Niven) held 1,770,341 shares awarded and not vested
under long-term incentive plans. No Executive Committee member held any options.
Table 3a – Plan interests (award of shares under all-employee share arrangements)
myShare
Value of
Matching
shares
awarded in
year(b)
(‘000)
Value of
Matching
shares
vested in year(c)
(‘000)
Plan interests
at
1 January
2020(a)
UK Share Plan
Total activity in 2020
Value of
Matching
shares
awarded
in year(b)
(‘000)
Value of
Matching
shares vested
in year(c)
(‘000)
Value of Free
shares
awarded
in year(d)
(‘000)
Value of Free
shares vested
in year(d)
(‘000)
Grants in year
(‘000)
Vesting in year
(‘000)
Plan interests
at
31 December
2020(a)
Bold Baatar
Alfredo Barrios
Mark Davies
Jean-Sébastien Jacques
Vera Kirikova
Stephen McIntosh
Simone Niven
Arnaud Soirat
Jakob Stausholm
Peter Toth
Simon Trott
Ivan Vella
392.86
235.95
236.28
520.29
508.24
219.03
286.00
250.96
60.09
520.29
260.09
181.70
2
4
5
0
2
4
0
2
2
2
0
3
5
6
6
3
4
7
0
0
0
3
7
5
2
0
0
0
2
0
0
2
2
2
0
0
0
0
0
3
1
0
0
0
0
3
0
0
5
0
0
5
5
0
5
5
5
5
0
0
0
0
0
6
6
0
6
3
0
6
0
0
9
4
5
5
9
4
5
9
9
9
0
3
5
6
6
12
11
7
6
3
0
12
7
5
472.90
212.15
243.06
418.67
473.71
188.76
260.00
350.36
217.50
473.71
173.27
162.02
(a) All shares shown are Rio Tinto plc shares except in the cases of Stephen McIntosh and Ivan Vella which are Rio Tinto Limited shares. Mark Davies and Simon Trott hold a combination of Rio Tinto plc
and Rio Tinto Limited shares.
(b) myShare and UK Share Plan Matching share awards are granted on a quarterly basis (January, April, July and October) throughout the year.
(c) The vesting of a Matching share is dependent on continued employment with Rio Tinto and the retention of the associated Investment share purchased by the participant for three years.
(d) UK Share Plan Free shares vest after three years.
(e) UK Share Plan awards shown above and the vested Matching shares under myShare are included, where relevant, in the executive’s share interests in table 2.
(f) All currency figures are shown in US$ and rounded.
184
Annual Report 2020 | riotinto.com
Implementation Report
Audited information
Under Schedule 8 of the Large- and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), the following
information is auditable:
– The 2020 performance for the purposes of the STIP on page 146.
– The single total figure of remuneration for each director, as set out on page 161 and table 1b on page 178.
– Details of the directors’ total pension entitlements, as set out on page 161.
– Details of taxable benefits on page 161.
– Details of scheme interests awarded to the directors during the financial year, as set out on page 166 and table 3 and 3a on pages 180-184.
– Details of payments to past directors as set out on page 169.
– Details of shareholding ownership policy and directors’ share ownership on pages 166 and 171.
– Statement of the directors’ shareholdings and share interests, as set out in tables 2, 3 and 3a on pages 179-184 of the Implementation Report.
– STIP objectives and outcomes for 2020 as set out on pages 162-164 and LTIP outcome and award granted for 2020 as set out on pages 165-166.
The Australian Securities and Investments Commission issued an order dated 14 December 2015, under which the Remuneration Report must be
prepared and audited in accordance with the requirements of the Australian Corporations Act 2001 applied on the basis of certain modifications set out in
the order (as detailed on page 310). The information provided in the Remuneration Report has been audited as required by section 308 (3C) of the
Australian Corporations Act 2001.
Directors’ approval statement
This directors’ Remuneration Report is delivered in accordance with a resolution of the Board, and has been signed on behalf of the Board by:
Sam Laidlaw
Chairman of the Remuneration Committee
22 February 2021
Annual Report 2020 | riotinto.com
185
Governance Governance
Additional Statutory Disclosure
The directors present their report and audited consolidated financial
statements for the year ended 31 December 2020.
Scope of this report
For the purposes of UK company law and the Australian Corporations
Act 2001:
– the additional disclosures under the heading ‘Shareholder
information’ on pages 359-366 are hereby incorporated by reference
to, and form part of, this Directors’ Report;
– the Strategic Report on pages 4-109 provides a comprehensive review
of Rio Tinto’s operations, its financial position and its business
strategies and prospects, and is incorporated by reference into, and
forms part of this Directors’ Report; certain items that would ordinarily
need to be included in this Directors’ Report (including an indication of
likely future developments in the business of the company and the
Group) have, as permitted, instead been discussed in the Strategic
Report, while details of the Group’s policy on addressing financial
risks and details about financial instruments are shown in note 29 to
the Group financial statements; and
– taken together, the Strategic Report and this Directors’ Report are
intended to provide a fair, balanced and understandable assessment
of: the development and performance of the Group’s business during
the year and its position at the end of the year; its strategy; likely
developments; and any principal or emerging risks and uncertainties
associated with the Group’s business.
– The Directors’ declaration on page 311 is also incorporated into this
Directors’ Report.
For the purposes of compliance with DTR 4.1.5R(2) and DTR 4.1.8R,
the required content of the ‘Management Report’ can be found in the
Strategic Report or this Directors’ Report, including the material
incorporated by reference.
A full report on director and executive remuneration and shareholdings
can be found in the Remuneration Report on pages 140-158, which for
the purposes of the Australian Corporations Act 2001, forms part of this
Directors’ Report.
Dual listed structure and constitutional documents
The dual listed companies (DLC) structure of Rio Tinto plc and Rio Tinto
Limited, and their constitutional provisions and voting arrangements –
including restrictions that may apply to the shares of either company
under specified circumstances – are described on pages 359-360.
Operating and financial review
Rio Tinto’s principal activities during 2020 were minerals and metals
exploration, production and processing, development and marketing.
Subsidiary and associated undertakings principally affecting the profits or
net assets of the Group in the year are listed in notes 32-35 to the
financial statements.
The following significant changes and events affected the Group during
2020 and up to the date of this report:
– In February 2020 Rio Tinto announced it would conduct a strategic
review of the ISAL smelter in Iceland, to determine the operation’s
ongoing viability and explore options to improve its competitive position.
– In February 2020, Rio Tinto’s subsidiary Energy Resources of Australia
Ltd (ERA) announced the completion of an entitlement offer, which was
underwritten by the Group. As a result of the issue of new shares to
the Group, our interest in ERA has increased from 68.39% to 86.33%.
– In February 2020, Rio Tinto announced the appointment of three new
independent non-executive directors to the board. They were Hinda
Gharbi, Jennifer Nason and Ngaire Woods.
– In February 2020, Rio Tinto announced that it expected Pilbara iron
ore shipments in 2020 to be between 324 million tonnes and
334 million tonnes (100% basis) versus previous guidance of between
330 million tonnes and 343 million tonnes.
186
Annual Report 2020 | riotinto.com
– In March 2020 Rio Tinto announced that it was working with the
Government of Mongolia to ensure that Oyu Tolgoi was operating in
accordance with the restrictions the Mongolian authorities had put in
place to contain the spread of COVID-19.
– In March 2020 Rio Tinto announced that as a result of separate actions
by the Premier of Quebec and the President of South Africa to contain
the spread of COVID-19, some of its operations would be slowed down.
– In March 2020, in accordance with ASX Listing Rule 3.17A.1, Rio Tinto
attached proposed resolutions received under section 249N of the
Australian Corporations Act 2001 for consideration by shareholders at
the 2020 Rio Tinto Limited annual general meeting to be held
in Brisbane, on 7 May 2020.
– In March 2020 Rio Tinto announced revised arrangements to its 2020
AGM in order to comply with mandatory COVID-19 measures from the
UK government.
– In June 2020 Rio Tinto announced that its report on payments to
governments made by it and its subsidiary undertakings for the year
ending 31 December 2019 as required under the UK’s Report on
Payments to Governments Regulations 2014 (as amended in
December 2015) was filed at Companies House.
– In June 2020 Rio Tinto launched a Board-led review of its heritage
management processes within Iron Ore following the events at Juukan
Gorge, with a focus on recommending improvements to the
effectiveness of its internal processes and governance.
– In June 2020 Rio Tinto announced that it had reached an agreement
with Turquoise Hill and the government of Mongolia on the preferred
domestic power solution for Oyu Tolgoi that paves the way for the
government to fund and construct a state-owned power plant at
Tavan Tolgoi.
– In July 2020 Rio Tinto announced that both Peter Toth and Mark Davies
would join the Rio Tinto Executive Committee on 1 October, reporting to
the then chief executive, J-S Jacques.
– In July 2020 Rio Tinto announced that Oyu Tolgoi LLC had completed
an updated feasibility study and was in the process of submitting this to
the government of Mongolia.
– In July 2020 Rio Tinto announced that it would start planning for the
wind-down of operations and the eventual closure of New Zealand
Aluminium Smelters (NZAS) following the conclusion of its strategic
review which showed that the business was no longer viable given high
energy costs and a challenging outlook for the aluminium industry.
– In July 2020 Rio Tinto announced that it had disclosed to the Australian
Securities Exchange (ASX) the maiden Inferred Mineral Resource at the
100% owned Winu copper-gold project.
– In August 2020 Rio Tinto made a submission to the Australian
Parliamentary Inquiry relating to the destruction of the rock shelters at
Juukan Gorge in the Pilbara region of Western Australia. Rio Tinto set out
in detail its relationship with the Puutu Kunti Kurrama and Pinikura
people (PKKP) from 2003 to 2020 and the circumstances over this period
that led to the events that occurred in Juukan Gorge.
– In August 2020 Rio Tinto announced that the Kennecott mine
in Utah had experienced delays to the restart of the smelter due to
unexpected issues following planned maintenance. As a result,
Rio Tinto group production guidance for refined copper in 2020 became
135 to 175 kt (previously 165 to 205 kt).
– In August 2020 Rio Tinto published the Board Review of cultural
heritage management, following the destruction of the Juukan Gorge
rock shelters in May 2020. The review detailed which elements of
Rio Tinto’s systems, decision-making processes and governance had
failed to work as they should have and set out recommendations to
prevent a similar incident occurring in the future.
– In August 2020 Rio Tinto announced that it had noted Turquoise Hill
Resources’ publication of its ‘2020 Oyu Tolgoi Technical Report’ in
relation to the Oyu Tolgoi project in Mongolia.
Additional Statutory Disclosure
– In September 2020 Rio Tinto announced that it had provided additional
At the AGMs held in 2020, shareholders authorised:
information to the Australian Parliamentary Inquiry into the destruction of
the rock shelters at Juukan Gorge. The additional information related to
questions taken on notice when Rio Tinto provided evidence to the Inquiry
Committee and additional questions received from the Committee.
– In September 2020 Rio Tinto announced that it had entered into a
memorandum of understanding with Turquoise Hill Resources, which
provided a clear pathway to progress the financing for completion
of the Oyu Tolgoi Underground Project in Mongolia and address TRQ’s
funding position.
– In September 2020 Rio Tinto announced that following consultation
with a wide range of significant stakeholders in response to the Board
Review of Cultural Heritage Management, changes to the Executive
Committee and Board were to be made.
– In November 2020 Rio Tinto announced that David Constable would
step down as a non-executive director of Rio Tinto with effect from
31 December 2020.
– In December 2020 Rio Tinto disclosed to the Australian Securities
Exchange (ASX) a maiden Ore Reserve and updated Mineral Resource
at the 100% owned Jadar lithium-borates project in western Serbia.
– In December 2020 Rio Tinto unveiled a pathway for the ongoing
development of the underground project at Oyu Tolgoi in Mongolia, one
of the largest known copper and gold deposits in the world. The
definitive estimate detailed how Oyu Tolgoi underground would achieve
sustainable production for Panel 0 by October 2022 for development
capital of $6.75 billion.
– In December 2020 Rio Tinto announced that it had appointed Jakob
Stausholm as Chief Executive, effective 1 January 2021.
– In January 2021 Rio Tinto announced a change to the classification of
executives designated as Key Management Personnel (KMP) under the
Australian corporations legislation.
– In January 2021 Rio Tinto announced that it had reached a new
electricity agreement with Meridian Energy that allowed New Zealand
Aluminium Smelter (NZAS) to continue operating the Tiwai Point
aluminium smelter until 31 December 2024.
– In January 2021 Rio Tinto unveiled a new executive team.
Details of events that took place after the balance sheet date are further
described in note 42 to the financial statements.
Risk identification, assessment and management
The Group’s principal risks and uncertainties are listed on pages 95-108.
The Group’s approach to risk management is discussed on pages 92-94.
Share capital
Details of the Group’s share capital as at 31 December 2020 are described
in notes 26 and 27 to the financial statements. Details of the rights and
obligations attached to each class of shares are covered on pages 359-360,
under the heading ‘Voting arrangements’.
In situations where an employee share plan operated by the company and
plan participants are the beneficial owners of shares but not the registered
owners, voting rights are normally exercised by the registered owner at the
direction of the participant.
Details of certain restrictions on holding shares in Rio Tinto and certain
consequences triggered by a change of control are described on page 360
under the heading ‘Limitations on ownership of shares and merger
obligations’. There are no other restrictions on the transfer of ordinary
Rio Tinto shares save for:
– restrictions that may from time to time be imposed by laws, regulations
or Rio Tinto policy (for example relating to market abuse, insider
dealing, share trading or an Australian foreign investment);
– restrictions on the transfer of shares that may be imposed following a
failure to supply information required to be disclosed, or where
registration of the transfer may breach a court order or a law, or in
relation to unmarketable parcels of shares;
– restrictions on the transfer of shares held under certain employee share
plans while they remain subject to the plan.
– the on-market purchase by Rio Tinto plc or Rio Tinto Limited or its
subsidiaries, of up to 124,667,622 Rio Tinto plc shares (representing
approximately 10% of Rio Tinto plc’s issued share capital, excluding
Rio Tinto plc shares held in Treasury at that time);
– the off-market purchase by Rio Tinto plc of up to 124,667,622 Rio Tinto
plc shares acquired by Rio Tinto Limited or its subsidiaries under the
above authority; and
– the off-market and/or on-market buy-back by Rio Tinto Limited of up to
55.6 million Rio Tinto Limited shares (representing approximately 15%
of Rio Tinto Limited’s issued share capital at that time).
Substantial shareholders
Details of substantial shareholders are included on page 361.
Dividends
Details of dividends paid and declared for payment, together with the
company’s shareholder returns policy, can be found on page 37.
Directors
The names of directors and their periods of appointment are listed on pages
116-117, together with details of each director’s qualifications, experience
and special responsibilities, and current directorships.
A table of directors’ attendance at Board and committee meetings during
2020 is on page 127.
All directors will stand for re-election at the 2021 AGMs.
Previous listed directorships
Details of each director’s previous directorships of other listed companies
(where relevant) held in the past three years are set out below:
Jakob Stausholm A. P. Moller – Maersk A/S (December 2016 to March 2018)
Simon Henry Lloyds Banking Group plc (June 2014 to September 2020)
Directors’ and executives’ beneficial interests
A table of directors’ and executives’ beneficial interests in Rio Tinto shares
is on page 179.
Secretaries
Steve Allen is company secretary of Rio Tinto plc and joint company
secretary, together with Tim Paine, of Rio Tinto Limited. Steve’s and Tim’s
qualifications and experience are described on page 117.
Indemnities and insurance
The Articles of Association of Rio Tinto plc and the Constitution of Rio Tinto
Limited provide for them to indemnify, to the extent permitted by law,
directors and officers of the companies, including officers of certain
subsidiaries, against liabilities arising from the conduct of the Group’s
business. The directors, Group company secretary and joint company
secretary of Rio Tinto Limited, together with employees serving as directors
of eligible subsidiaries at the Group’s request, have also received similar
direct indemnities. Former directors also received indemnities for the period
in which they were directors. These are qualifying third-party indemnity
provisions for the purposes of the UK Companies Act 2006, in force during
the financial year ended 31 December 2020 and up to the date of this
report. During 2020, Rio Tinto paid legal costs under the terms of those
indemnities for certain former directors and officers totalling $18,171,612.
Qualifying pension scheme indemnity provisions (as defined by section 235
of the UK Companies Act 2006) were in force during the course of the
financial year ended 31 December 2020 and up to the date of this Directors’
Report, for the benefit of trustees of the Rio Tinto Group pension and
superannuation funds across various jurisdictions. No amount has been paid
under any of these indemnities during the year.
The Group purchased directors’ and officers’ insurance during the year. In broad
terms, this cover indemnifies individual directors and officers against certain
personal legal liability and legal defence costs for claims arising out of actions
connected with Group business. During 2020, the Group paid premiums
totalling $35,098,751 net of statutory taxes and other local charges for this
directors’ and officers’ insurance.
Annual Report 2020 | riotinto.com
187
Governance Governance
Additional Statutory Disclosure
continued
Employment of disabled persons
We give full and fair consideration to applications for employment by disabled
persons, having regard to their particular aptitudes and abilities. We also
continue the employment of, and arrange appropriate training for, employees
who have become disabled during their employment as well as supporting
the training, career development and promotion of disabled employees.
Further information on the employment of disabled persons is on page 76.
Engagement with UK employees
Our statement on engagement with UK employees is on page 122.
Purchases
Rio Tinto plc shares of 10p each and Rio Tinto plc American Depositary Receipts (ADRs)
Engagement with suppliers, customers and others in a business
relationship with the company
Our statement on engagement with suppliers, customers and others in a
business relationship with the company is on page 123.
Statutory Audit Services Order
The Group has fully complied with the Statutory Audit Services Order.
2020
1 to 31 Jan
1 to 29 Feb
1 to 31 Mar
1 to 30 Apr
1 to 31 May
1 to 30 Jun
1 to 31 Jul
1 to 31 Aug
1 to 30 Sep
1 to 31 Oct
1 to 30 Nov
1 to 31 Dec
Total
2021
1 to 31 Jan
1 to 05 Feb
Rio Tinto Limited shares
2020
1 to 31 Jan
1 to 29 Feb
1 to 31 Mar
1 to 30 Apr
1 to 31 May
1 to 30 Jun
1 to 31 Jul
1 to 31 Aug
1 to 30 Sep
1 to 31 Oct
1 to 30 Nov
1 to 31 Dec
Total
2021
1 to 31 Jan
1 to 05 Feb
Total number of
shares purchased(a)
Average
price per
share US$(b)
Total number of shares
purchased to satisfy
company dividend
reinvestment plans
Total number of shares
purchased to satisfy
employee share plans
Total number of shares
purchased as part of publicly
announced plans or
programmes(c)
Maximum number of shares
that may be purchased
under plans or programmes
1,962,815
1,664,753
–
1,036,556
–
76,182
–
–
442,340
–
2
149,942
5,332,590(d)
58.41
53.79
–
46.50
–
56.69
–
–
63.45
–
58.16
76.51
55.55
–
–
–
–
–
–
–
520,647
–
–
–
–
–
–
–
515,909
–
76,182
–
–
302,214
140,126
–
–
–
822,861
–
–
–
2
149,942
882,161
–
–
1,962,815
1,664,753
–
–
–
–
–
–
–
–
–
–
3,627,568
–
–
109,974,149(e)
108,309,396(e)
108,309,396(e)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
124,667,622(f)
–
124,667,622(f)
124,667,622(f)
Total number of
shares purchased(a)
Average
price per
share US$(b)
Total number of shares
purchased to satisfy
company dividend
reinvestment plans
Total number of
shares purchased to
satisfy employee
share plans(g)
Total number of shares
purchased as part of publicly
announced plans or
programmes(c)
Maximum number of shares
that may be purchased
under plans or programmes
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70.02
–
–
57.11
–
67.47
–
–
73.62
–
67.15
88.48
68.93
–
–
–
–
–
1,186,788
–
–
–
–
21,555
–
–
215,749
–
97,000
–
–
639,326
234,349
–
–
–
1,826,114
–
–
–
1
685,508
1,254,162
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55,600,000(h)
55,600,000(h)
55,600,000(h)
55,600,000(h)
55,600,000(i)
55,600,000(i)
55,600,000(i)
55,600,000(i)
55,600,000(i)
55,600,000(i)
55,600,000(i)
55,600,000(i)
–
55,600,000(i)
55,600,000(i)
(a) Monthly totals of purchases are based on the settlement date.
(b) The shares were purchased in the currency of the stock exchange on which the purchases took place and the sale price has been converted into US dollars at the exchange rate on the date
of settlement.
(c) Shares purchased in connection with the dividend reinvestment plans and employee share plans are not deemed to form any part of any publicly announced plan or programme.
(d) This figure represents 0.425% of Rio Tinto plc issued share capital at 31 December 2020.
(e) At the Rio Tinto plc AGM held in 2019, shareholders authorised the on-market purchase by Rio Tinto plc, and Rio Tinto Limited and its subsidiaries of up to 126,772,263 Rio Tinto plc shares.
This authorisation expired on 10 July 2020.
(f) At the Rio Tinto plc AGM held in 2020, shareholders authorised the on-market purchase by Rio Tinto plc, and Rio Tinto Limited and its subsidiaries of up to 124,667,622 Rio Tinto plc shares.
This authorisation will expire on the later of 8 July 2021 or the date of the 2021 AGM.
(g) The average price of shares purchased on-market by the trustee of Rio Tinto Limited’s employee share trust during 2020 was US$77.44.
(h) At the Rio Tinto Limited AGM held in 2019 shareholders authorised the off-market and/or on-market buy-back of up to 55.6 million Rio Tinto Limited shares.
(i) At the Rio Tinto Limited AGM held in 2020 shareholders authorised the off-market and/or on-market buy-back of up to 55.6 million Rio Tinto Limited shares.
188
Annual Report 2020 | riotinto.com
Additional Statutory Disclosure
Political donations
Rio Tinto prohibits the use of its funds to support political candidates or
parties. No political donations were made by the Group for political
purposes during the year. In the United States, in accordance with the
United States Federal Election Campaign Act, we provide administrative
support for the Rio Tinto America Political Action Committee (PAC), which
was created in 1990 and encourages voluntary employee participation in
the political process. All Rio Tinto America PAC employee contributions are
reviewed for compliance with federal and state law and are publicly
reported in accordance with US election laws. The PAC is controlled by
neither Rio Tinto nor any of its subsidiaries but instead by a governing
board of 5 employee members on a voluntary basis. In 2020, contributions
to Rio Tinto America PAC by 15 employees amounted to $8,475.45, and
Rio Tinto America PAC donated $11,500 in political contributions in 2020.
Government regulations
Our operations around the world are subject to extensive laws and
regulations imposed by local, state, provincial and federal governments.
These regulations govern many aspects of our work – from how we
explore, mine and process ore, to conditions of land tenure and health,
safety and environmental requirements. They also govern how we
operate as a company in relation to securities, taxation, intellectual
property, competition and foreign investment, provisions to protect data
privacy, conditions of trade and export and infrastructure access. In
addition to these laws, several of our operations are governed by specific
agreements made with governments, some of which are enshrined in
legislation. The geographic and product diversity of our operations
reduces the likelihood of any single law or government regulation having
a material effect on the Group’s business as a whole.
Environmental regulations
Rio Tinto is subject to various environmental laws and regulations in the
countries where it has operations. Rio Tinto measures its performance
against environmental regulation by tracking and rating incidents
according to their actual environmental and compliance impacts using
five severity categories (minor, medium, serious, major or catastrophic).
Incidents with a consequence rating of major or catastrophic are of a
severity that require notification to the relevant product group chief
executive and the Rio Tinto chief executive immediately after the incident
occurring. In 2020, there were no environmental incidents at managed
operations with a major or catastrophic impact.
During 2020, four managed operations incurred fines amounting to
US$27,387 (2019: US$18,964). Details of these fines are reported in the
Sustainability section of this report, page 84.
Australian corporations that exceed specific greenhouse gas emissions or
energy use thresholds have obligations under the Australian National
Greenhouse and Energy Reporting Act 2007 (NGER). All Rio Tinto entities
covered under this Act have submitted their annual NGER reports by the
required 31 October 2020 deadline.
Further information on the Group’s environmental performance is
included in the Sustainability section of this Annual Report, on pages
62-91, and on the website.
Energy efficiency action
Details of the measures taken to increase the company’s energy
efficiency are reported on pages 67, 79 and 97 of this report.
Energy consumption(a)(b)(c)
Energy consumption in GWh
2020
2019
From activities including the combustion of fuel and
the operation of facilities
From the purchase of electricity, heat, steam or cooling
Total energy consumed(d)
86,389
22,778
86,111
23,056
111,667
112,778
(a) Rio Tinto does not report on the proportion of energy consumption associated with the UK
and offshore area since it has no producing assets in the United Kingdom, only offices, and
consequently falls below Rio Tinto’s threshold level of reporting.
(b) Our approach and methodology used for the determination of measuring energy
consumption is available at: https://www.riotinto.com/sustainability/sustainability-reporting.
(c) Data reported is for all managed operations, without adjustment for equity interest.
(d) Rio Tinto exports electricity and steam to others.
Greenhouse gas emissions
(in million tCO2-e)(e)(f)(g)
Scope 1(h)
Scope 2(i)
Total greenhouse gas emissions(j)
Ratios
2020
17.1
9.5
26.2
2019
17.2(l)
9.7
26.4
Greenhouse gas emissions intensity index(k)
72.6
71.0(l)
Greenhouse gas emissions intensity
(tCO2-e/t of product)
0.060
0.063(l)
(e) Rio Tinto’s greenhouse gas emissions for managed operations are reported in accordance
with the requirements under Part 7 of the UK Companies Act 2006 (Strategic report
and Directors’ report) Regulations 2013. Our approach and methodology used for the
determination of these emissions are available at: https://www.riotinto.com/sustainability/
sustainability-reporting.
(f) Rio Tinto’s greenhouse gas emissions inventory is based on definitions provided by The World
Resource Institute/World Business Council for Sustainable Development Greenhouse Gas
Protocol: A Carbon Reporting and Accounting Standard, March 2004.
(g) Rio Tinto does not report on the proportion of CO2 emissions associated with the UK and
offshore area since it has no producing assets in the United Kingdom, only offices, and
consequently falls below Rio Tinto’s threshold level of reporting.
(h) Scope 1 emissions include emissions from combustion of fuel and operation of managed
facilities. These include emissions from land management and livestock management at
those facilities.
(i) Scope 2 emissions include emissions from the purchase of electricity, heat, steam or cooling.
(j) Total emissions is the sum of Scope 1 and Scope 2 emissions, minus emissions that are
associated with the generation of electricity, heat, steam or cooling supplied to others.
These emissions exclude indirect emissions associated with transportation and use of our
products reported at https://www.riotinto.com/sustainability/sustainability-reporting.
(k) Rio Tinto greenhouse gas intensity index is the weighted emissions intensity for each
of Rio Tinto’s main commodities relative to the commodity intensities in the 2008 base
year (set to 100). This index includes approximately 96.3% of Rio Tinto’s emissions from
managed operations.
(l) Numbers are restated to ensure comparability over time.
Exploration, research and development
The Group carries out exploration, research and development, described
in the Innovation section on pages 58-59. Exploration and evaluation
costs, net of any gains and losses on disposal, generated a net loss
before tax of $624 million (2019: $614 million). Research and
development costs were $45 million (2019: $45 million).
Financial instruments
Details of the Group’s financial risk management objectives and policies,
and exposure to risk, are described in note 29 to the financial statements.
Dealing in Rio Tinto securities
Rio Tinto Securities Dealing Policy restricts dealing in Rio Tinto securities
by directors and employees who may be in possession of ‘inside
information’. These individuals must seek clearance before any proposed
dealing takes place.
Our policy also prohibits such persons from engaging in hedging or other
arrangements which limit the economic risk in connection to Rio Tinto
securities issued, or otherwise allocated, as remuneration that are either
unvested, or that have vested, but remain subject to a holding period. We
also impose restrictions on a broader group of employees, requiring them
to seek clearance before engaging in similar arrangements over any
Rio Tinto securities.
Financial reporting
The directors are required to prepare financial statements for each
financial period that give a true and fair view of the state of the
Group at the end of the financial period, together with profit or loss and
cash flows for that period. This includes preparing financial statements
in accordance with UK company law and preparing a Remuneration
Report that includes the information required by Regulation 11, Schedule
8 of the Large- and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended) and the Australian
Corporations Act 2001.
In addition, the UK Corporate Governance Code recommends that the
Board provides a fair, balanced and understandable assessment of the
company’s position and prospects in its external reporting.
Annual Report 2020 | riotinto.com
189
Governance Governance
Additional Statutory Disclosure
continued
Rio Tinto’s management conducts extensive review and challenge in
support of the Board’s obligations, aiming to strike a balance between
positive and negative statements and provide good linkages throughout
the Annual Report.
The directors were responsible for the preparation and approval of the
Annual Report for the year ended 31 December 2020. They consider the
Annual Report, taken as a whole, to be fair, balanced and understandable,
and that it provides the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy.
The directors are responsible for maintaining proper accounting records,
in accordance with UK and Australian legislation. They have a general
responsibility to safeguard the assets of the Group, and to prevent and
detect fraud and other irregularities. The directors are also responsible
for ensuring that appropriate systems are in place to maintain and
preserve the integrity of the Group’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from current and future legislation in
other jurisdictions. The work carried out by the Group’s external auditors
does not take into account such legislation and, accordingly, the external
auditors accept no responsibility for any changes to the financial
statements after they are made available on the Group’s website.
The directors, senior executives, senior financial managers and other
members of staff who are required to exercise judgment while preparing
the Group’s financial statements, are required to conduct themselves
with integrity and honesty and in accordance with the highest ethical
standards, as are all Group employees.
The directors consider that the 2020 Annual Report presents a true and
fair view and has been prepared in accordance with applicable accounting
standards, using the most appropriate accounting policies for Rio Tinto’s
business, and supported by reasonable judgments and estimates. The
accounting policies have been consistently applied as described on pages
206-222, and directors have received a written statement from the Chief
Executive and the Chief Financial Officer to this effect. In accordance with
the internal control requirements of the Code and the ASX Principles, this
written statement confirms that the declarations in the statement are
founded on a sound system of risk management and internal controls,
and that the system is operating effectively in all material respects in
relation to financial reporting risks. Further information on directors’
responsibilities in the light of UK Disclosure and Transparency Rules is
included on page 311.
Directors’ declaration
The directors’ statement of responsibilities in relation to the Group’s
financial statements is set out on page 311.
Non-audit services and auditor independence
Details of the non-audit services and a statement of independence
regarding the provision of non-audit services undertaken by our external
auditor, including the amounts paid for non-audit services, are set out on
page 134 of the Directors’ Report.
A copy of the Auditor’s Independence Declaration as required under
section 307C of the Corporations Act 2001 is set out on page 328.
Going concern
The directors, having made appropriate enquiries, have satisfied
themselves that it is appropriate to adopt the going concern basis of
accounting in preparing the financial statements. Additionally, the
directors have considered longer-term viability, as described in their
statement on page 94.
2021 AGMs
The 2021 AGMs will be held on 9 April in the UK and 6 May in Australia.
Separate notices of the 2021 AGMs will be produced for the shareholders
of each company.
Directors’ approval statement
The Directors’ Report is delivered in accordance with a resolution of
the Board.
Simon Thompson
Chairman
22 February 2021
190
Annual Report 2020 | riotinto.com
Compliance with Governance Codes and Standards
Compliance with Governance
Codes and Standards
Application of and compliance with governance codes
and standards
This section sets out our compliance with the applicable governance
codes and standards. As our shares are listed on both the Australian
Securities Exchange and the London Stock Exchange, we set out how we
have complied with the codes and standards of those bodies on the
following pages:
– London Stock Exchange – UK Corporate Governance Code (2018
version) (the UK Code), see pages 191-193.
– Australian Securities Exchange – ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations
(4th edition) (the ASX Principles), see pages 193-195.
In addition, as explained below, as a foreign private issuer (FPI) with
American Depository Receipts (ADRs) listed on the New York Stock
Exchange (NYSE), we need to report any significant corporate
governance differences from the NYSE listing standards (NYSE
Standards) followed by US companies.
Statement of compliance with the Code and ASX
Principles
Throughout 2020 and as at the date of this report, the Group has applied
the Principles of the UK Code and the ASX Principles. The UK Code is
available at www.frc.org.uk, and the ASX Principles at www.asx.com/au.
For the purposes of ASX Listing Rule 4.10.3 and the ASX Principles,
pages 113-139 of this report form our ‘Corporate Governance
Statement’. This statement is current as at 22 February 2021, unless
otherwise indicated, and has been approved by the Board. Corporate
governance documents and policies referenced can be found at
riotinto.com/invest/corporategovernance.
We have complied with all relevant provisions of the UK Code
throughout 2020.
Difference from NYSE listing standards
We have reviewed the NYSE Standards and consider that our practices
are broadly consistent with them, with the following exceptions where
the literal requirements of the NYSE Standards are not met due to
differences in corporate governance between the US, UK and Australia:
– The NYSE Standards state that US companies must have a
nominating/corporate governance committee which, in addition to
identifying individuals qualified to become board members, develops
and recommends to the board a set of corporate governance
principles applicable to the company. Our Nominations Committee
does not develop corporate governance principles for the Board’s
approval. The Board itself develops such principles.
– Under US securities law and the NYSE Standards, the company is
required to have an audit committee that is directly responsible for
the appointment, compensation, retention and oversight of the work
of external auditors. While our Audit Committee makes
recommendations to the Board on these matters, and is subject to
legal and regulatory requirements on oversight of audit tenders, the
ultimate responsibility for the appointment and retention of the
external auditors of Rio Tinto rests with the shareholders.
– Under US securities law and the NYSE Standards, an audit committee
is required to establish procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting
controls and audit matters. The whistleblowing programme enables
employees to raise any concerns confidentially or anonymously. The
Board has responsibility to ensure that the programme is in place and
to review the reports arising from its operations.
The UK Code
Board leadership and company purpose
A. Making the board effective
Our Board provides effective and entrepreneurial leadership. It is
collectively responsible for the stewardship and long-term success of the
Group. There is a framework of prudent and effective controls that enable
risk to be assessed and managed. The Sustainability section on pages
61-91 sets out how we assess our impact on wider society. See page 121
for the key activities undertaken by the Board during the year and the
factors that were considered when making decisions. In 2020, the Board
undertook an internally facilitated effectiveness review and details of this
are provided on pages 126-127 of the Governance report.
B. The company’s purpose, values and strategy and alignment
with culture
Through our The Way We Work framework, the Board sets the company’s
purpose, values, and standards for the Group’s employees. The Board is
committed to acting in accordance with these values, championing, and
embedding these in the organisation. The Board also seeks to ensure
that the culture of the company is aligned with these values and
standards. In this report, we address the events at Juukan Gorge (see
pages 10-11and 114-115) and the actions we have taken to strengthen
our processes and approach to cultural heritage.
C. Company performance and risk management
The Board leads the development of long-term investment plans for the
company. It aims to make good quality decisions at the right time, to
achieve the company’s objectives, in alignment with our purpose, values
and strategy. The role of the Board in establishing and monitoring the
internal control environment is set out in the Audit Committee report on
pages 131-135. The way in which the company manages risk is set out on
pages 92-109. For information on the delegation of business to
management please refer to pages 118-119.
The formal schedule of matters reserved for the Board’s decision,
available on our website, covers areas including: setting the Group’s
purpose and strategic vision; monitoring performance of the delivery of
the approved strategy; approving major investments, acquisitions and
divestments; the oversight of risk and the setting of the Group’s risk
appetite; and reviewing the Group’s governance framework.
D. Stakeholder engagement
The Chairman undertakes regular engagement with our major
shareholders, in addition to that carried out by the Chief Executive, the
Chief Financial Officer and the investor relations team. The committee
chairs also engage with their relevant stakeholders and details of this
engagement is provided in each of the committee reports. We have mapped
our key stakeholders and continually work to understand their views and
we take account of our responsibilities to our stakeholders when making
business decisions. We explain more about this in our section 172 (1)
statement, set out on pages 122-123. We also discuss stakeholders in the
Strategic Report on pages 18-19 and in the Sustainability section.
During 2020, the full Board took responsibility for workforce engagement
and we explain how we have engaged with employees during the year,
what we have heard and what actions we have taken on page 122. From
January 2021, the Board has appointed Simon McKeon as the designated
non-executive director for workforce engagement. The Board considers
that this approach will help sharpen the focus on dialogue with the
workforce, with Simon leading the overall programme of engagement.
At Rio Tinto plc’s AGM on 8 April 2020, Resolution 24 (‘Authority to
purchase Rio Tinto plc shares’) was passed with less than 80% of votes in
favour and Shining Prospect (a subsidiary of the Aluminium Corporation of
China (‘Chinalco’)) voted against. Chinalco has not sold any Rio Tinto plc
shares and now has a holding of over 14% given its non-participation in
Rio Tinto’s significant share buy-back programmes over the last four years.
This places Chinalco close to the 14.99% threshold agreed with the
Australian Government at the time of Chinalco’s original investment in
2008. An update was given in the Interim financial statement provided on
29 July 2020, which was within the six month period.
Annual Report 2020 | riotinto.com
191
Governance Governance
Compliance with Governance
Codes and Standards continued
E. Our workforce policies and practices
Group workforce policies are approved by the Board. All the policies
relating to our workforce take account of the global nature of our
company. Our whistleblowing process is overseen by the Board and every
member of the workforce has access to the whistleblower programme
and details of this programme are on page 87.
Division of responsibilities
F. The role of the Chairman
The Chairman leads the Board and is responsible for its overall
effectiveness. He was independent on the date of his appointment and
we consider he remains independent for the purposes of the Code. He
recognises the importance of creating a boardroom culture which
encourages openness and debate and ensures constructive relations
between executive and non-executive directors.
The Chairman is responsible for: the management of the Board
and its committees; director performance; induction; training and
development; succession planning; engagement with external
stakeholders; and attendance by the Board at shareholder meetings.
The Chairman is supported by the senior independent directors, the
Group company secretary and the Chief Executive. In line with the
UK Code, the senior independent director, Rio Tinto plc, is responsible
for acting as a sounding board for the Chairman and engages with
shareholders to develop a balanced understanding of their interests
and concerns. For further details, please see our Board Charter which
sets out the role, responsibilities, structure, compositions and conduct of
the Board, as well as the role of the Chairman, the Senior Independent
Director Rio Tinto plc,the Senior Independent Director Rio Tinto Ltd and
the Chief Executive – riotinto.com/en/invest/corporate-governance/
board-governance.
G. Composition of the board
As at the date of this report, the Board comprises ten members: eight
independent NEDs, the Chairman, and the Chief Executive.
As detailed in the Nominations Committee report, we have engaged
Spencer Stuart to support the search for a new non-executive director
following David Constable’s departure. A process is also underway for the
appointment of a permanent Chief Financial Officer.
The Board is satisfied that it has the appropriate balance of skills,
experience, independence, and knowledge of the company to enable its
members to discharge their respective duties and responsibilities
effectively, and that no individual or group can dominate the Board’s
decision-making.
There is a clear division of responsibilities between the leadership of the
Board and the executive leadership of our business. The Chief Executive
is responsible for the day-to-day management of the business and, under
a Group delegation of authority framework, delegates to other members
of the Executive Committee.
H. Role of non-executive directors
We list all of the non-executive directors that we consider to be
independent on pages 116-117 of this report. Over 50% of the Board
(excluding the Chairman) are non-executive directors. The non-executive
directors constructively challenge and help develop proposals on
strategy. They are also responsible for scrutinising management
performance and ensuring that financial information, risks and controls,
and systems of risk management are robust. In order to enhance Board
engagement in Australia, the role of Senior Independent Director,
Rio Tinto Limited, was established this year. Simon McKeon was
appointed to this position and the terms of this appointment were agreed
by the Board.
192
Annual Report 2020 | riotinto.com
The Board held an internally facilitated Board evaluation this year
and as part of this process, the Board met without the Chairman present
and a full assessment of the Chairman’s capability was carried out.
Details of this review are on pages 126-127. Each director has
undertaken to allocate sufficient time to the Group in order to discharge
their responsibilities effectively, and this is kept under review by the
Nominations Committee. The directors’ other appointments are listed on
pages 116-117.
I. Board processes and role of the Company Secretary
The Governance Framework on page 120 explains the governance
structure of the Board and sets out the relationship with the Chief
Executive. The roles and responsibilities of each committee are
explained. The Board insights section provides some examples of the
decision making process of the Board and the steps it takes to function
effectively, including how it considers stakeholders in this process.
The Group company secretary is the trusted interlocutor within the
Board and its committees, and between senior leadership and the
non-executive directors. He is responsible for advising the Board, through
the Chairman, on all governance matters. He supports the Chairman in
ensuring that the information provided to the Board is of sufficient quality
and appropriate detail in order for the Board to function effectively
and efficiently.
Composition, succession and evaluation
J. Appointments to the board
The Nominations Committee ensures a formal, rigorous and transparent
procedure for the appointment of new directors. It is also responsible for
Board succession planning, regularly assessing the balance of skills,
experience, diversity and capacity required to oversee the delivery of
Rio Tinto’s strategy. It reviews proposals for appointments to the
Executive Committee, and monitors executive succession planning. This
year the Nominations Committee oversaw the succession of the Chief
Executive and details of this process are provided in the Nominations
Committee report on pages 128-130.
All non-executive directors are members of the Nominations Committee.
The committee is chaired by the Chairman, apart from when the
committee is dealing with the appointment of his or her successor. Only
the Chairman and committee members have the right to attend the
meetings of the Nominations Committee; attendance by all other
individuals is by invitation only. The Nominations Committee report sets
out the Board’s approach to succession planning and how this supports
the development of a diverse pipeline, at all levels. All directors are
subject to annual re-election at the AGM.
Details of external search consultancies used for Board appointments
can be found in the Nominations Committee report.
K. Skills, experience and knowledge of the board and its
committees
In our succession planning, we aim to bring a diverse and complementary
range of skills, knowledge and experience to the Board, so that we are
equipped to navigate the operational, social, regulatory and geopolitical
complexity in which our business operates. Achieving the right blend of
skills and diversity to support effective decision-making is a continuing
process. Further details on tenure and experience of the Board are set
out in the Nominations Committee report on pages 128-130. The Board
biographies set out the specific skills and experience which each director
brings to the Board (page 116-117).
L. Board evaluation
A Board and committee effectiveness evaluation is carried out each year.
The evaluation considers (but is not limited to): the balance of Board
members’ skills and experience; independence; diversity; the running of
the Board; and directors’ knowledge of the company. Every third year, the
Board evaluation is externally facilitated. An internally facilitated Board
evaluation was carried out in 2020. The terms of reference for this review
and the outcomes are discussed on pages 126-127.
Compliance with Governance Codes and Standards
Audit, risk and internal control
M. Internal and external audit
The Audit Committee monitors the independence and effectiveness of
the internal audit function and external auditors. The Audit Committee is
responsible for reviewing key judgments within the Group’s financial
statements and narrative reporting, with the aim of maintaining the
integrity of the Group’s financial reporting. For further detail, please refer
to the Audit Committee report on pages 131-135.
Following an audit tender process in 2018, the Board endorsed the
appointment of KPMG as external auditor for the 2020 financial year.
The appointment of KPMG was approved by shareholders at our AGMs
in 2020.
N. Fair, balanced and understandable assessment
The Board is responsible for the presentation of a fair, balanced and
understandable assessment of the company’s position and prospects,
not only in the Annual Report. We have a robust process in place
including through the Disclosure Committee, to ensure that this is
the case.
O. Risk management and internal control framework
The Board is ultimately responsible for aligning our long term strategic
objectives with the risk appetite of the company, taking into account the
principal and emerging risks faced by the company. Please refer to pages
92-94 for further details on our business planning cycle and risk
management framework and how these support our longer-term viability
statement. For further details on our approach to risk, please refer to the
risk section on page 92.
Remuneration
P. Remuneration policies and practices
The Remuneration Committee supports the Board by setting our
Remuneration Policy. Through long-term and short-term incentives, our
Remuneration Policy is designed to help drive a performance culture
which incentivises executives to deliver the Group’s long-term strategy
and create superior shareholder value over the short, medium and long
term. The overarching aim is to ensure our remuneration structure and
policies reward fairly and responsibly with a clear link to corporate and
individual performance, and to the company’s long-term strategy and
values. We have worked to ensure that we have a clear policy that can be
understood by shareholders and stakeholders. Our proposed new policy
is included on pages 151-158.
Q. Procedure for developing Remuneration Policy
We have a formal and transparent procedure for developing our
Remuneration Policy, and no director is involved in deciding their own
remuneration. Executive remuneration is set with regard to the wider
workforce and through market benchmarking. For further detail, please
refer to the Remuneration Committee report on pages 140-185. The
Remuneration Committee is supported by remuneration consultant
Deloitte. The Board received assurance from the Remuneration
Committee and from Deloitte that Deloitte did not have any connections
with Rio Tinto or the Board that would have impaired its independence.
Please refer to page 159 of this Annual Report for further detail.
R. Exercising independent judgement
The Remuneration Committee comprises four non-executive directors
to ensure independent judgment with regard to remuneration outcomes.
The Remuneration Committee considers remuneration on an annual
basis and determines outcomes by assessing executive performance
against performance criteria, details of which can be found in the
Remuneration Committee report on pages 140-185 of this Annual
Report. This states how our Remuneration Policy has been applied and
sets out details of any adjustments made or discretions exercised.
ASX Principles
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1
Rio Tinto plc and Rio Tinto Limited have a common Board of Directors.
The principal role of the Board is to set the Group’s strategy and to
review its strategic direction regularly. The Board also has responsibility
for corporate governance. A Board Charter setting out the role of the
Board and management and matters reserved for the Board is available
on our website.
The Board delegates responsibility for day-to-day management of the
business to the Chief Executive and other members of the Executive
Committee. A number of management committees support the Chief
Executive and the Executive Committee. The structure of these
committees is set out on page 120.
Recommendation 1.2
The Nominations Committee, on behalf of the Board, ensures a formal,
rigorous and transparent procedure for the appointment of new directors.
Further information on the appointment approach is set out on pages
128-130. A similar process is followed with the Executive Committee and
senior executive appointments, including a formal and rigorous process
to source strong candidates from diverse backgrounds and conducting
appropriate background and reference checks on the shortlisted
candidates. Further information on the recently completed Chief
Executive appointment process is set out on page 129.
The notice of annual general meeting provides all material information in
Rio Tinto’s possession relevant to decisions on election and re-election of
directors, including a statement from the Board that it considers all
directors continue to perform effectively and demonstrate appropriate
levels of commitment. It also provides reasons why each director is
recommended for re-election, highlighting their relevant skills and
experience. Further information on the skills and experience of each
director is set out on pages 116-117 of the Annual Report.
Recommendation 1.3
The company has written agreements setting out the terms of
appointment for each director and senior executive. Non-executive
directors are appointed by letters of appointment. Executive directors
and other senior executives are employed through employment service
contracts. Further information is set out on pages 158, 167 and 174 of
the Annual Report.
Recommendation 1.4
The Group company secretary is accountable to the Board and advises
the Chairman, and, through the Chairman, the Board on all governance
matters. The appointment and removal of the Group company secretary
is a matter reserved for the Board.
Recommendation 1.5
Rio Tinto has a Group-wide, Board-endorsed Inclusion and diversity
policy. The policy is available on our website. The Board sets objectives
for achieving diversity for the Board, senior executives and the workforce,
and annually reviews the Group’s performance against them. Page 67 of
the Annual Report sets out the measurable objectives and our
performance against them. The respective proportions of men and
women on the Board, in senior executive positions and across the whole
organisation, is reported on pages 67 and 129-130 of the Annual Report.
Recommendation 1.6
The performance of the Board, and of each of its committees and
individual directors, was reviewed in 2020, as it is each year. Detailed
information on the Board and committee evaluation and the evaluation of
the Chairman and the non-executive directors is set out on pages 126, 135
and 138 of the Annual Report.
Recommendation 1.7
The performance of Executive Committee members, including executive
directors, is continually evaluated as part of the Group’s performance
evaluation cycle. Further details are set out in the Remuneration Report
on pages 140-185.
Annual Report 2020 | riotinto.com
193
Governance Governance
Compliance with Governance
Codes and Standards continued
Principle 2: Structure the board to be effective and add value
Recommendation 2.1
The Nominations Committee includes all non-executive directors and
is chaired by the Chairman of the Board. The Board is satisfied that all
non-executive directors, including the Chairman (as appropriate),
continue to meet the test for independence under the UK Code, the
ASX Principles and the NYSE Standards. The Nominations Committee’s
terms of reference are available on our website. The Nominations
Committee report on pages 128-130 provides further details on its
role and responsibilities. Details on membership, the number of times
the Committee met, and the attendance of members are set out on
page 127.
Recommendation 2.2
A Board skills matrix showing key attributes in terms of skills, experience
and diversity that are relevant to the Board is set out on page 130 of the
Annual Report.
Recommendations 2.3, 2.4, 2.5
The Nominations Committee is responsible for assessing the
independence of each non-executive director against an independence
framework which combines the requirements of the Code, the ASX
Principles and the NYSE Standards. The Nominations Committee reviews
and approves this framework each year.
The Board is satisfied that all of its non-executive directors are
independent in character and judgment and are free from any
relationships (material or otherwise) or circumstances that could create a
conflict of interest.
The Chairman was considered independent upon his appointment and, in
the Board’s view, he continues to satisfy the tests for independence
under the ASX Principles and the NYSE Standards.
The name, skills and experience of each director, together with their
terms in office are shown in the biographical details on pages 116-117.
Recommendation 2.6
On joining Rio Tinto, all directors receive a full, formal induction
programme. It is delivered over a number of months, and tailored to their
specific requirements, taking into account their prospective committee
responsibilities. Further details are set out on pages 125 and 127 of the
Annual Report.
The annual Board evaluation process identifies training and development
needs for the Board and individual directors. All directors are expected to
commit to continuing their development during their tenure. This is
supported through a combination of: site visits, teach-ins, deep dives and
internal business and operational briefings provided in or around
scheduled Board and committee meetings. In addition, the Group
company secretary provides regular updates on corporate governance
developments in the UK, Australia and the US. Further details are set out
on page 126 of the Annual Report.
Principle 3: Instil a culture of acting lawfully, ethically and
responsibly
Recommendations 3.1, 3.2, 3.3, 3.4
We have articulated the purpose, values and standards which apply to
our employees and directors on page 17 of the Annual Report and in
The Way We Work. This is available on our website. We have discussed
the events at Juukan Gorge and the actions we have taken to strengthen
our processes and approach to cultural heritage and rebuild our reputation,
on pages 10-11 of the Annual Report.
Rio Tinto’s confidential and independently operated whistleblowing
programme offers an avenue through which our employees, contractors,
suppliers and customers can report concerns anonymously, subject to
local law. These may include concerns about the business, or behaviour
of individuals, including suspicion of violations of financial reporting,
safety or environmental procedures or other business integrity issues.
The programme features telephone and web submissions, a case
management tool, and a reporting tool to allow for improved analysis of
case statistics.
The whistleblowing procedure explains how concerns regarding matters
relating to Rio Tinto, its business and its people can be raised, in
confidence and without fear of retaliation. The procedure also sets out
who can make a report and what they can expect from Rio Tinto if they do
report a concern. The procedure is available on our website.
Rio Tinto’s business integrity standard sets out the Group’s position on
issues relating to bribery and corruption. This is available on our website.
Oversight of the Group’s ethics, integrity and compliance programme
now falls within the remit of the Board.
Principle 4: Safeguard integrity in corporate reports
Recommendation 4.1
The Audit Committee report on pages 131-135 provides details of the
role and responsibilities of the Committee. The Audit Committee’s terms
of reference are available on our website. Further details on membership,
the number of times the Committee met during 2020 and, the
attendance of members are set out on pages 116-117 and 127.
Recommendation 4.2
Details on compliance with the financial reporting requirements
contemplated under this recommendation are set out on pages 189-190
of the Annual Report.
Recommendation 4.3
We have a thorough and rigorous review process in place to ensure
integrity of the periodic reports we release to the market. Rio Tinto
communicates with the market through accurate, clear, concise and
effective reporting, and contents of periodic reports are verified by the
subject matter experts and reviewed by the relevant Group functions.
Such reports are then reviewed and considered by the Group Disclosure
Committee for release to the market.
194
Annual Report 2020 | riotinto.com
Compliance with Governance Codes and Standards
Principle 5: Make timely and balanced disclosure
Recommendation 5.1
Rio Tinto recognises the importance of effective and timely communication
with shareholders and the wider investment community.
It is our policy to make sure that all information disclosed or released by
the Group is accurate, complete and timely and complies with all
continuous and other disclosure obligations under applicable Listing Rules
and other relevant legislation.
To ensure that trading in our securities takes place in an informed and
orderly market, we have established a Disclosure Committee to oversee
compliance with our continuous disclosure obligations. The Group
disclosure and communications policy, and the terms of reference of our
Disclosure Committee, together with our adopted procedures in relation to
disclosure and management of relevant information, support compliance
with our disclosure obligations. A copy of the Group disclosure and
communications policy is available on our website.
The Group’s Disclosure Committee is responsible for determining whether
information relating to Rio Tinto may require disclosure to the markets under
the continuous disclosure requirements in the jurisdictions in which Rio Tinto
is listed. In accordance with its terms of reference, the specific focus of the
Disclosure Committee is to consider and determine on a timely basis whether
information would, to the extent that the information is not public and relates
directly or indirectly to Rio Tinto, be likely to have a material effect on the
price of Rio Tinto securities if that information was generally available.
The members of the Committee are the Chief Executive; Interim Chief
Financial Officer; Group Company Secretary; the Chief Legal Officer &
External Affairs; the Head of Investor Relations; and the Vice President
Corporate Relations.
Recommendation 5.2
Consistent with the Group’s disclosure protocols, the Board is provided with
copies of all material market announcements promptly after there being
released to the market.
Recommendation 5.3
As a matter of practice, all our new or substantive investor presentations
are released to the market via ASX and LSE market announcement platforms.
Principle 6: Respect the rights of security holders
Recommendations 6.3, 6.4
The AGMs present an opportunity to provide a summary business
presentation, to inform shareholders of recent developments, and to give
them the opportunity to ask questions. Generally, the chairs of all Board
committees are available to answer questions raised by shareholders,
and all directors are expected to attend where possible. The AGMs are
generally webcast and transcripts of the Chairman’s and Chief
Executive’s speeches are made available on our website. A summary of
the proceedings at the meetings, and the results of voting on resolutions,
are made available as soon as practicable after the meetings. At Rio Tinto
AGMs, all resolutions are decided by poll and not by show of hands.
In 2020, due to the pandemic, the Rio Tinto Limited AGM was held as a
fully virtual meeting. With the use of technology, shareholders were
offered the opportunity to virtually participate at the AGM, ask questions
and vote on the resolutions.
Recommendation 6.5
Shareholders can choose to communicate electronically with the
companies and the share registrars. The contact details for the registrars
are on page 383 and on our website.
Principle 7: Recognise and manage risk
Recommendations 7.1, 7.2
The Board is ultimately responsible for risk management and internal
controls and for ensuring that the systems in place are robust and take
into account the principal risks faced by the Group. The Board delegates
certain matters relating to the Group’s risk management framework to
the Audit Committee, and the Audit Committee provides updates to the
Board on matters discussed at each meeting. The Sustainability
Committee advises the Board on risk appetite tolerance and strategy with
respect to sustainable development risks. Further information about the
Sustainability Committee is set out on pages 136-139 of the Annual
Report. Terms of reference for the Sustainability Committee are available
on our website. Further details on the Group’s governance framework for
risk management and internal control are set out on pages 92-94, 132
and 134-135 of the Annual Report.
Recommendation 7.3
Further information on Rio Tinto’s Group Internal Audit function is set out
on page 135 of the Annual Report.
Recommendation 6.1
Our website includes pages dedicated to corporate governance, providing
information on compliance with governance codes and standards (the Code,
ASX Principles and the NYSE Standards); the terms of reference of the
committees; risk management and financial reporting; and Board
governance including selection, appointment and re-election of directors,
directors’ independence and Board performance evaluation.
Recommendation 7.4
A description of the principal risks and uncertainties that could affect
Rio Tinto (including economic, environmental and social sustainability
risks), and of the Group’s governance framework for risk management
and internal control, is on pages 92-108 of the Annual Report.
Further information on sustainability is available on pages 62-91 of the
Annual Report.
All information released to the markets is posted in the media section of our
website. Our website also provides general investor information. Annual and
half-year results, as well as any major presentations, are webcast and the
materials are available on our website, which also contains presentation
material from investor seminars.
Recommendation 6.2
Our main channels of communication with the investment community are
through the Chairman, Chief Executive and Chief Financial Officer, who have
regular meetings with the Group’s major shareholders. The senior
independent director for Rio Tinto plc has a specific responsibility under the
UK Code to be available to shareholders who have concerns which have not
been resolved through contact with the Chairman, Chief Executive or Chief
Financial Officer, or for whom such contact is inappropriate. We have a
number of processes and initiatives to ensure that members of the Board
understand the views of major shareholders. The Chief Financial Officer
reports to the Board at each meeting, and provides regular investor
updates. In addition, the Head of Investor Relations reports regularly to the
Board, and an annual survey of major shareholders’ opinions is presented
to the Board by the Group’s investor relations advisers. Further information
on engagement with shareholders and investors during 2020 is set out on
page 122 of the Annual Report.
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1
The Remuneration Report on pages 140-185, provides details on the role
and responsibilities of the Committee. The Remuneration Committee’s
terms of reference are available on our website. Further details on
membership, the number of times the Committee met during 2020, and
the attendance of members are set out on pages 116-117 and 127.
Recommendation 8.2
Rio Tinto’s policies and practices regarding remuneration of non-executive
directors, executive directors and senior executives are set out on pages
140-185 in the Remuneration Report.
Recommendation 8.3
Rio Tinto’s approach on participating in equity-based remuneration
schemes is set out on page 189 of the Annual Report. This is also
addressed in the Rio Tinto Securities Dealing Policy which is available on
our website.
Annual Report 2020 | riotinto.com
195
Governance Financial
Statements
An employee who has been with the Iron Ore
Company of Canada (IOC) for more than 53
years! IOC’s high-grade iron ore is used in a
wide variety of everyday applications.
196
Annual Report 2020 | riotinto.com
p
e
r
f
o
r
m
a
n
c
e
c
o
m
m
u
n
i
t
i
e
s
a
n
d
s
o
c
i
a
l
S
t
r
e
n
g
t
h
e
n
n
g
i
Underlying EBITDA
$23.9bn
Annual Report 2020 | riotinto.com
197
Financial Statements
Financial
Statements
198
Annual Report 2020 | riotinto.com
2020 Financial Statements
Primary financial statements
Group Income Statement
Group Statement of Comprehensive Income
Group Cash Flow Statement
Group Balance Sheet
Group Statement of Changes in Equity
Reconciliation with Australian
Accounting Standards
Outline of dual listed companies
structure and basis of financial statements
Notes to the 2020 Financial Statements
Group income statement and
cash flow statement
Note 1 Principal accounting policies
Note 2 Operating segments
Note 3 Operating segments –
additional information
Note 4 Net operating costs
(excluding items shown separately)
Note 5 Employment costs
Note 6 Impairment charges
Note 7 Share of profit after tax of
equity accounted units
Note 8 Finance income and finance costs
Note 9 Taxation
Note 10 Earnings per ordinary share
Note 11 Dividends
Group balance sheet
Note 12 Goodwill
Note 13 Intangible assets
Note 14 Property, plant and equipment
Note 15 Investments in equity
accounted units
Note 16 Inventories
Note 17 Deferred taxation
Note 18 Receivables and other assets
Note 19 Other financial assets
Note 20 Cash and cash equivalents
Note 21 Borrowings and other
financial liabilities
Note 22 Leases
Note 23 Consolidated net (debt)/cash
Note 24 Trade and other payables
Note 25 Provisions (including post-
retirement benefits)
200
201
202
203
204
205
205
206
223
227
228
229
229
231
231
232
233
233
234
235
236
238
239
239
241
241
241
242
242
243
244
244
Capital and reserves
Note 26 Share capital – Rio Tinto plc
Note 27 Share capital – Rio Tinto Limited
Note 28 Other reserves and retained earnings
Additional disclosures
Note 29 Financial instruments
and risk management
Note 30 Contingencies and commitments
Note 31 Average number of employees
Note 32 Principal subsidiaries
Note 33 Principal joint operations
Note 34 Principal joint ventures
Note 35 Principal associates
Note 36 Purchases and sales of
subsidiaries, joint ventures, associates
and other interests in businesses
Note 37 Directors’ and key
management remuneration
Note 38 Auditors’ remuneration
Note 39 Related-party transactions
Note 40 Exchange rates in US$
Note 41 Share-based payments
Note 42 Post-retirement benefits
Note 43 Rio Tinto Limited parent
company disclosures
Note 44 Related undertakings
Note 45 Events after the balance sheet date
Rio Tinto plc Company Information
Rio Tinto Financial Information
by Business Unit
Australian Corporations Act –
Summary of ASIC Relief
Directors’ Declaration
Independent Auditors’ Reports of KPMG to the
Members of Rio Tinto plc and of KPMG to the
Members of Rio Tinto Limited
Auditors’ Independence Declaration
Alternative Performance Measures
Financial Summary 2011-2020
Summary of Financial Data in Australian
Dollars, Sterling and US Dollars
246
246
247
249
259
262
263
265
266
267
268
269
270
270
271
271
274
280
281
300
301
306
310
311
312
328
329
334
335
Annual Report 2020 | riotinto.com
199
Financial Statements Financial Statements
Financial Statements
Group Income Statement
Group Income Statement
Years ended 31 December
Years ended 31 December
Consolidated operations
Consolidated sales revenue
Net operating costs (excluding items shown separately)
Impairment charges
Net (losses)/gains on consolidation and disposal of interests in businesses
Exploration and evaluation costs
Profit relating to interests in undeveloped projects
Operating profit
Share of profit after tax of equity accounted units
Impairment of investments in equity accounted units
Profit before finance items and taxation
Finance items
Net exchange (losses)/gains on net external and intragroup debt balances
Net losses on derivatives not qualifying for hedge accounting
Finance income
Finance costs
Amortisation of discount
Profit before taxation
Taxation
Profit after tax for the year
– attributable to owners of Rio Tinto (net earnings)
– attributable to non-controlling interests
Basic earnings per share
Diluted earnings per share
The notes on pages 206-300 are an integral part of these consolidated financial statements.
Note
2,3
4
6
2,36
13
13
7
6
8
8
9
2020
US$m
2019
US$m
2018
US$m
44,611
(26,254)
(904)
—
(625)
1
16,829
652
(339)
17,142
(1,124)
(123)
141
(268)
(377)
(1,751)
15,391
(4,991)
10,400
9,769
631
43,165
(27,307)
(3,487)
(291)
(624)
10
11,466
301
—
11,767
58
(68)
300
(554)
(384)
(648)
11,119
(4,147)
6,972
8,010
(1,038)
40,522
(27,115)
(132)
4,622
(488)
278
17,687
513
—
18,200
704
(57)
249
(552)
(377)
(33)
18,167
(4,242)
13,925
13,638
287
10
10
604.0 c
599.8 c
491.4 c
487.8 c
793.2 c
787.6 c
200
200
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Primary Financial Statements
Group Statement of Comprehensive Income
Group Statement of Comprehensive Income
Years ended 31 December
Years ended 31 December
Profit after tax for the year
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss:
Actuarial (losses)/gains on post-retirement benefit plans
Changes in the fair value of equity investments held at fair value through other comprehensive income (FVOCI)
Tax relating to these components of other comprehensive income
Share of other comprehensive losses of equity accounted units, net of tax
Items that have been/may be subsequently reclassified to profit or loss:
Currency translation adjustment(a)
Currency translation on companies disposed of, transferred to the income statement
Fair value movements:
– Cash flow hedge gains
– Cash flow hedge (gains)/losses transferred to the income statement
Net change in costs of hedging(b)
Tax relating to these components of other comprehensive loss/(income)
Share of other comprehensive income/(loss) of equity accounted units, net of tax
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
– attributable to owners of Rio Tinto
– attributable to non-controlling interests
Note
2020
US$m
10,400
2019
US$m
6,972
2018
US$m
13,925
42
9
(474)
10
112
(6)
(358)
(262)
(5)
83
(6)
(190)
28
9
2,967
—
343
215
24
(63)
7
3
4
2,584
12,984
12,201
783
12
(41)
3
(6)
10
346
7,318
8,351
(1,033)
907
(13)
(271)
(1)
622
(3,830)
14
156
40
(39)
(54)
(48)
(3,139)
10,786
10,663
123
(a)
(b)
Excludes a currency translation gain of US$333 million (2019: charge of US$29 million; 2018: charge of US$382 million) arising on Rio Tinto Limited’s share capital for the year ended 31 December
2020, which is recognised in the Group statement of changes in equity. Refer to Group statement of changes in equity on page 204.
As part of the 2018 bond buy-back programme, cross currency interest rate swaps hedging the bonds repurchased were closed out. This resulted in the reclassification of US$3 million from the cost
of hedging reserve to finance costs in the income statement in 2018. There was no bond buy-back programme in 2019 or 2020.
The notes on pages 206-300 are an integral part of these consolidated financial statements.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
201
201
Financial Statements
Financial Statements
Financial Statements
Group Cash Flow Statement
Group Cash Flow Statement
Years ended 31 December
Years ended 31 December
Cash flows from consolidated operations(a)
Dividends from equity accounted units
Cash flows from operations
Net interest paid
Dividends paid to holders of non-controlling interests in subsidiaries
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets
Disposals of subsidiaries, joint ventures, unincorporated joint operations and associates
Purchases of financial assets(b)
Sales of financial assets(b)
Sales of property, plant and equipment and intangible assets
Net funding of equity accounted units
Acquisitions of subsidiaries, joint ventures and associates
Other investing cash flows
Net cash (used)/generated in investing activities
Cash flows before financing activities
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto
Proceeds from additional borrowings
Repayment of borrowings and associated derivatives(c)
Lease principal payments
Proceeds from issue of equity to non-controlling interests
Own shares purchased from owners of Rio Tinto
Other financing cash flows
Net cash flows used in financing activities
Effects of exchange rates on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents less overdrafts
Closing cash and cash equivalents less overdrafts
(a) Cash flows from consolidated operations
Profit after tax for the year
Adjustments for:
– Taxation
– Finance items
– Share of profit after tax of equity accounted units
– Net losses/(gains) on consolidation and disposal of interests in businesses
– Impairment charges of investments in equity accounted units after tax
– Impairment charges
– Depreciation and amortisation
– Provisions (including exchange differences on provisions)
Utilisation of provisions
Utilisation of provision for post-retirement benefits
Change in inventories
Change in receivables and other assets
Change in trade and other payables
Other items(d)
Note
2
36
36
18
11
21
22
20
36
6
6
25
2020
US$m
21,822
594
22,416
(569)
(683)
(5,289)
15,875
(6,189)
10
(5)
63
45
(43)
—
(437)
(6,556)
2019
US$m
19,705
669
20,374
(537)
(376)
(4,549)
14,912
(5,488)
(80)
(43)
83
49
(33)
—
11
(5,501)
2018
US$m
15,655
800
16,455
(612)
(420)
(3,602)
11,821
(5,430)
7,733
(1,572)
19
586
(9)
(5)
(1)
1,321
9,319
9,411
13,142
(6,132)
125
(721)
(324)
129
(208)
1
(7,130)
165
2,354
8,027
10,381
(10,334)
80
(203)
(315)
101
(1,552)
4
(12,219)
(54)
(2,862)
10,889
8,027
(5,356)
54
(2,300)
—
85
(5,386)
(48)
(12,951)
151
342
10,547
10,889
10,400
6,972
13,925
4,991
1,751
(652)
—
339
904
4,279
894
(582)
(192)
(281)
(562)
558
(25)
21,822
4,147
648
(301)
291
—
3,487
4,384
753
(539)
(205)
28
163
(191)
68
19,705
4,242
33
(513)
(4,622)
—
132
4,015
1,011
(620)
(219)
(587)
(421)
476
(1,197)
15,655
(b)
(c)
(d)
In 2020, the Group received net proceeds of US$58 million (2019 and 2018 net purchase of US$28 million and US$1.6 billion respectively) from its sales and purchases of investments within a
separately managed portfolio of fixed income instruments. Purchases and sales of these securities are reported on a net cash flow basis within “Sales of financial assets” or “Purchases of financial
assets” depending on the overall net position at each reporting date.
On 11 May 2020, we repaid our €402 million (nominal value) Rio Tinto Finance plc Euro Bonds on their maturity. The cash outflow relating to the repayment of the bonds and the realised loss on the
derivatives have been recognised within "Repayment of borrowings and associated derivatives" in the Group cash flow statement and totalled US$526 million.
In 2018 other items included adjustments to add back mark-to-market gains of US$288 million relating to derivative contracts transacted for operational purposes and not designated in a hedge
relationship, a gain of US$549 million on the sale of surplus land at Kitimat and a gain of US$167 million on the revaluation of a financial asset arising from the disposal of the Mount Pleasant coal
project in 2016.
The notes on pages 206-300 are an integral part of these consolidated financial statements.
202
202
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Primary Financial Statements
Group Balance Sheet
At 31 December
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments in equity accounted units
Inventories
Deferred tax assets
Receivables and other assets
Tax recoverable
Other financial assets
Current assets
Inventories
Receivables and other assets
Tax recoverable
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Borrowings and other financial liabilities
Trade and other payables
Tax payable
Provisions including post-retirement benefits
Non-current liabilities
Borrowings and other financial liabilities
Trade and other payables
Tax payable
Deferred tax liabilities
Provisions including post-retirement benefits
Total liabilities
Net assets
Capital and reserves
Share capital
– Rio Tinto plc
– Rio Tinto Limited
Share premium account
Other reserves
Retained earnings
Equity attributable to owners of Rio Tinto
Attributable to non-controlling interests
Total equity
Note
12
13
14
15
16
17
18
19
16
18
19
20
21
24
25
21
24
17
25
26
27
28
28
2020
US$m
946
2,755
62,882
3,764
174
3,385
1,796
4
829
76,535
3,917
3,644
62
2,851
10,381
20,855
97,390
(607)
(7,421)
(1,850)
(1,729)
(11,607)
(13,408)
(820)
(477)
(3,239)
(15,936)
(33,880)
(45,487)
51,903
207
3,781
4,314
11,960
26,792
47,054
4,849
51,903
2019
US$m
922
2,637
57,372
3,971
139
3,102
1,716
5
635
70,499
3,463
3,027
116
2,670
8,027
17,303
87,802
(1,372)
(6,480)
(1,874)
(1,399)
(11,125)
(13,341)
(794)
(376)
(3,220)
(13,704)
(31,435)
(42,560)
45,242
207
3,448
4,313
9,177
23,387
40,532
4,710
45,242
The notes on pages 206-300 are an integral part of these consolidated financial statements.
The financial statements on pages 200-300 were approved by the directors on 22 February 2021 and signed on their behalf by
Simon Thompson
Chairman
Jakob Stausholm
Chief Executive
Peter Cunningham
Interim Chief Financial Officer
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
203
203
Financial StatementsGroup Balance SheetAt 31 December
Financial Statements
Financial Statements
Group Statement of Changes in Equity
Group Statement of Changes in Equity
Attributable to owners of Rio Tinto
Year ended 31 December 2020
Opening balance
Total comprehensive income for the year(a)
Currency translation arising on Rio Tinto Limited's share capital(b)
Dividends (note 11)
Share buy-back(c)
Own shares purchased from Rio Tinto shareholders to satisfy share
awards to employees(d)
Change in equity interest held by Rio Tinto
Treasury shares reissued and other movements
Equity issued to holders of non-controlling interests
Employee share options and other IFRS 2 charges to the income
statement
Closing balance
Year ended 31 December 2019
Opening balance
Adjustment for transition to new accounting pronouncements(e)
Restated opening balance
Total comprehensive income for the year(a)
Currency translation arising on Rio Tinto Limited's share capital(b)
Dividends (note 11)
Share buy-back(c)
Companies no longer consolidated
Own shares purchased from Rio Tinto shareholders to satisfy share
options(d)
Change in equity interest held by Rio Tinto
Treasury shares reissued and other movements
Equity issued to holders of non-controlling interests
Employee share options and other IFRS 2 charges to the income
statement
Closing balance
Year ended 31 December 2018
Opening balance
Adjustment for transition to new accounting pronouncements(f)
Restated opening balance
Total comprehensive income for the year(a)
Currency translation arising on Rio Tinto Limited's share capital(b)
Dividends (note 11)
Share buy-back(c)
Own shares purchased from Rio Tinto shareholders to satisfy share
options(d)
Change in equity interest held by Rio Tinto
Treasury shares reissued and other movements
Equity issued to holders of non-controlling interests
Employee share options and other IFRS 2 charges to the income
statement
Transfers and other movements
Closing balance
Share capital
(notes 26
and 27)
US$m
3,655
—
333
—
—
—
—
—
—
—
Share
premium
account
US$m
4,313
—
—
—
—
—
—
1
—
—
Other
reserves
(note 28)
US$m
9,177
2,798
—
—
—
Retained
earnings
(note 28)
US$m
23,387
9,403
—
(6,132)
(1)
Total
US$m
40,532
12,201
333
(6,132)
(1)
(76)
(31)
(107)
—
—
—
61
84
—
—
82
84
1
—
Non-
controlling
interests
US$m
4,710
783
—
(689)
—
—
(84)
—
129
143
—
3,988
4,314
11,960
26,792
47,054
4,849
51,903
Attributable to owners of Rio Tinto
Share capital
(notes 26
and 27)
US$m
Share
premium
account
US$m
Other
reserves
(note 28)
US$m
Retained
earnings
(note 28)
US$m
27,025
Total
US$m
43,686
(113)
(113)
26,912
7,832
—
(10,334)
(1,135)
—
43,573
8,351
(29)
(10,334)
(1,135)
—
8,661
—
8,661
519
—
—
4
—
(63)
(43)
(106)
—
—
—
56
85
—
—
70
85
1
—
126
40,532
—
4,710
12,284
10
12,294
(3,600)
—
—
9
23,761
(179)
23,582
14,263
—
(5,356)
(5,423)
Total
US$m
44,711
(169)
44,542
10,663
(382)
(5,356)
(5,704)
(114)
(140)
(254)
—
—
—
50
60
—
—
61
60
6
—
111
Non-
controlling
interests
US$m
6,137
(2)
6,135
(1,033)
—
(376)
—
(32)
—
(85)
—
101
Non-
controlling
interests
US$m
6,404
—
6,404
123
—
(415)
—
—
(60)
—
85
—
3,688
—
3,688
—
(29)
—
(4)
—
—
—
—
—
—
4,312
—
4,312
—
—
—
—
—
—
—
1
—
—
4,360
—
4,360
—
(382)
—
(290)
—
—
—
—
—
4,306
—
4,306
—
—
—
—
—
—
6
—
—
3,655
4,313
9,177
23,387
Attributable to owners of Rio Tinto
Share capital
(notes 26
and 27)
US$m
Share
premium
account
US$m
Other
reserves
(note 28)
US$m
Retained
earnings
(note 28)
US$m
Total
equity
US$m
45,242
12,984
333
(6,821)
(1)
(107)
—
1
129
143
Total
equity
US$m
49,823
(115)
49,708
7,318
(29)
(10,710)
(1,135)
(32)
(106)
—
1
101
126
45,242
Total
equity
US$m
51,115
(169)
50,946
10,786
(382)
(5,771)
(5,704)
(254)
—
6
85
111
—
3,688
—
4,312
22
8,661
(22)
27,025
—
43,686
—
6,137
—
49,823
The notes on pages 206-300 are an integral part of these consolidated financial statements.
(a) Refer to Group statement of comprehensive income for further details. Adjustments to other reserves include currency translation attributable to owners of Rio Tinto, other than that arising on Rio
Tinto Limited’s share capital.
(b) Refer to note 1(d).
(c)
In 2020, the amount of US$1 million together with the amounts paid during the year in respect of an irrevocable contract in place at the beginning of the year to cover the share buy-back programme
totalled US$208 million as reported in the cash flow statement. In 2019, the total amount of US$1,135 million (2018: US$5,704 million) included own shares purchased from the owners of Rio Tinto as
per the cash flow statement of US$1,552 million (2018: US$5,386 million) and a financial liability recognised in respect of an irrevocable contract in place as at the reporting date to cover the share
buy-back programme, less amounts paid during the year in respect of a similar irrevocable contract in place at the beginning of the year.
(d) Net of contributions received from employees for share awards and share options.
(e)
(f)
Impact of the transition to new accounting pronouncements; IFRS 16 “Leases” and IFRIC 23 "Uncertainty over income tax treatments" on 1 January 2019.
impact of the transition to new accounting pronouncements; IFRS 9 “Financial Instruments” and IFRS 15 "Revenue from Contracts with Customers" on 1 January 2018.
204
204
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Primary Financial Statements
Reconciliation with Australian Accounting Standards
The Group’s financial statements have been prepared in accordance with
IFRS, as defined in note 1, which differs in certain respects from the version
of International Financial Reporting Standards 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, as defined in note 1, 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$374 million at 31 December 2020 (2019: US$379 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.
Outline of dual listed companies structure and basis of
financial statements
The Rio Tinto Group
These are the financial statements of the Group formed through the
merger of economic interests of Rio Tinto plc and Rio Tinto Limited
(“Merger”), and presented by both Rio Tinto plc and Rio Tinto Limited as
their consolidated financial statements in accordance with both UK and
Australian legislation and regulations.
Merger terms
On 21 December 1995, Rio Tinto plc and Rio Tinto Limited entered into a
dual listed companies (DLC) merger. Rio Tinto plc is incorporated in the UK
and listed on the London and New York Stock Exchanges and
Rio Tinto Limited is incorporated in Australia and listed on the Australian
Securities Exchange. The Merger was effected by contractual
arrangements between the companies and amendments to Rio Tinto plc’s
Memorandum and Articles of Association and Rio Tinto Limited’s
Constitution.
As a result, Rio Tinto plc and Rio Tinto Limited and their respective groups
operate together as a single economic enterprise, with neither assuming a
dominant role. In particular, the arrangements:
– confer upon the shareholders of Rio Tinto plc and Rio Tinto Limited a
common economic interest in both groups;
– provide for common boards of directors and a unified
management structure;
– provide for equalised dividends and capital distributions; and
– provide for the shareholders of Rio Tinto plc and Rio Tinto Limited to
take key decisions, including the election of directors, through an
electoral procedure in which the public shareholders of the two
companies in effect vote on a joint basis.
The Merger involved no change in the legal ownership of any assets of
Rio Tinto plc or Rio Tinto Limited, nor any change in the ownership of any
existing shares or securities of Rio Tinto plc or Rio Tinto Limited, nor the
issue of any shares, securities or payment by way of consideration, save for
the issue by each company of one special voting share to a trustee
company which facilitates the joint electoral procedure for public
shareholders. During 2002, each of the parent companies issued a DLC
Dividend Share to facilitate the efficient management of funds within the
DLC structure.
Accounting standards
The financial statements have been drawn up in accordance with IFRS as
defined in note 1. The Merger was accounted for as a merger under UK
GAAP. As permitted under the rules governing the transition to IFRS, which
are set out in IFRS 1, the Group did not restate business combinations that
occurred before the transition date of 1 January 2004. As a result, the DLC
Merger of economic interests described above continues to be accounted
for as a merger under IFRS as defined in note 1.
The main consequence of adopting merger rather than acquisition
accounting is that the balance sheet of the merged Group includes the
assets and liabilities of Rio Tinto plc and Rio Tinto Limited at their carrying
values prior to the Merger, subject to adjustments to achieve uniformity of
accounting policies, rather than at their fair values at the date of the
Merger. For accounting purposes Rio Tinto plc and Rio Tinto Limited are
viewed as a single public parent company (with their respective public
shareholders being the shareholders in that single company). As a result,
the amounts attributable to both Rio Tinto plc and Rio Tinto Limited public
shareholders are included in the amounts attributed to owners of Rio Tinto
on the balance sheet, income statement and statement of comprehensive
income.
Australian Corporations Act
The financial statements are drawn up in accordance with an order, under
section 340 of the Australian Corporations Act 2001, issued by the
Australian Securities and Investments Commission (ASIC) on 24 July 2020.
The main effect of the order is that the financial statements are prepared
on the basis that Rio Tinto Limited, Rio Tinto plc and their respective
controlled entities are treated as a single economic entity, and in
accordance with the principles and requirements of International Financial
Reporting Standards as adopted by the European Union (EU IFRS) and
include a reconciliation from EU IFRS to the Australian equivalent of IFRS
(see above).
For further details of the ASIC Class Order relief see page 310.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
205
205
Financial Statements Financial statements
Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies
Corporate information
Rio Tinto’s business is finding, mining and processing mineral resources.
Major products are aluminium, copper, diamonds, gold, industrial minerals
(borates, titanium dioxide and salt), iron ore and uranium. Activities span
the world and are strongly represented in Australia and North America,
with significant businesses also in Asia, Europe, Africa and South America.
Rio Tinto plc is incorporated in the UK and listed on the London and New
York Stock Exchanges and Rio Tinto Limited is incorporated in Australia
and listed on the Australian Stock Exchange. Rio Tinto plc’s registered
office is at 6 St James’s Square, London SW1Y 4AD, UK. Rio Tinto Limited’s
registered office is at Level 7, 360 Collins Street, Melbourne, Victoria
3000, Australia.
As described in the “Outline of dual listed companies structure and basis
of financial statements” on page 205, for the purposes of preparing the
IFRS compliant consolidated financial statements of the Rio Tinto Group,
both the DLC companies, Rio Tinto plc and Rio Tinto Limited, are viewed
as a single economic entity, and the interests of shareholders of both
companies are presented as the equity interests of shareholders in the
Rio Tinto Group.
These financial statements consolidate the accounts of Rio Tinto plc and
Rio Tinto Limited (together “the Companies”) and their respective
subsidiaries (together “the Group”) and include the Group’s share of joint
arrangements and associates as explained in note 1(b) below. The Group’s
financial statements for the year ended 31 December 2020 were
authorised for issue in accordance with a directors’ resolution on 22
February 2021.
Notes 32 to 35 provide more information on the Group’s subsidiaries, joint
arrangements and associates and note 39 provides information on the
Group’s transactions with other related parties.
The 2020 Annual Report satisfies the obligations of Rio Tinto Limited to
prepare consolidated accounts under Australian company law, as amended
by an order issued by the Australian Securities and Investments
Commission on 24 July 2020. The 2020 financial statements disclose on
page 205 the effect of the adjustments to the Group’s consolidated profit/
(loss), consolidated total comprehensive income/(loss) and consolidated
shareholders’ funds as prepared under IFRS as defined below that would
be required under the version of IFRS that is applicable in Australia,
referred to as Australian Accounting Standards (AAS).
The US dollar is the presentation currency used in these financial
statements, as it most reliably reflects the Group’s global
business performance.
Basis of preparation of the financial statements
The basis of preparation and the accounting policies used in preparing the
Group’s 2020 financial statements are set out below.
The financial statements have been prepared on a going concern basis in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 applicable to companies
reporting under IFRS and in accordance with applicable UK law, applicable
Australian law as amended by the Australian Securities and Investments
Commission Order dated 24 July 2020, Article 4 of the European Union IAS
regulation and also with:
– International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB) and interpretations
issued from time to time by the IFRS Interpretations Committee (IFRS
IC) both as adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union (IFRSs as adopted by the EU), and which
are mandatory for EU reporting as at 31 December 2020; (EU IFRS) and
– International Financial Reporting Standards as issued by the IASB and
interpretations issued from time to time by the IFRS IC which are
mandatory as at 31 December 2020.
206
206
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
The above accounting standards and interpretations are collectively
referred to as “IFRS” in this report. The Group has not early adopted any
amendments, standards or interpretations that have been issued but are
not yet mandatory.
The UK's transition period for leaving the EU ended on 31 December 2020.
In accordance with consequent changes to applicable UK law, the Group
will include the following in the basis of preparation for its 2021 financial
statements:
– International Financial Reporting standards as issued by the IASB and
interpretations issued from time to time as adopted by the United
Kingdom (UK).
COVID-19 impact
Despite various COVID-19 related challenges, the Group's assets have
continued to operate, with our first priority being the protection of the
health and safety of all our employees and communities. During the
COVID-19 pandemic, the Group has implemented strict protocols globally
across the business. These range from physical distancing, travel
restrictions, roster changes and team splits, to flexible working
arrangements, rapid screening and personal hygiene controls. The Group
has delivered a good operational performance across most of our assets,
catching up on planned maintenance activity in the second half of the year,
particularly in iron ore, and continuing to adapt to new operating
conditions as we learn to live with COVID-19. Recognising the broad and
complex impacts of the pandemic on our markets, operations and financial
performance, we have chosen not to segregate COVID-19 related costs
from our underlying performance metrics.
Going concern
Management has prepared cash flow forecast scenarios that represent
plausible downside scenarios to the business and global economy
including the effects arising from the COVID-19 pandemic for a period of at
least 12 months from the date of approval of the financial statements,
which have been reviewed by the directors. These forecasts demonstrate
that the Group has sufficient cash, other liquid resources and undrawn
credit facilities to enable it 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 full year financial information.
Further detail on the going concern basis of accounting is included on
page 190.
Climate change
The Group continues to develop its assessment of the potential impacts of
climate change, the transition to a low-carbon future and our ambition to
achieve net zero emissions across our operations by 2050.
We framed the strategic context for the Group and our internal price
setting process, including carbon price assumptions, through the lens of
three plausible scenarios structured around the interplay of three global
forces: Realpolitik, Society and Technology.
– In Realpolitik, a fragmented world order, defined by strong nationalistic
tendencies including structural tensions between the United States and
China, holds back trade and global action on climate. Despite a low
growth environment, global warming is on a path to reach or even
exceed 3°C by 2100. Carbon prices remain low – in the range US$0-30/
tCO2e.
– In Society, strong global co-ordination of climate policies, supported by
high and rising carbon prices (reaching US$130/tCO2e in developed
countries by 2040), accelerates the energy transition. Despite stronger
economic growth in low-income countries, global emissions peak and
start to decline early, turning net-negative during the second half of the
century, to meet the Paris goal of keeping temperature increases below
2°C.
Notes to the 2020 Financial Statements
– In Technology, the fast roll-out of innovation provides both a strong
boost to global economic productivity and decarbonisation efforts. But,
without adequate policy support and with carbon prices remaining
modest (US$15 to US$30/tCO2e by 2030) the decline in global emissions
is insufficient to keep temperature increases below 2°C by 2100.
The Group will take relevant Phase 2 practical reliefs from certain
requirements in IFRS 9, IFRS 7, IFRS 4 and IFRS 16 relating to changes in
the basis for determining contractual cash flows of financial assets,
financial liabilities and hedge accounting.
Through our strategy process we test the resilience of our portfolio against
each of these three scenarios. Overall, our portfolio is expected to perform
more strongly in scenarios with proactive climate action, however we have
not yet assessed the complete financial reporting consequences of a single
Paris aligned scenario (more details on our portfolio scenario analysis can
be found in our 2020 Climate Change report).
The scenarios also inform the internal price setting process led by our
Economics team. Those prices (including carbon) are used pervasively in
our financial processes from budgeting, forecasting, capital allocation and
project evaluation to the determination of Ore Reserves. In turn these
prices are used to derive critical accounting estimates including as inputs
to impairment testing (note 6), estimation of remaining economic life for
units of production depreciation (note 1(i)) and discounting closure and
rehabilitation provisions (note 25).
As only one of the scenarios is aligned with the goals of the Paris
Agreement, our internal carbon prices are not consistent with the
expectation of climate policies required to accelerate the global transition
to meet those goals.
New standards issued
The Group’s financial statements have been prepared on the basis of
accounting policies consistent with those applied in the financial
statements for the year ended 31 December 2019, except for the
accounting requirements set out below, all of which were effective as at 1
January 2020 without restatement of prior years.
The Group's accounting policies and critical accounting judgments have
been updated to include the Group's approach to materiality upon
implementation of "Definition of Material, Amendments to IAS 1 and IAS
8" (refer to "Materiality" below). The amendments do not affect the Group's
approach to identifying and evaluating material transactions, or result in
any change to policies and procedures for reviewing whether a disclosure
or presentation is material.
The IASB revised its Conceptual Framework which is mandatory in 2020. It
is not a standard and does not override any standard, but its principles
apply to arrangements not covered by IFRS standards. No arrangements
have been identified which require a change in accounting treatment under
the revised Conceptual Framework.
The Group has adopted the definition of a business as required by
"Definition of a business - amendments to IFRS 3" (refer to note 1b), Basis
of consolidation, Acquisitions). Changes might result in future investment
in new operations being accounted for as asset acquisitions rather than as
business combinations, however no evaluation of a transaction under the
amended IFRS 3 has been required in 2020.
Standards issued, but not yet effective
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16, endorsed by the UK and mandatory in
2021)
The amendments address the financial reporting impact from reform of the
London Interbank Offered Rate (LIBOR) and other benchmark interest rates
(collectively “IBOR reform”). Financial authorities have asked market
participants to complete the transition to alternative Risk Free Rates (RFR)
by the end of 2021. As part of the Group’s transition plan, a
multidisciplinary working group continues to assess the impact of IBOR
reform on systems, processes and financial reporting.
Based on the Group’s assessment we expect that the most significant
practical impact from IBOR reform will be on our hedging arrangements
and that this will arise from reform of US LIBOR. At 31 December 2020, the
Group has interest rate risk exposure including US$7.3 billion nominal
values of fixed-rate borrowings swapped to US dollar rates in fair value
hedge relationships, described further in note 29 A (b) (v). It is anticipated
that the Secured Overnight Financing Rate (SOFR) benchmark rate,
recommended by the Alternative Reference Rates Committee, will be
widely adopted by market participants and in practice will replace US
LIBOR by the end of 2021. We expect application of the Phase 2 reliefs to
result in continuation of the Group’s pre-existing hedge accounting upon
amendment of designated arrangements in response to the replacement of
IBOR with new benchmarks. The Group early adopted, in the financial
statements for the year ended 31 December 2019, “Phase 1 -
Amendments to IFRS 9, IAS 39, and IFRS 7- Interest rate benchmark
reform”, which allowed temporary relief from applying specific hedge
accounting requirements to hedging arrangements directly impacted by
IBOR reform (refer to note 1 q (iv)). This temporary relief is expected to
cease, on a hedge-by-hedge basis, when the designated hedge relationship
is amended and application of Phase 2 reliefs begins.
In addition, the Group has a number of arrangements which reference
IBOR benchmarks and extend beyond 2021. These include third-party
borrowings relating to the Oyu Tolgoi LLC project finance facility and other
secured loans (refer to note 21), a number of intragroup balances and
certain commercial contracts. Other arrangements which currently
reference IBOR benchmarks include accessible revolving lines of credit
(refer to note 29 A (b)), and shareholder loan facilities. Phase 2
amendments will require the Group to account for a change in the basis for
determining the cash flows of a financial asset or a financial liability
measured at amortised cost, by updating their respective effective interest
rates as required by IBOR reform. As a result of the relief the Group
expects that no significant gain or loss will arise from these updates.
Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16, mandatory in 2022 and not yet endorsed by
the UK)
Under the amendments the proceeds from selling items before the related
item of property, plant and equipment is available for use should be
recognised in profit or loss, together with the costs of producing those
items. The impact from adoption is not currently expected to be material
for the Group.
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS
37, mandatory in 2022 and not yet endorsed by the UK)
The amendments specify which costs an entity includes in determining the
cost of fulfilling a contract for the purpose of assessing whether the
contract is onerous. The Group is currently evaluating the impacts of this
amendment.
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance
Contracts (mandatory in 2023 and not yet endorsed by the UK)
The standard provides consistent principles for all aspects of accounting
for insurance contracts. The Group is currently evaluating the impact of
this pronouncement.
Amendments to IAS 1 "Presentation of financial statements" on
classification of liabilities (mandatory in 2023 and not yet endorsed by
the UK)
Narrow-scope amendments to IAS 1 clarify that liabilities are classified as
either current or non-current, depending on the rights that exist at the end
of the reporting period. Classification is unaffected by the expectations of
the entity or events after the reporting date. The Group is currently
evaluating the impacts of this amendment.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
207
207
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
Other standards
The following new and amended standards are not expected to have a
significant impact on the Group’s consolidated financial statements:
COVID-19-Related Rent Concessions (Amendment to IFRS 16, effective in
2021), Reference to Conceptual Framework (Amendments to IFRS 3,
effective in 2022) and Annual Improvements to IFRS Standards, (effective
2023).
Judgments in applying accounting policies and key sources of
estimation uncertainty
The preparation of the financial statements requires management to use
judgment in applying accounting policies and in making critical
accounting estimates.
These judgments and estimates are based on management’s best
knowledge of the relevant facts and circumstances, having regard to
previous experience, but actual results may differ materially from the
amounts included in the financial statements. Areas of judgment in the
application of accounting policies that have the most significant effect on
the amounts recognised in the financial statements and key sources of
estimation uncertainty that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are noted below and further information is contained in the
accounting policies and/or the notes to the financial statements.
These areas of judgment and estimation are discussed further in critical
accounting policies and estimates on pages 219-222. The quantum of ore
reserves and mineral resources impacts many of these areas and the basis
of calculation is explained below. Information on less material judgments
and sources of estimation uncertainty has been incorporated into the
relevant accounting policy notes.
Areas of judgment in the application of accounting policies that have the
most significant effect on the amounts recognised in the financial
statements in the current year are:
– Impairment of non-current assets – determination of cash-generating
units (CGUs) and assessment of indicators of impairment – note 1(e)
and (i), critical policy (i), note 6, note 12 and note 13.
– Estimation of asset lives – determination of the life of the orebody and
mine reserves, including grade cut-off assumptions consistent with the
internal prices described in the Climate Change section – note 1(i) and
critical policy (ii).
– Close-down, restoration and environmental obligations – determining
when a closure study plan and cost estimate is sufficiently advanced
and reliable to form the basis for an update – note 1(l) and critical policy
(iii).
– Deferral of stripping costs – judgment on components/strip ratios and
separate or integrated multiple pit mines – note 1(h) and critical policy
(iv).
– Uncertain tax positions – technical interpretation of tax law and
evaluation of outcomes in the determination of whether multiple or
binary scenarios are the appropriate basis for provision measurement –
note 1(n), critical policy (v), note 9 and note 30.
– Recoverability of potential deferred tax assets – recognition of deferred
tax assets for loss making operations – critical policy (vi) and note 17.
Other areas of judgment impacting the financial statements are:
– Provision for onerous contracts – determination of assets dedicated to a
contract – note 1(i) and critical policy (vii).
– Identification of functional currencies – different companies may make
different judgments based on similar facts – note 1(d) and critical policy
(viii).
– Basis of consolidation – judgment as to when the Group has control,
joint control or significant influence – critical policy (ix) and notes 32-35.
– Contingencies – assessing the probability of any loss and whether it is
possible to quantify any loss – critical policy (x) and note 30.
208
208
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
– Exclusions from underlying earnings – judgment on items to be
excluded on grounds of nature or size – critical policy (xi) and note 2.
– Accounting for the Pilbara Iron Arrangements – treatment of payments
made over a contractually specified period for network infrastructure
capacity – critical policy (xiii) and note 33(c).
Key sources of estimation uncertainty that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are:
– Impairment of non-current assets – review of asset carrying values,
impairment charges and reversals and the recoverability of goodwill –
determination of discounted cash flows – note1(e) and (i), critical
estimates (i), note 6, note 12 and note 13.
– Close-down, restoration and environmental cost obligations –
estimation of costs and the timing of expenditure – note 1(l), critical
estimates (iii) and note 25.
– Uncertain tax positions – estimating the potential exposures for each
possible scenario – note 1(n), critical estimates (v), note 9 and note 30.
– Recoverability of potential deferred tax assets – determination of cash
flows – note 1(n), critical estimates (vi) and note 17.
– Estimation of obligations for post-employment costs – note 1(o), critical
estimates (xiv) and note 42.
Materiality
The Group considers information to be material if correcting a
misstatement, omission or obscuring could, in the light of surrounding
circumstances, reasonably be expected to change the judgment of a
reasonable person relying on the financial statements. The Group
considers both quantitative and qualitative factors in determining whether
information is material; the concept of materiality is therefore not driven
purely by numerical values.
When considering the potential materiality of information, management
makes an initial quantitative assessment using thresholds based on
estimates of profit before taxation; for the year ended 31 December 2020
the quantitative threshold was US$550 million (year ended 31 December
2019: US$350 million based on underlying earnings). However, other
considerations can result in a determination that lower values are material
or, occasionally, that higher values are immaterial. These considerations
include whether a misstatement, omission or obscuring: masks a change
or trend in key performance indicators; causes reported key metrics to
change from a positive to negative values or vice-versa; affects compliance
with regulatory requirements or other contractual requirements; could
result in an increase to management’s compensation; or might conceal an
unlawful transaction.
In assessing materiality, management also applies judgment based on its
understanding of the business and its internal and external financial
statement users. The assessment will consider user expectations of
numerical and narrative reporting. Sources used in making this
assessment would include, for example: published analyst consensus
measures, experience gained in formal and informal dialogue with users
(including regulatory correspondence), and peer group benchmarking.
Ore reserves and mineral resources
Estimates of ore reserves and, in some cases, mineral resources can
impact: depreciation and amortisation rates; the carrying values of
intangible assets and property, plant and equipment; deferred stripping
costs; provisions for close-down and restoration costs; and the recovery of
deferred tax assets.
The Group estimates its ore reserves and mineral resources based on
information compiled by Competent Persons as defined in accordance with
the Joint Ore Reserves Committee (JORC) code (see note 1(j)).
Notes to the 2020 Financial Statements
The estimation of ore reserves and mineral resources requires judgment to
interpret available geological data and subsequently to select an
appropriate mining method and then to establish an extraction schedule.
Estimation requires assumptions about future commodity prices and
demand, exchange rates, production costs, transport costs, close-down
and restoration costs, recovery rates and discount rates and, in some
instances, the renewal of mining licences.
There are many uncertainties in the estimation process and assumptions
that are valid at the time of estimation may change significantly when new
information becomes available. New geological or economic data, or
unforeseen operational issues, may change estimates of ore reserves and
mineral resources.
The Group uses judgment as to when to include mineral resources in
accounting estimates, for example, the use of mineral resources in the
Group’s depreciation policy is described in note 1(i) below and in the
determination of the date of closure as described in note 1(l). The
unaudited statement of ore reserves is included on page 325 and of
mineral resources on page 329.
(a) Accounting convention
The financial information included in the financial statements for the year
ended 31 December 2020, and for the related comparative periods, has
been prepared under the historical cost convention, as modified by the
revaluation of certain derivative contracts and financial assets, the impact
of fair value hedge accounting on the hedged item and the accounting for
post-employment assets and obligations. The Group’s policy in respect of
these items is set out in the notes below.
All financial statement values are rounded to the nearest million (US$m)
unless otherwise stated.
Where applicable, comparatives have been adjusted to measure or present
them on the same basis as current period figures.
(b) Basis of consolidation (notes 32-35)
All intragroup transactions and balances have been eliminated
on consolidation.
Where necessary, adjustments are made to the locally reported assets,
liabilities, and results of subsidiaries, joint arrangements and associates to
bring their accounting policies in line with those used by the Group.
Subsidiaries
Subsidiaries are entities controlled by either of the companies. Control
exists where either of the companies has: power over the entities, that is,
existing rights that give it the current ability to direct the relevant activities
of the entities (those that significantly affect the companies’ returns);
exposure, or rights, to variable returns from its involvement with the
entities; and the ability to use its power to affect those returns. Subsidiaries
are fully consolidated from the date on which the Group obtains control.
They are de-consolidated from the date that control ceases.
Joint arrangements
A joint arrangement is an arrangement in which two or more parties have
joint control. Joint control is the contractually agreed sharing of control
such that decisions about the relevant activities of the arrangement (those
that significantly affect the companies’ returns) require the unanimous
consent of the parties sharing control. The Group has two types of
joint arrangements:
Joint operations (JO)
A JO is a joint arrangement in which the parties that share joint control
have rights to the assets, and obligations for the liabilities, relating to the
arrangement. This includes situations where the parties benefit from the
joint activity through a share of the output, rather than by receiving a share
of the results of trading. In relation to its interest in a JO, the Group
recognises: its share of assets and liabilities; revenue from the sale of its
share of the output and its share of any revenue generated from the sale of
the output by the JO; and its share of expenses. All such amounts are
measured in accordance with the terms of the arrangement, which is
usually in proportion to the Group’s interest in the JO. These amounts are
recorded in the Group’s financial statements on the appropriate lines.
Joint ventures (JV)
A JV is a joint arrangement in which the parties that share joint control
have rights to the net assets of the arrangement. JVs are accounted for
using the equity accounting method.
Other unincorporated arrangements
In some cases, the Group participates in unincorporated arrangements and
has rights to its share of the assets and obligations for its share of the
liabilities of the arrangement rather than a right to a net return, but does
not share joint control. In such cases, the Group recognises: its share of
assets and liabilities; revenue from the sale of its share of the output and
its share of any revenue generated from the sale of the output by the
unincorporated arrangement; and its share of expenses. All such amounts
are measured in accordance with the terms of the arrangement, which is
usually in proportion to the Group’s interest in the arrangement. These
amounts are recorded in the Group’s financial statements on the
appropriate lines.
Associates
An associate is an entity that is neither a subsidiary nor a joint
arrangement, over which the Group has significant influence. Significant
influence is presumed to exist where there is neither control nor joint
control and the Group has over 20% of the voting rights, unless it can be
clearly demonstrated that this is not the case. Significant influence can
arise where the Group holds less than 20% of the voting rights if it has the
power to participate in the financial and operating policy decisions
affecting the entity. Investments in associates are accounted for using the
equity accounting method.
The Group uses the term “equity accounted units” (EAUs) to refer to
associates and JVs collectively. Under the equity accounting method the
investment is recorded initially at cost to the Group, including any goodwill
on acquisition. In subsequent periods the carrying amount of the
investment is adjusted to reflect the Group’s share of the EAUs’ retained
post-acquisition profit or loss and other comprehensive income. Long-term
loans to EAUs that in substance form part of the Group’s net investment
(quasi equity loans) are financial assets but are included in the line
“Investments in equity accounted units” on the face of the balance sheet.
When the Group’s share of losses in an EAU equals or exceeds its interest
in the EAU, including such long-term loans and any other unsecured
receivables, the Group does not recognise further losses, unless it has
incurred legal or constructive obligations to continue to make payments on
behalf of the EAU.
Acquisitions (note 36)
Under the “acquisition” method of accounting for business combinations,
the purchase consideration is allocated to the identifiable assets acquired
and liabilities and contingent liabilities assumed (the identifiable net
assets) on the basis of their fair value at the date of acquisition, which is
the date on which control is obtained.
In determining whether a particular set of activities is a business, an
acquired arrangement has to have an input and substantive process which
together significantly contribute to the ability to create outputs.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
209
209
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
The consideration transferred for the acquisition of a subsidiary comprises
the fair values of the assets transferred, the liabilities incurred to the
former owners of the acquiree, the fair value of any asset or liability
resulting from a contingent consideration arrangement and any equity
interests issued by the Group. Costs related to the acquisition of a
subsidiary are expensed as incurred.
The excess of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair value of the
identifiable net assets acquired is recorded as goodwill. Any shortfall is
immediately recognised in the income statement.
Non-controlling interests in the acquiree, that are present ownership
interests and entitle their holders to a proportionate share of the entity’s
net assets in the event of liquidation, are recognised by the Group in one of
two ways with the choice being available on an acquisition-by-acquisition
basis. They can be measured at either the non-controlling interest’s
proportionate share of the acquiree’s identifiable net assets or at fair value.
In some cases, non-controlling interests may be treated as equity options
and valued on that basis. Goodwill (see note 1(e)) and amounts
attributable to non-controlling interests will differ depending on the
basis used.
Where the Group previously held a non-controlling interest in the acquiree,
this is remeasured to fair value at the date control is obtained with any
gain or loss recognised in the income statement. The cash cost of the
share purchase that gives rise to control is included within “investing
activities” in the cash flow statement.
Where the Group increases its ownership interest in a subsidiary, the
difference between the purchase price and the carrying value of the share
of net assets acquired is recorded in equity. The cash cost of such
purchases is included within “financing activities” in the cash
flow statement.
Provisional fair values allocated at a reporting date are finalised within 12
months of the acquisition date.
The results of businesses acquired during the year are included in the
consolidated financial statements from the date on which control, joint
control or significant influence is obtained.
Disposals (note 36)
Individual non-current assets or “disposal groups” (that is, groups of assets
and liabilities) to be disposed of by sale or otherwise in a single transaction
are classified as “held for sale” if the following criteria are met at the
period end:
– The carrying amount will be recovered principally through a sale
transaction rather than through continuing use; and
– The disposal group is available for immediate sale in its present
condition subject only to terms that are usual and customary for such
sales; and
– The sale is highly probable.
Disposal groups held for sale are carried at the lower of their carrying
amount and fair value less costs to sell. The comparative balance sheet is
not restated. Disposal groups acquired with a view to resale are held at the
fair value determined at the acquisition date. For these assets acquired for
resale no profits or losses are recognised between the acquisition date and
the disposal date, unless there is a subsequent impairment.
On classification as held for sale, the assets are no longer depreciated and,
if applicable, equity accounting ceases.
If control is lost, any interest in the entity retained by the Group is
remeasured to its fair value and the change in carrying amount is
recognised in the income statement. The retained interest may be
subsequently accounted for as a joint venture, joint operation, associate or
financial asset depending on the facts. Certain amounts previously
recognised in other comprehensive income in respect of the entity
disposed of, or for which control, joint control or significant influence has
ceased, may be recycled to the income statement. The cash proceeds of
disposals are included within “Investing activities” in the cash flow
statement.
Changes in the Group’s interest in a subsidiary that do not result in a loss
of control are accounted for in equity. The cash proceeds of such disposals
are included within “Financing activities” in the cash flow statement.
(c) Sales revenue
Recognition and measurement
The Group recognises sales revenue related to the transfer of promised
goods or services when control of the goods or services passes to the
customer. The amount of revenue recognised reflects the consideration to
which the Group is or expects to be entitled in exchange for those goods
or services.
Sales revenue is recognised on individual sales when control transfers to
the customer. In most instances, control passes and sales revenue is
recognised when the product is delivered to the vessel or vehicle on which
it will be transported once loaded, the destination port or the customer’s
premises. There may be circumstances when judgment is required based
on the five indicators of control below.
– The customer has the significant risks and rewards of ownership and
has the ability to direct the use of, and obtain substantially all of the
remaining benefits from, the good or service.
– The customer has a present obligation to pay in accordance with the
terms of the sales contract. For shipments under the Incoterms Cost,
Insurance and Freight (CIF)/Carriage Paid to (CPT)/Cost and Freight
(CFR) this is generally when the ship is loaded, at which time the
obligation for payment is for both product and freight.
– The customer has accepted the asset. Sales revenue may be subject to
adjustment if the product specification does not conform to the terms
specified in the sales contract but this does not impact the passing of
control. Assay and specification adjustments have been
immaterial historically.
– The customer has legal title to the asset. The Group usually retains
legal title until payment is received for credit risk purposes only.
– The customer has physical possession of the asset. This indicator may
be less important as the customer may obtain control of an asset prior
to obtaining physical possession, which may be the case for goods
in transit.
The Group sells a significant proportion of its products on CFR or CIF
Incoterms. This means that the Group is responsible (acts as principal) for
providing shipping services and, in some instances, insurance after the
date at which control of goods passes to the customer at the loading port.
The Group therefore has separate performance obligations for freight and
insurance services that are provided solely to facilitate sale of the
commodities it produces. Other Incoterms commonly used by the Group
are Free on Board (FOB), where the Group has no responsibility for freight
or insurance once control of the goods has passed at the loading port, and
Delivered at Place (DAP), where control of the goods passes when the
product is delivered to the agreed destination. For these Incoterms there is
only one performance obligation, being for provision of product at the point
where control passes.
210
210
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
The Group’s products are sold to customers under contracts which vary in
tenure and pricing mechanisms, including some volumes sold in the spot
market. Pricing for iron ore is on a range of terms, the majority being either
monthly or quarterly average pricing mechanisms, with a smaller
proportion of iron ore volumes being sold on the spot market.
Revenues from the sale of significant by-products, such as gold, are
included in sales revenue. Sundry revenue (eg sales of surplus power)
incidental to the main revenue-generating activities of the operations is
treated as a credit to operating costs.
Within each sales contract, each unit of product shipped is a separate
performance obligation. Revenue is generally recognised at the contracted
price as this reflects the stand-alone selling price. Sales revenue excludes
any applicable sales taxes. Mining royalties payable are presented as an
operating cost or, where they are in substance a profit-based tax, within
taxation.
Sales of copper concentrate are stated net of the treatment and refining
charges which will be required to convert it to an end product.
Certain of the Group’s products may be provisionally priced at the date
revenue is recognised; however, substantially all iron ore and aluminium
sales are reflected at final prices in the results for the period. The final
selling price for all provisionally priced products is based on the price for
the quotational period stipulated in the contract. Final prices for copper
concentrate are normally determined between 30-120 days after delivery
to the customer. The change in value of the provisionally priced receivable
is based on relevant forward market prices and is included in sales
revenue.
Rio Tinto has a number of long-term contracts to supply product to
customers in future periods. Generally, revenues are recognised on an as
invoiced basis; hence, the right to consideration from a customer
corresponds directly with the entity’s performance completed to date.
A number of the Group’s businesses provide volume discounts in certain
circumstances. The impact of constraining such variable consideration
under IFRS 15 was immaterial at both 31 December 2020 and
31 December 2019.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and
does not disclose information on the transaction price allocated to
performance obligations that are unsatisfied.
Presentation and disclosures
Consolidated sales revenue as reported in the income statement comprises
sales to third parties. Certain of the Group’s products may be provisionally
priced at the date revenue is recognised. Sales revenue includes revenue
from contracts with customers, which is accounted for under IFRS 15
“Revenue from Contracts with Customers” and subsequent movements in
provisionally priced receivables which are accounted for under IFRS 9
“Financial Instruments”. A breakdown of sales revenue between these two
amounts is disclosed in the product analysis in note 3 and further detail on
provisional pricing in note 3. Sales revenue includes revenue from
movements in provisionally priced receivables, consistent with the
treatment in prior periods.
The Group considers that the impact of economic factors on its sales
revenue, particularly pricing and volumes, is best understood by reference
to the disclosure of sales revenue by product group and sales destination
in note 3. The analysis of provisional pricing adjustments by commodity in
the product analysis in note 3 shows which products are subject to price
volatility post the transfer of control. With the exception of Oyu Tolgoi,
which sells copper concentrate to China, this price uncertainty is largely
resolved at the period end.
Typically, the Group has a right to payment before or at the point that
control of the goods passes including a right, where applicable, to payment
for provisionally priced products and unperformed freight and insurance
services. Cash received before control passes is recognised as a contract
liability. The amount of consideration does not contain a significant
financing component as payment terms are less than one year.
The Group does not disclose sales revenue from freight and insurance
services separately as it does not consider that this is necessary in order to
understand the impact of economic factors on the Group; the Group’s Chief
Executive, the chief operating decision maker, as defined under IFRS 8,
“Operating Segments”, does not review information specifically relating to
these sources of revenue in order to evaluate the performance of business
segments and Group information on these sources of revenue is not
provided externally.
The Group does provide information on freight revenue for the iron ore and
bauxite businesses on pages 45 and 49 to help stakeholders understand
FOB operating margins for those products.
Third-party commodity swap arrangements principally for delivery and
receipt of smelter-grade alumina are offset within operating costs.
(d) Currency translation
The functional currency for each entity in the Group, and for joint
arrangements and associates, is the currency of the primary economic
environment in which that entity operates. For many of these entities, this
is the currency of the country in which they are located. Transactions
denominated in other currencies are converted to the functional currency
at the exchange rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated at period-
end exchange rates.
The Group’s financial statements are presented in US dollars, as that
presentation currency most reliably reflects the global business
performance of the Group as a whole. On consolidation, income statement
items for each entity are translated from the functional currency into US
dollars at average rates of exchange, except for material one-off
transactions, which are translated at the rate prevailing on the transaction
date. Balance sheet items are translated into US dollars at period-end
exchange rates.
Exchange differences arising on the translation of the net assets of entities
with functional currencies other than the US dollar are recognised directly
in the currency translation reserve. These translation differences are
shown in the statement of comprehensive income, with the exception of
translation adjustments relating to Rio Tinto Limited’s share capital which
are shown in the statement of changes in equity.
Where an intragroup balance is, in substance, part of the Group’s net
investment in an entity, exchange gains and losses on that balance are
taken to the currency translation reserve.
Except as noted above, or in note 1(q) relating to derivative contracts, all
other exchange differences are charged or credited to the income
statement in the year in which they arise.
(e) Goodwill and intangible assets (excluding exploration and
evaluation expenditure) (notes 12 and 13)
Goodwill is not amortised; it is tested annually for impairment or more
frequently if events or changes in circumstances indicate a potential
impairment. Investments in EAUs, including any goodwill, are tested for
impairment as a single asset when a trigger for impairment has been
identified. The Group’s impairment policy is explained in note 1(i).
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
211
211
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
In accordance with IFRS 6 “Exploration for and Evaluation of Mineral
Resources”, the criteria for the capitalisation of evaluation costs are
applied consistently from period to period.
In the case of undeveloped mining projects which have arisen through
acquisition, the allocation of the purchase price consideration may result in
undeveloped properties being recognised at an earlier stage of project
evaluation compared with projects arising from the Group’s exploration and
evaluation programme. Subsequent expenditure on acquired undeveloped
projects is only capitalised if it meets the high degree of confidence
threshold discussed above.
The carrying values of capitalised evaluation expenditure for undeveloped
mining projects (projects for which the decision to mine has not yet been
approved at the appropriate authorisation level within the Group) are
reviewed at each reporting date for indicators of impairment in accordance
with IFRS 6, and when indicators are identified are tested in accordance
with IAS 36. Evaluation expenditure for non-mining projects is reviewed
and tested under IAS 36.
The impairment review is based on a status report summarising the
Group’s intentions to recover value through development, sale or other
partnering arrangements. If a project does not prove viable and is
cancelled, all irrecoverable costs associated with the project net of any
previously recorded impairment provisions are charged to the income
statement.
(g) Property, plant and equipment (note 14)
Once an undeveloped mining project has been determined as
commercially viable and approval to mine has been given, expenditure
other than that on land, buildings, plant, equipment and capital work in
progress is capitalised under “Mining properties and leases” together with
any amount transferred from “Exploration and evaluation”.
Costs which are necessarily incurred whilst commissioning new assets, in
the period before they are capable of operating in the manner intended by
management, are capitalised. Development costs incurred after the
commencement of production are capitalised to the extent they are
expected to give rise to a future economic benefit. Interest on borrowings
related to construction or development projects is capitalised, at the rate
payable on project-specific debt if applicable or at the Group or
subsidiary’s cost of borrowing if not, until the point when substantially all
the activities that are necessary to make the asset ready for its intended
use are complete. It may be appropriate to use a subsidiary’s cost of
borrowing when the debt was negotiated based on the financing
requirements of that subsidiary.
Property, plant and equipment is stated at cost, as defined in IAS 16, less
accumulated depreciation and accumulated impairment losses. The cost of
property, plant and equipment includes, where applicable, the estimated
close-down and restoration costs associated with the asset.
Property, plant and equipment includes right of use assets (note 14)
arising from leasing arrangements, shown separately from owned and
leasehold assets.
(h) Deferred stripping (note 14)
In open pit mining operations, overburden and other waste materials must
be removed to access ore from which minerals can be extracted
economically. The process of removing overburden and waste materials is
referred to as stripping. During the development of a mine (or, in some
instances, pit; see below), before production commences, stripping costs
related to a component of an orebody are capitalised as part of the cost of
construction of the mine (or pit) and are subsequently amortised over the
life of the mine (or pit) on a units of production basis.
1 Principal accounting policies continued
Purchased intangible assets are initially recorded at cost. Finite-life
intangible assets are amortised over their useful economic lives on a
straight line or units of production basis, as appropriate. Intangible assets
that are deemed to have indefinite lives and intangible assets that are not
yet ready for use are not amortised; they are reviewed annually for
impairment or more frequently if events or changes in circumstances
indicate a potential impairment in accordance with accounting policy
note 1(i).
The Group considers that intangible assets have indefinite lives when,
based on an analysis of all of the relevant factors, there is no foreseeable
limit to the period over which the asset is expected to generate cash flows
for the Group. The factors considered in making this judgment include the
existence of contractual rights for unlimited terms or evidence that
renewal of the contractual rights without significant incremental cost can
be expected for indefinite future periods in view of the Group’s investment
intentions. The life cycles of the products and processes that depend on
the asset are also considered.
(f) Exploration and evaluation (note 13)
Exploration and evaluation expenditure comprises costs that are directly
attributable to:
– Researching and analysing existing exploration data;
– Conducting geological studies, exploratory drilling and sampling;
– Examining and testing extraction and treatment methods; and/or
– Compiling various studies (order of magnitude, pre-feasibility
and feasibility).
Exploration expenditure relates to the initial search for deposits with
economic potential. Expenditure on exploration activity undertaken by the
Group is not capitalised.
Evaluation expenditure relates to a detailed assessment of deposits or
other projects (including smelter and refinery projects) that have been
identified as having economic potential. Capitalisation of evaluation
expenditure commences when there is a high degree of confidence that
the Group will determine that a project is commercially viable, that is the
project will provide a satisfactory return relative to its perceived risks, and
therefore it is considered probable that future economic benefits will flow
to the Group. The Group’s view is that a high degree of confidence is
greater than “more likely than not” (that is, greater than 50% certainty)
and less than “virtually certain” (that is, less than 90% certainty).
Assessing whether there is a high degree of confidence that the Group will
ultimately determine that an evaluation project is commercially viable
requires judgment and consideration of all relevant factors such as the
nature and objective of the project; the project’s current stage; project
timeline; current estimates of the project’s net present value, including
sensitivity analyses for the key assumptions; and the main risks of the
project. Development expenditure incurred prior to the decision to proceed
is subject to the same criteria for capitalisation, being a high degree of
confidence that the Group will ultimately determine that a project is
commercially viable.
In some cases, undeveloped projects are regarded as successors to
orebodies, smelters or refineries currently in production. Where this is the
case, it is intended that these will be developed and go into production
when the current source of ore is exhausted or when existing smelters or
refineries are closed.
Ore reserves may be declared for an undeveloped mining project before its
commercial viability has been fully determined. Evaluation costs may
continue to be capitalised during the period between declaration of ore
reserves and approval to mine as further work is undertaken in order to
refine the development case to maximise the project’s returns.
212
212
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
Where a mine operates several open pits that are regarded as separate
operations for the purpose of mine planning, initial stripping costs are
accounted for separately by reference to the ore from each separate pit. If,
however, the pits are highly integrated for the purpose of mine planning,
the second and subsequent pits are regarded as extensions of the first pit
in accounting for stripping costs. In such cases, the initial stripping (ie
overburden and other waste removal) of the second and subsequent pits is
considered to be production phase stripping (see below).
The life-of-component ratios are based on the ore reserves of the mine
(and for some mines, other mineral resources) and the annual mine plan;
they are a function of the mine design and, therefore, changes to that
design will generally result in changes to the ratios. Changes in other
technical or economic parameters that impact the ore reserves (and for
some mines, other mineral resources) may also have an impact on the life-
of-component ratios even if they do not affect the mine design. Changes to
the ratios are accounted for prospectively.
The Group’s judgment as to whether multiple pit mines are considered
separate or integrated operations depends on each mine’s specific
circumstances.
The following factors would point towards the initial stripping costs for the
individual pits being accounted for separately:
– If mining of the second and subsequent pits is conducted consecutively
following that of the first pit, rather than concurrently;
– If separate investment decisions are made to develop each pit, rather
than a single investment decision being made at the outset;
– If the pits are operated as separate units in terms of mine planning and
the sequencing of overburden removal and ore mining, rather than as
an integrated unit;
– If expenditures for additional infrastructure to support the second and
subsequent pits are relatively large; and
– If the pits extract ore from separate and distinct orebodies, rather than
from a single orebody.
If the designs of the second and subsequent pits are significantly
influenced by opportunities to optimise output from several pits combined,
including the co-treatment or blending of the output from the pits, then
this would point to treatment as an integrated operation for the purposes
of accounting for initial stripping costs. The relative importance of each of
the above factors is considered in each case.
In order for production phase stripping costs to qualify for capitalisation as
a stripping activity asset, three criteria must be met:
– It must be probable that there will be an economic benefit in a future
accounting period because the stripping activity has improved access to
the orebody;
– It must be possible to identify the “component” of the orebody for
which access has been improved; and
– It must be possible to reliably measure the costs that relate to the
stripping activity.
It may be the case that subsequent phases of stripping will access
additional ore and that these subsequent phases are only possible after the
first phase has taken place. Where applicable, the Group considers this on
a mine-by-mine basis. Generally, the only ore attributed to the stripping
activity asset for the purposes of calculating a life-of-component ratio, and
for the purposes of amortisation, is the ore to be extracted from the
originally identified component.
Deferred stripping costs are included in “Mining properties and leases”
within “Property, plant and equipment” or within “Investments in equity
accounted units”, as appropriate. Amortisation of deferred stripping costs
is included in “Depreciation of property, plant and equipment” within “Net
operating costs” or in “Share of profit after tax of equity accounted units”,
as appropriate.
(i) Depreciation and impairment (notes 13 and 14)
Depreciation of non-current assets
Property, plant and equipment is depreciated over its useful life, or over
the remaining life of the mine or smelter or refinery if that is shorter and
there is no reasonable alternative use for the asset by the Group.
The useful lives of the major assets of a cash-generating unit are often
dependent on the life of the orebody to which they relate. Where this is the
case, the lives of mining properties, and their associated refineries,
concentrators and other long-lived processing equipment are generally
limited to the expected life of the orebody. The life of the orebody, in turn,
is estimated on the basis of the life-of-mine plan. Where the major assets
of a cash-generating unit are not dependent on the life of a related
orebody, management applies judgment in estimating the remaining
service potential of long-lived assets. Factors affecting the remaining
service potential of smelters include, for example, smelter technology and
electricity purchase contracts when power is not sourced from the
companies, or in some cases from local governments permitting electricity
generation from hydro-power stations.
The useful lives and residual values for material assets and categories of
assets are reviewed annually and changes are reflected prospectively.
A “component” is a specific section of the orebody that is made more
accessible by the stripping activity. It will typically be a subset of the larger
orebody that is distinguished by a separate useful economic life (for
example, a pushback).
Depreciation commences when an asset is available for use. The major
categories of property, plant and equipment are depreciated on a units of
production and/or straight line basis as follows:
Units of production basis
For mining properties and leases and certain mining equipment,
consumption of the economic benefits of the asset is linked to production.
Except as noted below, these assets are depreciated on the units of
production basis.
Production phase stripping can give rise to two benefits: the extraction of
ore in the current period and improved access to ore which will be
extracted in future periods. When the cost of stripping which has a future
benefit is not distinguishable from the cost of producing current
inventories, the stripping cost is allocated to each of these activities based
on a relevant production measure using a life-of-component strip ratio.
The ratio divides the tonnage of waste mined for the component for the
period either by the quantity of ore mined for the component or by the
quantity of minerals contained in the ore mined for the component. In
some operations, the quantity of ore is a more appropriate basis for
allocating costs, particularly where there are significant by-products.
Stripping costs for the component are deferred to the extent that the
current period ratio exceeds the life of component ratio. The stripping
activity asset is depreciated on a “units of production” basis based on
expected production of either ore or minerals contained in the ore over the
life of the component unless another method is more appropriate.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
213
213
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
In applying the units of production method, depreciation is normally
calculated based on production in the period as a percentage of total
expected production in current and future periods based on ore reserves
and, for some mines, other mineral resources. Other mineral resources
may be included in the calculations of total expected production in limited
circumstances where there are very large areas of contiguous
mineralisation, for which the economic viability is not sensitive to likely
variations in grade, as may be the case for certain iron ore, bauxite and
industrial mineral deposits, and where there is a high degree of confidence
that the other mineral resources can be extracted economically. This
would be the case when the other mineral resources do not yet have the
status of ore reserves merely because the necessary detailed evaluation
work has not yet been performed and the responsible technical personnel
agree that inclusion of a proportion of measured and indicated resources in
the calculation of total expected production is appropriate based on
historical reserve conversion rates.
The required level of confidence is unlikely to exist for minerals that are
typically found in low-grade ore (as compared with the above), such as
copper or gold. In these cases, specific areas of mineralisation have to be
evaluated in detail before their economic status can be predicted with
confidence.
Where measured and indicated resources are used in the calculation of
depreciation for infrastructure, primarily rail and port, which will benefit
current and future mines, then the measured and indicated resources may
relate to mines which are currently in production or to mines where there
is a high degree of confidence that they will be brought into production in
the future. The quantum of mineral resources is determined taking into
account future capital costs as required by the JORC code. The
depreciation calculation, however, applies to current mines only and does
not take into account future development costs for mines which are not yet
in production. Measured and indicated resources are currently
incorporated into depreciation calculations in the Group’s Australian iron
ore business.
Straight line basis
Assets within operations for which production is not expected to fluctuate
significantly from one year to another or which have a physical life shorter
than the related mine are depreciated on a straight line basis.
Impairment charges/reversals of non-current assets
Impairment charges and reversals are assessed at the level of cash-
generating units which, in accordance with IAS 36 “Impairment of Assets”,
are identified as the smallest identifiable asset or group of assets that
generate cash inflows which are largely independent of the cash inflows
from other assets. Separate cash-generating units are identified where an
active market exists for intermediate products, even if the majority of those
products are further processed internally. Impairment of financial assets is
evaluated in accordance with IFRS 9.
In some cases, individual business units consist of several operations with
independent cash-generating streams which constitute separate cash-
generating units.
Goodwill acquired through business combinations is allocated to the cash-
generating unit or groups of cash-generating units that are expected to
benefit from the related business combination, and tested for impairment
at the lowest level within the Group at which goodwill is monitored for
internal management purposes. All goodwill, intangible assets that have an
indefinite life and intangible assets that are not ready for use are tested
annually for impairment as at 30 September, regardless of whether there
has been an impairment trigger, or more frequently if events or changes in
circumstances indicate a potential impairment.
Property, plant and equipment and intangible assets with finite lives are
reviewed for impairment if there is an indication that the carrying amount
may not be recoverable. Right of use assets recognised under IFRS 16
"Leases" are included in the review. The Group conducts an internal review
of the asset values annually as at 30 September which is used as a source
of information to assess for indications of impairment or reversal of
previously recognised impairment losses. External factors, such as
changes in forecasted commodity prices, costs and other market factors as
well as internal factors such as cancellation of a project or reduced project
scope, are also monitored to assess for indications of impairment or
reversal of previously recognised impairment losses. If any such indication
exists then an impairment review is undertaken; the recoverable amount is
assessed by reference to the higher of value in use (being the net present
value of expected future cash flows of the relevant cash-generating unit in
its current condition) and fair value less costs of disposal (FVLCD).
When the recoverable amount of the cash-generating unit is measured by
reference to FVLCD, this amount is further classified in accordance with
the fair value hierarchy for observable market data that is consistent with
the unit of account for the cash-generating unit being tested. The Group
considers that the best evidence of FVLCD is the value obtained from an
active market or binding sale agreement and, in this case, the recoverable
amount is classified in the fair value hierarchy as level 1. When FVLCD is
based on quoted prices for equity instruments but adjusted to reflect
factors such as a lack of liquidity in the market, the recoverable amount is
classified as level 2 in the fair value hierarchy. No cash-generating units
are currently assessed for impairment by reference to a recoverable
amount based on FVLCD classified as level 1 or level 2.
Where unobservable inputs are material to the measurement of the
recoverable amount, FVLCD is based on the best information available to
reflect the amount the Group could receive for the cash-generating unit in
an orderly transaction between market participants at the measurement
date. This is often estimated using discounted cash flow techniques and is
classified as level 3 in the fair value hierarchy.
Where the recoverable amount is assessed using FVLCD based on
discounted cash flow techniques, the resulting estimates are based on
detailed life-of-mine and/or long-term production plans. These may
include anticipated expansions which are at the evaluation stage of study.
The cash flow forecasts for FVLCD purposes are based on management’s
best estimates of expected future revenues and costs, including the future
cash costs of production, capital expenditure, and closure, restoration and
environmental costs. For the purposes of determining FVLCD from a
market participant’s perspective, the cash flows incorporate management’s
price and cost assumptions in the short and medium term. In the longer
term, operating margins are assumed to remain constant where
appropriate, as it is considered unlikely that a market participant would
prepare detailed forecasts over a longer term. The cash flow forecasts may
include net cash flows expected to be realised from the extraction,
processing and sale of material that does not currently qualify for inclusion
in ore reserves. Such non-reserve material is only included when there is a
high degree of confidence in its economic extraction. This expectation is
usually based on preliminary drilling and sampling of areas of
mineralisation that are contiguous with existing ore reserves. Typically, the
additional evaluation required to achieve reserves status for such material
has not yet been done because this would involve incurring evaluation
costs earlier than is required for the efficient planning and operation of
the mine.
As noted above, cost levels incorporated in the cash flow forecasts for
FVLCD purposes are based on the current life-of-mine plan or long-term
production plan for the cash-generating unit. This differs from value in use
which requires future cash flows to be estimated for the asset in its current
condition and therefore does not include future cash flows associated with
improving or enhancing an asset’s performance. Anticipated
enhancements to assets may be included in FVLCD calculations and,
therefore, generally result in a higher value.
214
214
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
Where the recoverable amount of a cash-generating unit is dependent on
the life of its associated orebody, expected future cash flows reflect the
current life of mine and/or long-term production plans, which are based on
detailed research, analysis and iterative modelling to optimise the level of
return from investment, output and sequence of extraction. The mine plan
takes account of all relevant characteristics of the orebody, including
waste-to-ore ratios, ore grades, haul distances, chemical and metallurgical
properties of the ore impacting process recoveries and capacities of
processing equipment that can be used. The life-of-mine plan and/or long-
term production plans are, therefore, the basis for forecasting production
output and production costs in each future year.
Forecast cash flows for ore reserve estimation for JORC purposes are
generally based on Rio Tinto’s commodity price forecasts, which assume
short-term market prices will revert to the Group’s assessment of the long-
term price, generally over a period of three to five years. For most
commodities, these forecast commodity prices are derived from a
combination of analyses of the marginal costs of the producers and of the
incentive price of these commodities. These assessments often differ from
current price levels and are updated periodically. The Group does not
believe that published medium- and long-term forward prices necessarily
provide a good indication of future levels because they tend to be strongly
influenced by spot prices. The price forecasts used for ore reserve
estimation are generally consistent with those used for impairment testing
unless management deems that in certain economic environments, a
market participant would not assume Rio Tinto’s view on prices, in which
case in preparing FVLCD impairment calculations management estimates
the assumptions that a market participant would be expected to use.
Forecast future cash flows of a cash-generating unit take into account the
sales prices under existing sales contracts.
The discount rates applied to the future cash flow forecasts represent an
estimate of the rate the market would apply having regard to the time
value of money and the risks specific to the asset for which the future cash
flow estimates have not been adjusted. The Group’s weighted average cost
of capital is generally used as a starting point for determining the discount
rates, with appropriate adjustments for the risk profile of the countries in
which the individual cash-generating units operate. For final feasibility
studies and ore reserve estimation, internal hurdle rates, which are
generally higher than the Group’s weighted average cost of capital, are
used. For developments funded with project finance, the debt component
of the weighted average cost of capital may be calculated by reference to
the specific interest rate of the project finance and anticipated leverage of
the project.
For operations with a functional currency other than the US dollar, the
impairment review is undertaken in the relevant functional currency. In
estimating FVLCD, internal forecasts of exchange rates take into account
spot exchange rates, historical data and external forecasts, and are kept
constant in real terms after five years. The great majority of the Group’s
sales are based on prices denominated in US dollars. To the extent that the
currencies of countries in which the Group produces commodities
strengthen against the US dollar without an increase in commodity prices,
cash flows and, therefore, net present values are reduced. Management
considers that over the long term, there is a tendency for movements in
commodity prices to compensate to some extent for movements in the
value of the US dollar, particularly against the Australian dollar and
Canadian dollar, and vice versa. However, such compensating changes are
not synchronised and do not fully offset each other. In estimating value in
use, the present value of future cash flows in foreign currencies is
translated at the spot exchange rate on the testing date.
Non-current assets (excluding goodwill) that have suffered impairment are
reviewed using the same basis for valuation as explained above whenever
events or changes in circumstances indicate that the impairment loss may
no longer exist, or may have decreased. If appropriate, an impairment
reversal will be recognised. The carrying amount of the cash-generating
unit after reversal must be the lower of (a) the recoverable amount, as
calculated above, and (b) the carrying amount that would have been
determined (net of amortisation or depreciation) had no impairment loss
been recognised for the cash-generating unit in prior periods.
An onerous contract is defined under IAS 37 “Provisions, Contingent
Liabilities and Contingent Assets” as a contract under which the
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it. Provision is made
when the assets dedicated to the contract are fully impaired or the
contract becomes stranded as a result of a business decision.
(j) Determination of ore reserve and mineral resource estimates
The Group estimates its ore reserves and mineral resources based on
information compiled by Competent Persons as defined in accordance with
the JORC code.
Ore reserves and, for certain mines, other mineral resources, determined in
this way are used in the calculation of depreciation, amortisation and
impairment charges and for forecasting the timing of the payment of
close-down and restoration costs and the recovery of deferred tax assets.
The depreciation and impairment policy above notes instances in which
mineral resources are taken into account for accounting purposes. In
addition, value may be attributed to mineral resources in purchase price
allocations undertaken for the purposes of business combination
accounting.
(k) Leases (notes 14, 21, 22)
IFRS 16 “Leases” applies to the recognition, measurement, presentation
and disclosure of leases. Certain leases are exempt from the standard,
including leases to explore for or use minerals, oil, natural gas and similar
non-regenerative resources. The Group does not apply IFRS 16 to
arrangements which fall within the scope of IAS 38 “Intangible Assets”.
A significant proportion by value of the Group’s lease arrangements relate
to dry bulk vessels and offices. Other leases include land and non-mining
rights, warehouses, ports, equipment and vehicles. The majority of lease
terms are negotiated through the Group’s procurement function, although
agreements contain a wide range of different terms and conditions.
The Group recognises all lease liabilities and corresponding right of use
assets, with the exception of short-term (12 months or fewer) and low
value leases, on the balance sheet. Lease liabilities are recorded at the
present value of: fixed payments; variable lease payments that depend on
an index or rate; amounts payable under residual value guarantees; and
extension options expected to be exercised. Where a lease contains an
extension option which the Group can exercise without negotiation, lease
payments for the extension period are included in the liability if the Group
is reasonably certain that it will exercise the option. Variable lease
payments not dependent on an index or rate are excluded from the
calculation of lease liabilities. Payments are discounted at the incremental
borrowing rate of the lessee, unless the interest rate implicit in the lease
can be readily determined. For lease agreements relating to vessels, ports
and properties, non-lease components are excluded from the projection of
future lease payments and recorded separately within operating costs on a
straight line basis. The lease liability is measured at amortised cost using
the effective interest method. The right of use asset arising from a lease
arrangement at initial recognition reflects the lease liability, initial direct
costs, lease payments made before the commencement date of the lease,
and capitalised provision for dismantling and restoration, less any lease
incentives.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
215
215
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
The Group recognises depreciation of right of use assets and interest on
lease liabilities in the income statement over the lease term. Repayments
of lease liabilities are separated into a principal portion (presented within
financing activities) and interest portion (which the Group presents in
operating activities) in the cash flow statement. Payments made before the
commencement date are included within financing activities unless they in
substance represent investing cash flows, for example where pre-
commencement cash flows are significant relative to aggregate cash flows
of the leasing arrangement.
(l) Close-down, restoration and environmental obligations (note 25)
The Group has provisions for close-down and restoration costs which
include the dismantling and demolition of infrastructure, the removal of
residual materials and the remediation of disturbed areas for mines and
certain refineries and smelters. These provisions are based on all
regulatory requirements and any other commitments made to
stakeholders.
Closure provisions are not made for those operations that have no known
restrictions on their lives as the closure dates cannot be reliably estimated.
This applies primarily to certain Canadian smelters which have indefinite-
lived water rights from local governments permitting electricity generation
from hydro-power stations.
Close-down and restoration costs are a normal consequence of mining or
production, and the majority of close-down and restoration expenditure is
incurred in the years following closure of the mine, refinery or smelter.
Although the ultimate cost to be incurred is uncertain, the Group’s
businesses estimate their costs using current restoration standards and
techniques.
Close-down and restoration costs are provided for in the accounting period
when the obligation arising from the related disturbance occurs, based on
the net present value of the estimated future costs of restoration to be
incurred during the life of the operation and post closure. Where
appropriate, the provision is estimated using probability weighting of the
different remediation and closure scenarios. The obligation may occur
during development or during the production phase of a facility.
Provisions for close-down and restoration costs do not include any
additional obligations which are expected to arise from future disturbance.
The costs are estimated on the basis of a closure plan, and are reviewed at
each reporting period during the life of the operation to reflect known
developments. The estimates are also subject to formal review, with
appropriate external support, at regular intervals.
The initial close-down and restoration provision is capitalised within
“Property, plant and equipment”. Subsequent movements in the close-
down and restoration provisions for ongoing operations, including those
resulting from new disturbance related to expansions or other activities
qualifying for capitalisation, updated cost estimates, changes to the
estimated lives of operations, changes to the timing of closure activities
and revisions to discount rates are also capitalised within “Property, plant
and equipment”. These costs are then depreciated over the lives of the
assets to which they relate.
Changes in closure provisions relating to closed operations are charged/
credited to “Net operating costs” in the income statement.
Where rehabilitation is conducted systematically over the life of the
operation, rather than at the time of closure, provision is made for the
estimated outstanding continuous rehabilitation work at each balance
sheet date and the cost is charged to the income statement.
In the context of current market volatility and uncertainty, the Group has
taken a long-term view of interest rates into account in determining the
appropriate discount rate for discounting of future costs for close-down,
restoration and environmental obligations. The amortisation or
“unwinding” of the discount applied in establishing the provisions is
charged to the income statement in each accounting period. The
amortisation of the discount is shown within “Finance items” in the income
statement.
In some cases, Group companies make a contribution to trust funds in
order to meet or reimburse future environmental and decommissioning
costs. Amounts due for reimbursement from trust funds are not offset
against the corresponding closure provision unless payments into the fund
have the effect of passing the closure obligation to the trust.
Environmental costs result from environmental damage that was not a
necessary consequence of operations, and may include remediation,
compensation and penalties. Provision is made for the estimated present
value of such costs at the balance sheet date. These costs are charged to
“Net operating costs”, except for the unwinding of the discount which is
shown within “Finance items”.
Remediation procedures may commence soon after the time the
disturbance, remediation process and estimated remediation costs become
known, but can continue for many years depending on the nature of the
disturbance and the remediation techniques used.
(m) Inventories (note 16)
Inventories are valued at the lower of cost and net realisable value,
primarily on a weighted average cost basis. Average costs are calculated by
reference to the cost levels experienced in the relevant month together
with those in opening inventory. The cost of raw materials and consumable
stores is the purchase price. The cost of partly-processed and saleable
products is generally the cost of production, including:
– Labour costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore or the production of
alumina and aluminium;
– The depreciation of mining properties and leases and of property, plant
and equipment used in the extraction and processing of ore or the
production of alumina and aluminium, copper and other refined
products; and
– Production overheads.
Work in progress includes ore stockpiles and other partly processed
material. Stockpiles represent ore that has been extracted and is available
for further processing. If there is significant uncertainty as to if and/or
when the stockpiled ore will be processed, the ore is expensed as mined.
If the ore will not be processed within 12 months after the balance sheet
date, it is included within non-current assets and net realisable value is
calculated on a discounted cash flow basis. Quantities of stockpiled ore are
assessed primarily through surveys and assays. Certain estimates,
including expected metal recoveries, are calculated using available
industry, engineering and scientific data, and are periodically reassessed
taking into account technical analysis and historical performance.
(n) Taxation (note 9 and note 17)
Current tax is the tax expected to be payable on the taxable income for
the year calculated using rates that have been enacted or substantively
enacted at the balance sheet date. It includes adjustments for tax expected
to be payable or recoverable in respect of previous periods. Where the
amount of tax payable or recoverable is uncertain, Rio Tinto establishes
provisions based on either: the Group’s judgment of the most likely
amount of the liability or recovery; or, when there is a wide range of
possible outcomes, a probability weighted average approach.
216
216
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
Deferred tax is calculated in accordance with IAS 12. The Group provides
for deferred tax in respect of fair value adjustments on acquisitions
including mining rights that, in general, are not eligible for income tax
allowances. Provision for deferred tax is based on the difference between
the carrying value of the asset and its income tax base (which may be nil).
Even when there is no income tax base, the existence of a tax base for
capital gains tax purposes is not usually taken into account in determining
the deferred tax provision for the assets, unless they are classified as held
for sale or it is determined for other reasons that the carrying amount is
expected to be recovered primarily through disposal and not through use
of the assets. 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. Primarily this occurs
with new lease arrangements and changes in closure cost estimates for
assets in operation.
(o) Post-employment benefits (note 42)
The Group operates a number of defined benefit plans which provide
lump sums, pensions, medical benefits and life insurance to retirees. In
accordance with IAS 19, for post-employment defined benefit plans, the
difference between the fair value of any plan assets and the present value
of the plan obligations is recognised as an asset or liability in the balance
sheet.
Where appropriate, the recognition of assets may be restricted to the
present value of any amounts the Group expects to recover by way of
refunds from the plan or reductions in future contributions. In determining
the extent to which a refund will be available the Group considers whether
any third party, such as a trustee or pension committee, has the power to
enhance benefits or to wind up a pension plan without the Group’s
consent.
The most significant assumptions used in accounting for pension plans are
the discount rate, the inflation rate and mortality rates. The discount rate is
used to determine the net present value of the obligations, the interest
cost on the obligations and the interest income on plan assets. The
discount rate used is the yield on high-quality corporate bonds with
maturities and terms that match those of the post-employment obligations
as closely as possible. Where there is no developed corporate bond market
in a currency, the rate on government bonds is used. The inflation rate is
used to project increases in future benefit payments for those plans that
have benefits linked to inflation. The mortality rates are used to project the
period over which benefits will be paid, which is then discounted to arrive
at the net present value of the obligations.
The current service cost, any past service cost and the effect of any
curtailment or settlements are recognised in the income statement.
The interest cost less interest income on assets held in the plans is also
charged to the income statement. All amounts charged to the income
statement in respect of these plans are included within “Net operating
costs” or in “Share of profit after tax of equity accounted units”, as
appropriate.
The Group’s contributions to defined contribution plans are charged to the
income statement in the period to which the contributions relate. These
are included within “Net operating costs” or in “Share of profit after tax of
equity accounted units”, as appropriate.
(p) Cash and cash equivalents (note 20)
For the purpose of the balance sheet, cash and cash equivalents comprise:
cash on hand, deposits held with banks, and short-term, highly liquid
investments (mainly money market funds) that are readily convertible into
known amounts of cash and which are subject to insignificant risk of
changes in value. Bank overdrafts are shown as current liabilities in the
balance sheet.
Further detail on cash and cash equivalents, including restricted cash, is
shown in note 20.
For the purposes of the cash flow statement, cash and cash equivalents
are net of bank overdrafts that are repayable on demand.
(q) Financial instruments (note 29)
(i) Financial assets
Classification and measurement
The Group classifies its financial assets into the following categories: those
to be measured subsequently at fair value (either through other
comprehensive income (FVOCI) or through the income statement (FVPL))
and those to be held at amortised cost.
Classification depends on the business model for managing the financial
assets and the contractual terms of the cash flows.
Management determines the classification of financial assets at initial
recognition. The Group’s policy with regard to financial risk management is
set out in note 29. Generally, the Group does not acquire financial assets
for the purpose of selling in the short term.
The Group’s business model is primarily that of “hold to collect” (where
assets are held in order to collect contractual cash flows). When the Group
enters into derivative contracts, these transactions are designed to reduce
exposures relating to assets and liabilities, firm commitments or
anticipated transactions.
(a) Financial assets held at amortised cost
This classification applies to debt instruments which are held under a hold
to collect business model and which have cash flows that meet the “solely
payments of principal and interest” (SPPI) criteria.
At initial recognition, trade receivables that do not have a significant
financing component are recognised at their transaction price. Other
financial assets are initially recognised at fair value plus related transaction
costs; they are subsequently measured at amortised cost using the
effective interest method. Any gain or loss on de-recognition or
modification of a financial asset held at amortised cost is recognised in the
income statement.
(b) Financial assets held at fair value through other comprehensive
income (FVOCI)
This classification applies to the following financial assets:
– Debt instruments that are held under a business model where they are
held for the collection of contractual cash flows and also for sale
(“collect and sell”) and which have cash flows that meet the SPPI
criteria. An example would be where trade receivable invoices for
certain customers were factored from time to time.
All movements in the fair value of these financial assets are taken
through other comprehensive income, except for the recognition of
impairment gains or losses, interest revenue (including transaction
costs by applying the effective interest method), gains or losses arising
on de-recognition and foreign exchange gains and losses which are
recognised in the income statement. When the financial asset is
derecognised, the cumulative fair value gain or loss previously
recognised in other comprehensive income is reclassified to the
income statement.
– Equity investments where the Group has irrevocably elected to present
fair value gains and losses on revaluation in other comprehensive
income. The election can be made for each individual investment;
however it is not applicable to equity investments held for trading.
Fair value gains or losses on revaluation of such equity investments,
including any foreign exchange component, are recognised in other
comprehensive income. When the equity investment is derecognised,
there is no reclassification of fair value gains or losses previously
recognised in other comprehensive income to the income statement.
Dividends are recognised in the income statement when the right to
receive payment is established.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
217
217
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
(c) Financial assets held at fair value through profit or loss (FVPL)
This classification applies to the following financial assets. In all cases,
transaction costs are immediately expensed to the income statement.
– Debt instruments that do not meet the criteria of amortised cost or fair
value through other comprehensive income. The Group has a
significant proportion of trade receivables with embedded derivatives
for provisional pricing. These receivables are generally held to collect
but do not meet the SPPI criteria and as a result must be held at FVPL.
Subsequent fair value gains or losses are taken to the
income statement. In addition, trade receivable invoices for certain
customers which are routinely factored, in order to address credit risk
and support value delivery through timelier realisation, are held at
FVPL.
– Equity investments which are held for trading or where the FVOCI
election has not been applied. All fair value gains or losses and related
dividend income are recognised in the income statement.
– Derivatives which are not designated as a hedging instrument. All
subsequent fair value gains or losses are recognised in the
income statement.
(ii) Financial liabilities
Borrowings and other financial liabilities (including trade payables but
excluding derivative liabilities) are recognised initially at fair value, net of
transaction costs incurred, and are subsequently measured at
amortised cost.
The Group participates in supply chain finance arrangements whereby
vendors may elect to receive early payment of their invoice from a third-
party bank by factoring their receivable from Rio Tinto. These
arrangements do not modify the terms of the original liability with respect
to either counterparty terms, settlement date or amount due. Utilisation of
the early settlement facility is voluntary and at the vendors' discretion on
an invoice-by-invoice basis. Financial liabilities subject to supply chain
finance therefore continue to be classified as trade payables. At 31
December 2020, trade payables included US$551 million (2019: US$573
million) subject to early settlement election by vendors.
(iii) Impairment of financial assets
A forward-looking expected credit loss (ECL) review is required for: debt
instruments measured at amortised cost or held at fair value through other
comprehensive income; loan commitments and financial guarantees not
measured at fair value through profit or loss; lease receivables; and trade
receivables that give rise to an unconditional right to consideration.
As permitted by IFRS 9, the Group applies the “simplified approach” to
trade receivable balances and receivables relating to net investment in
finance leases and the “general approach” to all other financial assets. The
general approach incorporates a review for any significant increase in
counterparty credit risk since inception. The ECL reviews include
assumptions about the risk of default and expected loss rates. For trade
receivables and receivables relating to net investment in finance leases,
the assessment takes into account the use of credit enhancements, for
example, letters of credit. Impairments for undrawn loan commitments are
reflected as a provision.
(iv) Derivatives and hedge accounting
The Group applies the hedge accounting requirements under IFRS 9 and
its hedging activities are discussed in note 29 with movements on hedging
reserves disclosed in note 28. Where applicable, the Group may defer the
costs of hedging including currency basis spreads, forward points and the
time value of options.
Phase 1 amendments related to IBOR reform adopted in the comparative
period allowed temporary relief from applying specific hedge accounting
requirements to hedging arrangements directly impacted by the reform.
Application of the temporary reliefs mean that IBOR reform does not result
in termination of hedging relationships referencing an IBOR during the
anticipated period of IBOR-related uncertainty. The principal relief which
the Group has applied to its hedging portfolio is in the assumption that US
LIBOR remains a separately identifiable component for the duration of the
hedge; and the US LIBOR rates referenced by fixed-to-floating rate swaps
in fair value hedge relationships do not change as the result of IBOR
reform, preserving the economic relationship and allowing the related
hedges to remain effective (refer to note 29 A (b) (v)).
(r) Share-based payments (note 41)
The fair value of the Group’s share plans is recognised as an expense over
the expected vesting period with an offset to retained earnings for Rio Tinto
plc plans and to other reserves for Rio Tinto Limited plans.
The Group uses fair values provided by independent actuaries calculated
using either a lattice-based option valuation model or a Monte Carlo
simulation model.
The terms of each plan are considered at the balance sheet date to
determine whether the plan should be accounted for as equity-settled or
cash-settled. The Group does not operate any plans as cash-settled.
However, the Performance Share Plan can, at the discretion of the
directors, offer employees an equivalent amount in cash. This is not
standard practice. In some jurisdictions, employees are granted cash-
settled awards where equity-settled awards are prohibited by local laws
and regulations. The value of these awards is immaterial.
The Group’s equity-settled share plans are settled either by: the issuance
of shares by the relevant parent company; the purchase of shares on
market; or the use of shares held in treasury which were previously
acquired as part of a share buy-back. If the cost of shares acquired to
satisfy the plans differs from the expense charged, the difference is taken
to retained earnings or other reserves, as appropriate.
(s) Share capital (notes 26 and 27)
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issuance of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Where any Group company purchases the Group’s equity share capital
(treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted from equity
attributable to owners of Rio Tinto. Where such shares are subsequently
reissued, any consideration received, net of any directly attributable
incremental costs and the related income tax effects, is included in equity
attributable to owners of Rio Tinto. If purchased Rio Tinto plc shares are
cancelled, an amount equal to the nominal value of the cancelled share is
credited to the capital redemption reserve.
(t) Segment reporting (notes 2 and 3)
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker (CODM). The
Group considers that Rio Tinto’s Chief Executive is the CODM, who is
responsible for allocating resources and assessing performance of the
operating segments.
218
218
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
Critical accounting policies and estimates
(i) Determination of CGUs, assessment of indicators of impairment,
review of asset carrying values, impairment charges and reversals and
the recoverability of goodwill (notes 6, 12 and 13)
Impairment is assessed at the cash-generating unit (CGU) level. A CGU is
the smallest identifiable asset or group of assets that generates
independent cash inflows. Judgment is applied to identify the Group’s
CGUs, particularly when assets belong to integrated operations, and
changes in CGUs could impact impairment charges and reversals. The
most significant examples of this judgment are: in 2020, the continued
grouping of Rio Tinto Fer et Titane in Quebec, Canada and QIT Madagascar
Minerals (QMM) into a single CGU on the basis that they are vertically
integrated operations with no active market for ilmenite; and in 2019,
disaggregation of the Weipa bauxite mine and the downstream Gladstone
alumina refineries (Yarwun and QAL) in Queensland, Australia into three
separate CGUs on the basis of the ramp-up of the Amrun expansion at
Weipa which increased bauxite exports such that the mine is now
considered to generate largely independent cash inflows. Prior to 2019, the
Weipa mine and Gladstone refineries were grouped into a single CGU.
Management reviews these judgments on an annual basis as part of the
annual internal review of asset values as described in note (i) above.
External and internal factors are monitored for indicators of impairment
and include an annual internal review of asset values as described in note
(i) above. Judgment is required to determine whether the impact of
adverse spot commodity price movements is significant and structural in
nature. There were no material instances of this judgment resulting in an
indicator of impairment as at 31 December 2020.
Generally, discounted cash flow models are used to determine the
recoverable amount of CGUs. In this case, significant judgment is required
to determine the appropriate estimates and assumptions used and there is
significant estimation uncertainty. In particular, for fair value less costs of
disposal valuations, judgment is required to determine the estimates a
market participant would use. The discounted cash flow model is most
sensitive to the following estimates: the timing of project expansions; the
cost to complete assets under construction; long-term commodity prices;
production timing and recovery rates; exchange rates; operating costs;
reserve and resource estimates; closure costs; discount rates; allocation of
long-term contract revenues between CGUs; and, in some instances, the
renewal of mining licences. Some of these variables are unique to an
individual CGU. Future changes in these variables may differ from
management’s expectations and may materially alter the recoverable
amounts of the CGUs.
Note (i) above also describes the Group’s methodology for estimating long-
term commodity prices, exchange rates and discount rates for impairment
testing purposes. Note 6 outlines the significant judgments, assumptions
and sensitivities made for both measuring the impairments recorded and
for determining whether reversal of part or all of a previous impairment
was appropriate. Judgments, assumptions and sensitivities in relation to
the testing of CGUs containing goodwill and indefinite-lived intangible
assets are outlined in notes 12 and 13 respectively.
(ii) Estimation of asset lives
Intangible assets are considered to have indefinite lives (and therefore no
related depreciation or amortisation charge) if, in the Group’s judgment,
there is no foreseeable limit to the period over which the asset is expected
to generate cash flows. Factors that are considered in making this
judgment include the existence of contractual rights for unlimited terms or
evidence that renewal of the contractual rights without significant
incremental costs can be expected for indefinite periods into the future in
view of the Group’s investment intentions. The most significant
assessment of indefinite life applicable to intangible assets relates to
contract based water rights in Canada acquired with Alcan, described
further in note 13.
The useful lives of the major assets of a CGU are often dependent on the
life of the orebody to which they relate. The life of the orebody will be
determined on the basis of the life-of-mine plan which is based on the
estimates of ore reserves as described on page 325.
(iii) Close-down, restoration and environmental obligations (note 25)
Provision is made for close-down, restoration and environmental costs
when the obligation occurs, based on the net present value of estimated
future costs required to satisfy the obligation. Management uses its
judgment and experience to determine the potential scope of closure
rehabilitation work required to meet the Group’s legal, statutory and
constructive obligations, and any other commitments made to
stakeholders, and the options and techniques available to meet those
obligations and estimate the associated costs and the likely timing of those
costs. Significant judgment is also required to determine both the costs
associated with that work and the other assumptions used to calculate the
provision. External experts support the cost estimation process where
appropriate but there remains significant estimation uncertainty.
The key judgment in applying this accounting policy is determining when
an estimate is sufficiently reliable to make or adjust a closure provision.
Closure provisions are not made for those operations that have no known
restrictions on their lives as the closure dates cannot be reliably estimated.
This applies primarily to certain Canadian smelters which have indefinite-
lived water rights or power agreements for renewably sourced power with
local governments.
Cost estimates are updated throughout the life of the operation; generally
cost estimates must comply with the Group’s Capital Project Framework
once the operation is ten years from expected closure. This means, for
example, that where an Order of Magnitude (OoM) study is required for
closure it must be of the same standard as an OoM study for a new mine,
smelter or refinery. As at 31 December 2020, there are 10 operations with
remaining lives of under ten years before taking into account unapproved
extensions. The largest recent closure study is at Rio Tinto Kennecott,
which was completed during 2020; information available from this study at
31 December 2020 resulted in an increase to closure and environmental
liabilities of US$74 million (2019: US$444 million).
Adjustments are made to provisions when the range of possible outcomes
becomes sufficiently narrow to permit reliable estimation. Depending on
the materiality of the change, adjustments may require review and
endorsement by the Group’s Closure Steering Committee before the
provision is updated.
In some cases, the closure study may indicate that monitoring and,
potentially, remediation will be required indefinitely - for example ground
water treatment. In these cases the underlying cash flows for the provision
may be restricted to a period for which the costs can be reliably estimated,
which on average is around 30 years. Where an alternative commercial
arrangement to meet our obligations can be predicted with confidence, this
period may be shorter.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
219
219
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
Project specific risks are embedded within the cash flows which are based
on a central case estimate of closure activities assuming that the
obligation is fulfilled by the Group. These cash flows are then discounted
using a discount rate specific to the class of obligations. The selection of
appropriate sources on which to base the calculation of the discount rate
requires judgment. The 1.5% real rate currently used by the Group is
based on a number of inputs including observable historical yields on 30
year US Treasury Inflation Protected Securities (TIPS), and consideration of
findings by independent valuation experts.
(iv) Deferral of stripping costs (note 14)
Stripping of waste materials takes place throughout the production phase
of a surface mine or pit. The identification of components within a mine
and of the life of component strip ratios requires judgment and is
dependent on an individual mine’s design and the estimates inherent
within that. Changes to that design may introduce new components and/or
change the life of component strip ratios. Changes in other technical or
economic parameters that impact ore reserves may also have an impact on
the life of component strip ratios, even if they do not affect the mine’s
design. Changes to the life of component strip ratios are accounted for
prospectively.
The Group’s judgment as to whether multiple pit mines are considered
separate or integrated operations determines whether initial stripping of a
pit is deemed to be pre-production or production phase stripping and,
therefore, the amortisation base for those costs. The analysis depends on
each mine’s specific circumstances and requires judgment: another mining
company could make a different judgment even when the fact pattern
appears to be similar.
(v) Uncertain tax positions
The Group operates across a large number of jurisdictions and is subject to
periodic challenges by local tax authorities on a range of tax matters
during the normal course of business, including transfer pricing, indirect
taxes and transaction related issues.
Uncertain tax provisions include the related interest and penalties for all
matters worldwide based on the Group’s judgment of the most likely
amount of the liability or recovery; or, when there is a wide range of
possible outcomes, a probability weighted average approach. The most
significant judgments are in relation to transfer pricing matters. Whilst the
potential outcomes are highly variable our current expectation is that there
will be no material change to the amounts provided in the 12 months from
31 December 2020.
(vi) Recoverability of potential deferred tax assets (note 17)
The Group has tax losses and other deductible temporary differences,
mainly in Australian, Canadian, US and Mongolian taxable entities, that
have the potential to reduce tax payments in future years. Deferred tax
assets have been recognised to the extent that their recovery is probable,
having regard to the availability of sufficient taxable temporary differences
relating to the same taxation authority and the same taxable entity, the
estimates of projected future taxable income of these taxable entities and
after taking account of specific risk factors that are expected to affect the
recovery of these assets including the risk of expiry of losses. Further
information on deferred tax assets is given in note 17.
In addition to the risk of expiry of losses, the projections on which recovery
of tax losses are based are subject to the same estimation uncertainty as
noted in (i) above in relation to impairment. The key judgment in the
application of this accounting policy is the recognition of deferred tax
assets for losses where the operation is not currently profitable for tax
purposes.
1 Principal accounting policies continued
The most significant assumptions and estimates used in calculating the
provision are:
– Closure timeframes. The weighted average remaining lives of
operations is shown in note 25. Some expenditure may be incurred
before closure whilst the operation as a whole is in production.
– The length of any post-closure monitoring period. This will depend on
the specific site requirements and the availability of alternative
commercial arrangements; some expenditure can continue into
perpetuity. The Rio Tinto Kennecott closure and environmental
remediation provision includes an allowance for ongoing monitoring
and remediation costs, including ground water treatment, of
approximately US$0.6 billion.
– The probability weighting of possible closure scenarios. The most
significant impact of probability weighting is at the Pilbara operations
(Iron Ore) relating to infrastructure and incorporates the expectation
that some infrastructure will be retained by the relevant State
authorities post closure. The assignment of probabilities to this
scenario reduces the closure provision by US$1.2 billion.
– Appropriate sources on which to base the calculation of the discount
rate. On 30 September 2020, management reviewed the rate used for
discounting provisions and reduced the discount rate by 0.5%. The
discount rate by nature is subjective and therefore sensitivities are
shown in note 25 for how the provision balance, which at 31 December
2020 was US$13.3 billion, would change if discounted at alternative
discount rates were applied.
There is significant estimation uncertainty in the calculation of the
provision and cost estimates can vary in response to many factors
including:
– Changes to the relevant legal or local/national government
requirements and any other commitments made to stakeholders;
– Review of remediation and relinquishment options;
– Additional remediation requirements identified during the rehabilitation;
– The emergence of new restoration techniques;
– Precipitation rates and climate change;
– Change in the expected closure date;
– Change in the discount rate; and
– The effects of inflation.
Experience gained at other mine or production sites may also change
expected methods or costs of closure, although elements of the restoration
and rehabilitation of each site are relatively unique to a site. Generally,
there is relatively limited restoration and rehabilitation activity and
historical precedent elsewhere in the Group, or in the industry as a whole,
against which to benchmark cost estimates.
The expected timing of expenditure can also change for other reasons, for
example because of changes to expectations around ore reserves and
mineral resources, production rates, renewal of operating licences or
economic conditions.
As noted in note (l) above, changes in closure and restoration provisions
for ongoing operations are usually capitalised and therefore will impact
assets and liabilities but have no impact on profit or loss at the time the
change is made. However, these changes will impact depreciation and the
unwind of discount in future years. Changes in closure estimates at the
Group’s ongoing operations could result in a material adjustment to assets
and liabilities in the next 12 months.
Changes to closure cost estimates for closed operations, and changes to
environmental cost estimates at any operation, would impact profit or loss;
however, the Group does not consider that there is significant risk of a
change in estimates for these liabilities causing a material adjustment to
profit or loss in the next 12 months. Any new environmental incidents may
require a material provision but cannot be predicted.
220
220
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
(vii) Provision for onerous contracts
Provision for an onerous contract is made only when the assets dedicated
to that contract are fully impaired or the contract becomes stranded as a
result of a business decision. Judgment is required in determining which
assets are considered dedicated to a contract when there is optionality as
to how the contract obligations can be settled. Key estimates are the cash
flows associated with the contract and the discount rate assumption. The
Group completed the disposal of its remaining coking coal assets in 2018
and has retained the onerous provisions made in past periods for rail
infrastructure “take or pay” contracts which were considered stranded.
Refer to note 36. As at 31 December 2020, the balance of the provision was
US$219 million (2019: US$284 million). In 2019, the Group's investment in
the Escondida Joint Venture reduced by US$138 million relating to
contractual payments under a power purchase agreement which became
stranded and was judged to be onerous upon early cancellation in favour of
renewable energy sources.
(viii) Identification of functional currencies
The functional currency for each subsidiary, unincorporated arrangement,
joint operation and equity accounted unit, is the currency of the primary
economic environment in which it operates. Determination of functional
currency involves significant judgment and other companies may make
different judgments based on similar facts. For many of Rio Tinto’s
businesses, their functional currency is the currency of the country in
which they operate. The Group reconsiders the functional currency of its
businesses if there is a change in the underlying transactions, events or
conditions which determine their primary economic environment.
The determination of functional currency is a key judgment which affects
the measurement of non-current assets included in the balance sheet and,
as a consequence, the depreciation and amortisation of those assets
included in the income statement. It also impacts exchange gains and
losses included in the income statement and in equity. The Group applies
judgment in determining whether settlement of certain intragroup loans is
neither planned nor likely in the foreseeable future and therefore whether
the associated exchange gains and losses can be taken to equity. During
2020, A$14 billion of intragroup loans continued to meet these criteria;
associated exchange gains and losses are taken to equity.
(ix) Basis of consolidation (notes 32-35)
Judgment is sometimes required to determine whether after considering
all relevant factors, the Group has control, joint control or significant
influence over an entity or arrangement. Significant influence includes
situations of collective control (see note 35 (a)). Other companies may
make different judgments regarding the same entity or arrangement. The
most significant instance of such a judgment by the Group is in the
determination that Escondida is a joint venture, based on the nature of
significant commercial decisions, including capital expenditure, which
require approval by both Rio Tinto and its partner BHP.
(x) Contingencies (note 30)
Disclosure is made of material contingent liabilities unless the possibility
of any loss arising is considered remote based on the Group’s judgment
and legal advice. Contingent liabilities are quantified unless, in the Group’s
judgment, the amount cannot be reliably estimated.
The unit of account for claims is the matter taken as a whole and therefore
when a provision has been recorded for the best estimate of the cost to
settle the obligation there is no further contingent liability component. This
means that when a provision is recognised for the best estimate of the
expenditure required to settle the present obligation from a single past
event, a further contingent liability is not reported for the maximum
potential exposure in excess of that already provided. We also consider the
requirements of IAS 1 and provide disclosure when there is a significant
risk the value of assets or liabilities could materially change within the next
12 months.
(xi) Exclusions from underlying earnings (note 2)
As set out in note 2, certain items are excluded from net earnings/(loss) in
arriving at underlying earnings in each period irrespective of materiality. In
addition, there is a final judgmental category which includes, where
applicable, other credits and charges that, individually or in aggregate if of
a similar type, are of a nature or size to require exclusion in order to
provide additional insight into underlying business performance.
The exclusion of provisions for obligations, including impact of change in
discount rate in respect of legacy operations was the only application of
the judgmental category in 2020.
(xii) Funding of Oyu Tolgoi
As described in note 32(l), Turquoise Hill, a 50.8% subsidiary of Rio Tinto,
has funded common share investments in Oyu Tolgoi on behalf of Erdenes
Oyu Tolgoi LLC ("Erdenes"), a company controlled by the Mongolian
government, which owns the 34% non-controlling interest in Oyu Tolgoi
not owned by Turquoise Hill. Funded amounts earn interest at an annual
effective rate of LIBOR plus 6.5% and are repayable via a pledge over
Erdenes' share of future Oyu Tolgoi common share dividends; Erdenes also
has the right to reduce the outstanding balance by making payments
directly to Turquoise Hill.
Since these funding balances, including accrued interest, are expected to
be recovered principally through dividends from Oyu Tolgoi or sale by
Erdenes of its interests in Oyu Tolgoi, related amounts are recorded as a
reduction to the net carrying value of non-controlling interests.
(xiii) Pilbara Iron Arrangements
The arrangements described in note 33 (c) to the accounts permit each of
the partners to the joint operation to request the other to construct assets
on their tenure to increase the capacity of the rail and port infrastructure
network. The requesting partner’s (Asset User’s) share of the capacity of
the network will increase by the capacity of the newly constructed asset
but, generally, that capacity may be provided from any of the network
assets. The Asset User will pay an annual charge (Committed Use Charge –
“CUC”) over a contractually specified period irrespective of usage of the
network. The constructing partner (Asset Owner) has an ongoing obligation
to make available capacity from those assets and to maintain the assets in
good working order as required under relevant State Agreements and
associated tenure.
The Group considered whether the CUC arrangements give rise to a lease
between the Asset Owner and the Asset User. The conclusion that they do
not is because there is no specified asset; rather the Asset User has a first
priority right to the capacity in the CUC asset. This treatment was
grandfathered on adoption of IFRS 16 "Leases" on 1 January 2019,
following assessment under the preceding standards IAS 17 "Leases" and
IFRIC 4 "Determining whether an arrangement contains a lease", with no
change to the conclusion under IFRS 16 for subsequent expenditure
subject to the existing CUC arrangements. Management considers that
these arrangements are unique and has used judgment to apply the
principles of IFRS to the accounting for the arrangements as described
above. The obligation of the Asset Owner to make capacity available is
fulfilled over time and not at a point in time. The CUC arrangement is
therefore an executory contract as defined under IAS 37 “Provisions,
contingent liabilities and contingent assets” whereby neither party has
performed any of its obligations, or both parties have partially performed
their obligations to an equal extent, and so the CUC payments are
expensed as incurred. An alternative interpretation of the fact pattern
could have resulted in a gross presentation in the Group’s balance sheet
with an asset and a corresponding liability to reflect the present value of
the CUC payments. The Asset User is a wholly owned subsidiary of Rio
Tinto, whereas the Asset Owner is a joint operation. This impact would be
some US$2 billion (calculated on the basis of grossing up the tax written
down value of the CUC assets). Other methods of calculating the gross up
might give rise to different numbers.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
221
221
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
1 Principal accounting policies continued
(xiv) Estimation of obligations for post-employment costs (note 42)
The value of the Group’s obligations for post-employment benefits is
dependent on the amount of benefits that are expected to be paid out,
discounted to the balance sheet date. The discount rate is a key
assumption and is based upon the yields on high quality corporate bonds
in the relevant currency which have durations consistent with the term of
the obligations. The discount rate will vary from one period to another in
line with movements in corporate bond yields, but at any given
measurement date there is relatively little estimation uncertainty. This rate
is also used to calculate the interest cost on obligations and interest
income on plan assets.
The following key assumptions are used to calculate the estimated benefit:
future pay increases to be received by members of final pay plans, the
level of inflation (for those benefits that are subject to some form of
inflation protection), current mortality rates and future improvements in
mortality rates. The assumption regarding future inflation is based on
market yields on inflation linked instruments, where possible, combined
with consensus views. The Group reviews the actual mortality rates of
retirees in its major pension plans on a regular basis and uses these rates
to set its current mortality assumptions. It also uses its judgment with
respect to allowances for future improvements in longevity having regard
to standard improvement scales in each relevant country and after taking
external actuarial advice.
Most of the Group’s defined benefit pension plans are closed to new
entrants and the majority of the obligations relate to former employees.
The carrying value of the Group’s post-employment obligations is therefore
less sensitive to assumptions about future salary increases than it is to
assumptions regarding future inflation.
Details of the key assumptions, how they have moved since the previous
balance sheet date and the sensitivity of the carrying value to changes in
the assumptions are set out in note 42.
222
222
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
2 Operating segments
Rio Tinto’s management structure is based on the principal product groups (PG) 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. Finance costs and net debt are managed on a group-wide basis.
The Group's reportable segments are based on principal product groups and are consistent with the internal reporting structure as at 31 December 2020.
Business units (BUs) are allocated to PGs based on management structure. The reportable segments are described as follows:
Reportable segment
Iron Ore
Aluminium
Copper & Diamonds
Principal activities
Iron ore mining and salt and gypsum production in Western Australia.
Bauxite mining; alumina refining; aluminium smelting.
Mining and refining of copper, gold, silver, molybdenum and other by-products; exploration activities. Also includes diamond mining,
sorting and marketing.
Energy & Minerals
Includes businesses with products such as uranium, borates, titanium dioxide feedstock together with the Iron Ore Company of Canada
(iron ore mining and iron concentrate/pellet production) and the Simandou iron ore project, which are the responsibility of the Energy
& Minerals product group chief executive. The Group’s coal operations were included in Energy & Minerals until the divestment of
these assets, which was completed during 2018.
Following a reassessment in 2020 of the Group's reportable segments, Other Operations, which included our 100% interest in the Gove alumina refinery
(in closure), Rio Tinto Marine, and the remaining legacy liabilities of Rio Tinto Coal Australia are separately shown from the above reportable segments as
none of these operations met the quantitative thresholds to be reportable segments. The Underlying earnings and Underlying EBITDA of Rio Tinto Marine
are attributed back to the product groups. Legacy operations are not an operating segment as they do not earn revenue and are not expected to do so in
the future. Comparatives have been adjusted to ensure comparability with the current year disclosures.
Other items includes amounts in relation to Group functions, unallocated corporate costs and central items.
The financial information by business unit provided on pages 306-309 of these financial statements provides additional voluntary disclosure which the
Group considers useful to the users of the financial statements.
Gross product sales
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Inter-segment transactions
Product group total
Share of equity accounted unit sales and adjustments for intra-subsidiary/equity accounted units sales
Consolidated sales revenue per income statement
2020
US$m
27,508
9,314
5,428
5,014
47,264
18
(264)
47,018
(2,407)
44,611
2019
US$m
24,075
10,340
5,815
5,150
45,380
18
(31)
45,367
(2,202)
43,165
2018
US$m
18,731
12,191
6,468
5,451
42,841
9
(15)
42,835
(2,313)
40,522
Gross product sales includes the Group’s proportionate share of product sales by equity accounted units (after adjusting for sales to subsidiaries) of
US$2,441 million (2019: US$2,234 million; 2018: US$2,354 million) which are not included in consolidated sales revenue. Consolidated sales revenue
includes subsidiary sales of US$34 million (2019: US$32 million; 2018: US$41 million) to equity accounted units which are not included in gross product
sales.
Capital expenditure
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Product group total
Other items
Less: capital expenditure of equity accounted units
Capital expenditure per financial information by business unit
Add back: proceeds from disposal of property, plant and equipment(a)
Capital expenditure per cash flow statement
2020
US$m
2,941
1,085
1,864
428
6,318
2
6,320
79
(255)
6,144
45
6,189
2019
US$m
1,741
1,456
2,087
551
5,835
(4)
5,831
64
(456)
5,439
49
5,488
2018
US$m
1,302
1,373
2,150
442
5,267
12
5,279
65
(500)
4,844
586
5,430
(a)
In 2018, proceeds from disposal of property, plant and equipment included US$508 million received on the sale of surplus land at Kitimat.
Capital expenditure for reportable segments comprises the net cash outflow on purchases less disposals of property, plant and equipment, capitalised
evaluation costs and purchases less disposals of other intangible assets. The details provided include 100% of subsidiaries’ capital expenditure and Rio
Tinto’s share of the capital expenditure of joint operations and equity accounted units.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
223
223
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
Depreciation and amortisation
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Product group total
Other items
Less: depreciation and amortisation of equity accounted units
Depreciation and amortisation per note 4
2020
US$m
1,838
1,191
1,153
392
4,574
199
4,773
82
(576)
4,279
2019
US$m
1,723
1,312
1,320
428
4,783
177
4,960
77
(653)
4,384
2018
US$m
1,702
1,122
1,317
455
4,596
26
4,622
43
(650)
4,015
Product group depreciation and amortisation for reportable segments include 100% of subsidiaries’ depreciation and amortisation and Rio Tinto’s share of
the depreciation and amortisation of equity accounted units. Rio Tinto’s share of the depreciation and amortisation charge of equity accounted units is
deducted to arrive at depreciation and amortisation as shown in note 4. These figures do not include impairment charges and reversals, which are
excluded from underlying earnings.
Tax charge/(credit)
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Inter-segment transactions
Product group total
Other items
Exploration and evaluation not attributed to product groups
Net finance costs
Tax (credit)/charge excluded from underlying earnings
Taxation per income statement
2020
US$m
5,035
320
(238)
360
5,477
(7)
(24)
5,446
(179)
(34)
(38)
5,195
(204)
4,991
2019
US$m
4,198
211
65
411
4,885
(51)
(2)
4,832
(67)
(83)
(144)
4,538
(391)
4,147
Tax charge/(credit) excludes amounts relating to equity accounted units. Further information on the tax charge/(credit) excluded from underlying
earnings is provided in the section “Underlying earnings”, below.
Underlying EBITDA
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Inter-segment transactions
Product group total
Central pension costs, share-based payments and insurance
Restructuring, project and one-off costs
Central costs
Exploration and evaluation not attributed to product groups
Underlying EBITDA
Impairment charges
Gains/(losses) on embedded commodity derivatives not qualifying for hedge accounting (including exchange)
Net (losses)/gains on consolidation and disposal of interests in businesses
Change in closure estimates (non-operating and fully impaired sites)
Gain on sale of wharf and land in Kitimat, Canada
Change in other exclusions
Items excluded from underlying EBITDA
Depreciation and amortisation in subsidiaries and equity accounted units
Taxation and finance items in equity accounted units
Finance items
Profit before taxation
2020
US$m
18,837
2,152
2,172
1,646
24,807
—
(94)
24,713
72
(133)
(500)
(250)
23,902
(1,272)
6
—
(401)
—
—
(1,667)
(4,650)
(443)
(1,751)
15,391
2019
US$m
16,098
2,285
2,073
1,762
22,218
(77)
(9)
22,132
59
(183)
(496)
(315)
21,197
(3,487)
(260)
(291)
—
—
(171)
(4,209)
(4,925)
(296)
(648)
11,119
2018
US$m
2,830
532
118
500
3,980
(51)
—
3,929
(276)
(38)
(174)
3,441
801
4,242
2018
US$m
11,378
3,095
2,776
2,140
19,389
(70)
—
19,319
(128)
(272)
(552)
(231)
18,136
(132)
279
4,622
(376)
602
—
4,995
(4,559)
(372)
(33)
18,167
224
224
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
2 Operating segments continued
Underlying earnings
Iron Ore
Aluminium
Copper & Diamonds
Energy & Minerals
Reportable segments total
Other Operations
Inter-segment transactions
Product group total
Central pension costs, share-based payments and insurance
Restructuring, project and one-off costs
Central costs
Exploration and evaluation not attributed to product groups
Net finance costs
Underlying earnings
Items excluded from underlying earnings
Net earnings attributable to owners of Rio Tinto per income statement
2020
US$m
11,398
471
763
577
13,209
(54)
(32)
13,123
81
(108)
(418)
(216)
(14)
12,448
(2,679)
9,769
2019
US$m
9,638
599
554
611
11,402
(89)
(3)
11,310
60
(94)
(550)
(231)
(122)
10,373
(2,363)
8,010
2018
US$m
6,531
1,347
1,054
995
9,927
(102)
—
9,825
(90)
(190)
(410)
(193)
(134)
8,808
4,830
13,638
Underlying EBITDA and underlying earnings are reported by Rio Tinto to provide greater understanding of the underlying business performance of its
operations and to enhance comparability of reporting periods.
The measures of underlying EBITDA and underlying earnings, in conjunction with net cash generated from operating activities and capital expenditure
(net of proceeds on disposals), are used by the Chief Executive of Rio Tinto to assess the performance of the product groups. Underlying earnings and net
earnings both represent amounts net of tax attributable to owners of Rio Tinto.
The following items are excluded from net earnings in arriving at underlying earnings in each period irrespective of materiality:
– Net gains/(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 debt and intragroup balances, unrealised
gains/(losses) on currency and interest rate derivatives not qualifying for hedge accounting, unrealised gains/(losses) on certain commodity
derivatives not qualifying for hedge accounting, and unrealised gains/(losses) on embedded derivatives not qualifying for hedge accounting.
In addition, there is a final judgmental category which includes, where applicable, other credits and charges that, individually or in aggregate with similar
items, are of a nature or size to require exclusion in order to provide additional insight into underlying business performance.
Underlying EBITDA excludes the EBITDA impact of the same items that are excluded from underlying earnings.
Product group underlying earnings include the Group's share of the underlying earnings of subsidiaries and equity accounted units stated before finance
items but after the amortisation of discount on provisions.
Rio Tinto’s share of the underlying earnings of equity accounted units amounted to US$656 million in 2020 (2019: US$302 million; 2018: US$513 million).
This amount is attributable as follows: US$640 million profit to the Copper & Diamonds product group and US$16 million profit to other product groups
(2019: US$292 million profit to the Copper & Diamonds product group and US$10 million profit to other product groups; 2018: US$476 million profit to
the Copper & Diamonds product group and US$37 million profit to other product groups). These amounts are included in underlying earnings and include
the underlying earnings of the Group’s tolling entities which process alumina. Tolling entities recharge the majority of their costs and generally have
minimal earnings.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
225
225
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
Reconciliation of underlying earnings to net earnings
Underlying earnings
Items excluded from underlying earnings
Impairment charges (note 6)
Net (losses)/gains on consolidation and disposal of interests in businesses(a)
Exchange and derivative gains/(losses):
– Exchange (losses)/gains on external net debt, intragroup balances and
derivatives(b)
– Losses on currency and interest rate derivatives not qualifying for hedge
accounting(c)
– Gains/(losses) on embedded commodity derivatives not qualifying for hedge
accounting(d)
Net losses from movements to closure estimates (non-operating and fully impaired
sites)(e)
Gain relating to surplus land at Kitimat(f)
Other exclusions(g)
Total excluded from underlying earnings
Net earnings
Pre-tax(h)
2020
US$m
18,282
Non-
controlling
interests
2020
US$m
Taxation
2020
US$m
Net amount
2020
US$m
Net amount
2019
US$m
Net amount
2018
US$m
(5,195)
(639)
12,448
10,373
8,808
(1,243)
—
128
—
(1,138)
5
(142)
(19)
—
—
8
4
(1,115)
—
(1,658)
(291)
(104)
3,996
(1,125)
51
550
(157)
(59)
(48)
33
(10)
(5)
18
(192)
202
(401)
—
—
100
—
—
1
—
—
(2,891)
15,391
204
(4,991)
8
(631)
(2,679)
9,769
(300)
—
(335)
—
—
—
(214)
(2,363)
8,010
569
—
4,830
13,638
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
In 2019, the net loss mainly related to the disposal of our entire 68.62% stake in Rössing Uranium on 16 July 2019 for which we recorded a pre-tax loss of US$289 million (US$289 million net of tax).
In 2018, the net gain related mainly to the sales of the Hail Creek coal mine and the Kestrel underground coal mine, which both completed on 1 August 2018, the sale of the Dunkerque aluminium
smelter on 14 December 2018 and the sale of Grasberg on 21 December 2018. The net gain in 2018 also includes a gain on consolidation recognised on the formation on 10 May 2018 of ELYSIS, a
new joint venture to develop a carbon-free smelting process. Refer to note 36 for further details in respect of these transactions.
Exchange losses on external net debt and intragroup balances comprise post-tax foreign exchange losses on intragroup balances of US$1,330 million partially offset by post-tax gains of US$205
million on external net debt, primarily as a result of strengthening of the Australian dollar against the US dollar. In 2019, exchange gains on external net debt and intragroup balances comprise post-
tax foreign exchange gains on net debt of US$60 million and post-tax losses of US$9 million on intragroup balances, primarily as a result of the Canadian dollar strengthening against the US dollar.
From 1 January 2019, all foreign exchange gains and losses relating to net debt are excluded from underlying earnings. In 2018 and previous years, foreign exchange gains and losses on non-US
dollar cash held in US dollar functional currency entities was included within underlying earnings. The impact of this change on the reported 2018 comparatives is insignificant, and therefore the
comparatives have not been restated. In 2018 the net exchange gains comprise post-tax foreign exchange losses of US$386 million on US dollar denominated net debt and US$936 million gains on
intragroup balances.
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.
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.
In 2020 the pre-feasibility study for the Gove refinery closure was completed, resulting in an increase to the closure provision. As a non-operating asset, this increase was recognised through the
income statement. Also in 2020, the feasibility study for the Argyle mine closure was completed, resulting in a decrease to the closure provision. As the assets at Argyle had previously been fully
impaired this decrease was recognised through the income statement, in line with previous movements to the closure provision. This amount also includes an increase in Diavik's closure provision to
reflect the latest findings from the ongoing Pre-Feasibility Study, recognised through the incomes statement as Diavik was fully impaired during the year. It also includes the net earnings impact
(US$138 million loss) in respect of increases to these closure provisions following a reduction to the closure discount rate to 1.5%.
In 2018, the pre-feasibility study for the Argyle mine closure was completed, resulting in an increase to the closure provision. As the assets at Argyle had previously been fully impaired, this increase
was not capitalised and was instead recognised in the income statement. Also in 2018, the feasibility study for the closure of the Ranger Project Area at Energy Resources of Australia (ERA) was
finalised, resulting in an increase to the closure provision. As the assets of ERA had been fully impaired, this increase was recognised in the income statement. The charge was excluded from
underlying earnings.
In November 2018, Rio Tinto completed the lease and sale of a wharf and land in Kitimat. The resulting gain on disposal of property, plant and equipment and other income were both excluded from
underlying earnings on the grounds of materiality.
In 2019, other exclusions included provisions for obligations in respect of legacy operations of US$246 million (loss of US$233 million after tax), partially offset by the write-back of a net realisable
value provision in respect of low grade stockpile inventories at Oyu Tolgoi of US$75 million (gain of US$19 million after tax and non-controlling interests). As a result of increased uncertainty over
timing of production from the Oyu Tolgoi underground project (refer to note 6), we expected to utilise low grade stockpiles sooner than previously forecast. This was excluded from underlying
earnings, consistent with the related impairment charge recognised in 2019.
Exclusions from underlying earnings relating to equity accounted units are stated after tax and are included in the column “Pre-tax”.
226
226
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
3 Operating segments – additional information
Consolidated sales revenue by destination(a)
China
Asia (excluding China and Japan)
United States of America
Japan
Europe (excluding UK)
Canada
Australia
UK
Other countries
Consolidated sales revenue
2020
%
58.1
10.2
10.9
7.5
5.9
2.9
1.7
0.5
2.3
100
2019
%
51.3
10.6
14.2
8.9
6.0
3.3
1.7
0.6
3.4
100
2018
%
44.6
11.5
15.6
9.6
9.3
3.3
1.8
0.7
3.6
100
2020
US$m
25,940
4,536
4,867
3,354
2,623
1,289
745
242
1,015
44,611
2019
US$m
22,135
4,558
6,125
3,855
2,610
1,478
737
248
1,419
43,165
2018
US$m
18,061
4,665
6,337
3,873
3,788
1,330
720
264
1,484
40,522
(a)
Consolidated sales revenue by geographical destination is based on the ultimate country of destination of the product, if known. If the eventual destination of the product sold through traders is not
known then revenue is allocated to the location of the product at the time when control is transferred. Rio Tinto is domiciled in both the UK and Australia.
Consolidated sales revenue by product
Consolidated sales revenues of the Group are derived from the following products sold to external customers:
Iron ore
Aluminium, Alumina and Bauxite
Copper
Industrial minerals
Gold
Diamonds
Uranium(b)
Other(b)
Consolidated sales revenue
Share of equity accounted unit sales and intra-subsidiary/equity accounted unit sales
Gross product sales
Revenue from
contracts
with
customers
2020
US$m
28,202
9,092
1,721
2,054
471
459
299
1,194
43,492
Other
revenue(a)
2020
US$m
Consolidated
sales revenue
2020
US$m
1,000
54
64
(3)
6
—
—
(2)
1,119
29,202
9,146
1,785
2,051
477
459
299
1,192
44,611
2,407
47,018
Iron ore
Aluminium, Alumina and Bauxite
Copper
Coal
Industrial minerals
Gold
Diamonds
Uranium(b)
Other(b)
Consolidated sales revenue
Share of equity accounted unit sales and intra-subsidiary/equity accounted unit
sales
Gross product sales
Revenue from
contracts
with
customers
2019
US$m
Other
revenue(a)
2019
US$m
Consolidated
sales revenue
2019
US$m
Revenue from
contracts
with
customers
2018
US$m
Other
revenue(a)
2018
US$m
Consolidated
sales revenue
2018
US$m
25,516
10,207
2,030
—
2,251
667
619
375
1,322
42,987
19,888
12,041
2,420
986
2,168
869
695
415
1,112
40,594
229
(32)
(7)
—
(12)
2
—
—
(2)
178
25,745
10,175
2,023
—
2,239
669
619
375
1,320
43,165
2,202
45,367
(21)
(22)
(32)
3
—
—
—
—
—
(72)
19,867
12,019
2,388
989
2,168
869
695
415
1,112
40,522
2,313
42,835
(a)
(b)
Certain of the Group's products may be provisionally priced at the date revenue is recognised. The change in value of the provisionally priced receivables is based on relevant forward market prices
and is included in “Other revenue” above.
Uranium sales revenues were previously included within "Other". These sales revenues are now presented separately and the 2018 and 2019 comparatives have been adjusted to ensure
comparability.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
227
227
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
Non-current assets other than excluded items(a)
The total of non-current assets other than excluded items is shown by location below.
Australia
Canada
Mongolia
United States of America
Africa
South America
Europe (excluding France and the UK)
UK
France
Other countries
Total non-current assets other than excluded items
Non-current assets excluded from analysis above:
Deferred tax assets
Other financial assets(b)
Quasi equity loans to equity accounted units(b)
Tax recoverable
Receivables and other assets
Total non-current assets per balance sheet
2020
US$m
32,290
14,666
10,285
6,090
3,294
2,718
157
117
55
1,008
70,680
3,385
829
112
4
1,525
76,535
2019
US$m
27,944
14,644
9,187
5,459
3,583
2,652
193
158
64
1,314
65,198
3,102
635
113
5
1,446
70,499
(a)
(b)
Allocation of non-current assets by country is based on the location of the business units holding the assets. It includes investments in equity accounted units totalling US$3,652 million (2019:
US$3,858 million) which represents the Group’s share of net assets excluding quasi equity loans shown separately above.
Loans to equity accounted units comprise quasi equity loans of US$112 million (2019: US$113 million) included in “Investments in equity accounted units” on the face of the balance sheet and non-
current non-quasi equity loans of US$1 million (2019: US$39 million) shown within “Other financial assets”.
4 Net operating costs (excluding items shown separately)
Raw materials, consumables, repairs and maintenance
Amortisation of intangible assets
Depreciation of property, plant and equipment
Employment costs
Shipping and other freight costs(a)
(Increase)/decrease in finished goods and work in progress
Royalties
Amounts charged by equity accounted units(b)
Net foreign exchange losses/(gains)
Other external costs(a)
Loss/(gain) on sale of property, plant and equipment(c)
Provisions (including exchange differences on provisions)
Research and development
Costs included above capitalised or shown separately as exploration and evaluation costs(d)
Other operating income
Net operating costs (excluding items shown separately)
Note
13
14
5
25
2020
US$m
8,490
161
4,118
4,770
2,088
(47)
2,763
958
300
3,083
50
894
45
(708)
(711)
2019
US$m
9,485
133
4,251
4,522
2,257
42
2,501
1,136
(52)
3,627
31
753
45
(651)
(773)
26,254
27,307
2018
US$m
10,613
133
3,882
4,728
2,580
(186)
2,117
1,200
(56)
3,184
(506)
1,011
45
(589)
(1,041)
27,115
(a)
(b)
(c)
(d)
In 2020, other external costs include US$314 million (2019: US$327 million) of short-term lease costs and US$30 million (2019: US$15 million) of variable lease costs recognised in the income
statement in accordance with IFRS 16 “Leases”. Refer to note 22. In 2018, net operating costs included US$787 million of operating lease expenses under IAS 17 “Leases”. Costs for leases of dry bulk
vessels (which included costs for crewing services) were included within “Shipping and other freight costs” and other lease costs were included within “Other external costs”.
Amounts charged by equity accounted units relate to toll processing and also include purchases from equity accounted units of bauxite and aluminium which are then processed by the product
group or sold to third parties. Generally, purchases are in proportion to the Group’s share of the equity accounted unit but in 2020, US$129 million (2019: US$291 million; 2018: US$332 million)
related to purchases of the other investors’ share of production.
In 2018, includes a US$549 million pre-tax gain on the sale of property, plant and equipment at Kitimat. Refer to note 2.
In 2020, US$537 million (2019: US$469 million; 2018: US$400 million) of operating costs were capitalised and US$171 million (2019: US$182 million; 2018: US$189 million) of costs were shown
separately within "Exploration and evaluation costs" in the Group income statement.
228
228
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
5 Employment costs
Total employment costs
– Wages and salaries
– Social security costs
– Net post-retirement charge
– Share-based payment charge
Less: charged within provisions(a)
Total employment costs
Note
2020
US$m
2019
US$m
4,141
330
469
138
5,078
(308)
4,770
3,923
328
384
123
4,758
(236)
4,522
42
41
25
4
2018
US$m
4,154
336
532
122
5,144
(416)
4,728
(a)
Amounts included above relate to provisions for pensions, post-retirement healthcare, long service leave and other employee entitlements. These are included in “Provisions (including exchange
differences on provisions)” in note 4.
6 Impairment charges
Aluminium – Pacific Aluminium
Aluminium – Sohar
Aluminium – ISAL
Copper & Diamonds – Diavik
Copper & Diamonds – Oyu Tolgoi
Aluminium - Yarwun alumina refinery
Energy & Minerals – Rössing
Total impairment charge
Allocated as:
Intangible assets
Property, plant and equipment
Investment in equity accounted units ("EAUs")
Total impairment charge
Comprising:
Impairment charges of consolidated balances
Impairment charges related to EAUs (pre-tax)
Total impairment charges in the financial information by
business unit (page 306)
Taxation (including related to EAUs)
Non-controlling interests
Total impairment in the income statement
Non-
controlling
interest
2020
US$m
Taxation
2020
US$m
17
—
(38)
149
—
—
—
128
—
—
—
—
—
—
—
—
Note
13
14
Pre-tax
amount
2020
US$m
(489)
(220)
(93)
(441)
—
—
—
(1,243)
(4)
(900)
(339)
(1,243)
Net
amount
2020
US$m
(472)
(220)
(131)
(292)
—
—
—
(1,115)
(904)
(368)
(1,272)
157
—
(1,115)
Pre-tax
amount
2019
US$m
—
—
(109)
—
(2,240)
(1,138)
—
(3,487)
(1)
(3,486)
—
(3,487)
(3,487)
—
(3,487)
323
1,506
(1,658)
Pre-tax
amount
2018
US$m
—
(123)
—
—
(9)
(132)
(2)
(130)
—
(132)
(132)
—
(132)
25
3
(104)
Aluminium – Pacific Aluminium, Australia and New Zealand
On 9 July 2020, we announced the conclusion of the NZAS strategic review and gave Meridian Energy 14 months' notice for the termination of the power
contract. As a result of the decision to wind-down operations an impairment trigger was identified. The net present value of post-tax cash flows over the
remaining life for this cash-generating unit (CGU) was negative and therefore the non-current assets of the smelter were fully impaired. On 14 January
2021 a new agreement was reached with Meridian Energy in relation to power prices, allowing NZAS to continue operating the Tiwai Point aluminium
smelter until December 2024. The extension allows time for detailed closure studies to be completed and for NZAS to support the government and
Southland community in planning for the future. We have evaluated and concluded that these updated circumstances are not a trigger for impairment
reversal.
The high operating costs and challenging outlook for the aluminium industry have also resulted in impairment triggers being identified at the Bell Bay
aluminium smelter in Tasmania, Australia and at Boyne Smelter in Queensland, Australia at 30 June 2020. Bell Bay has a power contract to 2025 with
Hydro Tasmania and with the current market context the forecast net present value of cash flows over that period was negative. The property, plant and
equipment of the Bell Bay smelter was therefore fully impaired. We determined the recoverable amount for our share of the Boyne Smelter CGU which
also includes the Gladstone Power Station as US$273 million based on post-tax cash flows expressed in real terms and discounted at 6.6%. Accordingly
our share of impairment after tax in the equity accounted unit was US$119 million (US$148 million pre-tax) related to the smelter and US$26 million
(US$36 million pre-tax) related to the power station.
Aluminium – Sohar
In 2020, the challenging outlook for the Middle Eastern aluminium industry was identified as an impairment trigger at the Sohar aluminium smelter in
Oman, an equity accounted unit of the Group.
At 30 September 2020 we determined the recoverable amount for our share of the Sohar CGU to be US$258 million based on post-tax cash flows
expressed in real terms and discounted at 7.6%. Accordingly our share of impairment after tax in the equity accounted unit was US$220 million.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
229
229
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
6 Impairment charges continued
Aluminium – ISAL smelter, Iceland
In 2018, we reached agreement with Hydro to sell the ISAL smelter in Iceland, our 53.3% interest in the Aluchemie anode plant in the Netherlands and
our 50% share in the Aluminium fluoride plant in Sweden (ISAL). The anticipated headline sales price of US$345 million was lower than the carrying value
of these assets, leading us to recognise an impairment charge of US$123 million. This was based on a fair value less cost of disposal (FVLCD) model,
against property, plant and equipment and acquired software. Subsequently, Hydro withdrew its offer.
In 2019, these assets no longer met the accounting criteria to be classified as assets held for sale. Accordingly these non-current assets were tested for
impairment. We calculated the recoverable amount for the CGUs based on the IAS 36 value-in-use methodology by reference to the net present value of
post-tax cash flows expressed in real terms and discounted at 6.9%. These were US$302 million for the CGU comprising ISAL and Aluchemie and US$46
million for Alufluor. This resulted in a pre-tax impairment charge of US$109 million allocated to property, plant and equipment and intangibles in the ISAL
and Aluchemie CGU.
In February 2020 we announced a strategic review of the ISAL smelter in Iceland and the challenging market conditions were identified as an impairment
trigger. The net present value of cash flows projected over the remaining life for this CGU did not support retaining any carrying value for the non-current
assets of the CGU, which were fully impaired following a pre-tax impairment charge of US$204 million in the first half of 2020.
During subsequent negotiations Landsvirkjun tabled an improved offer for power delivery, restoring the competitiveness of the smelter over its remaining
life. We have concluded these updated circumstances, represent an indicator of partial impairment reversal. When combined with improved pricing since
the half year we have calculated a recoverable amount of US$139 million based on the IAS 36 fair value less cost of disposal (FVLCD) methodology,
discounted using a post-tax discount rate of 6.6% expressed in real terms. As a result we have reversed previously recorded pre-tax impairment of
US$111 million reflected as an adjustment to the impairment charge recognised in the first half of 2020.
Copper & Diamonds – Diavik, Canada
The COVID-19 pandemic has significantly disrupted the global demand for diamonds with many countries restricting the movement of citizens and
closing retail outlets. Our 40% joint venture partner at the Diavik diamond mine filed for creditor protection in April 2020 and has since defaulted on its
cash calls. Together these circumstances were identified as an impairment trigger. The net present value of post-tax cash flows projected over the
remaining life of the Diavik diamond mine to 2025 did not support retaining any carrying value for the property, plant and equipment and intangible
assets of the CGU, which have therefore been fully impaired.
Copper & Diamonds – Oyu Tolgoi, Mongolia
On 16 July 2019 we announced that the first sustainable production from the Oyu Tolgoi underground project could be delayed by 16 to 30 months
compared with the original feasibility study guidance in 2016. We also announced that development capital spend for the project may increase by
between US$1.2 billion and US$1.9 billion in excess of the US$5.3 billion previously disclosed.
We identified these matters as an impairment trigger and prepared an assessment of the recoverable amount for the CGU at 30 June 2019 using a FVLCD
model, as prescribed by IAS 36 “Impairment of Assets”.
In arriving at a recoverable amount, as at 30 June 2019, we estimated post-tax cash flows expressed in real terms over the current life of mine plus
anticipated future expansions, utilising mineral resources. The mineral resources incorporate almost two billion tonnes of ore, which contributes
approximately 20% to the total recoverable amount. We discounted the cash flows using a post-tax discount rate of 8.3% expressed in real terms. Due to
the inputs used, the recoverable amount of the Oyu Tolgoi CGU was classified as level 3 under the fair value hierarchy.
At 30 June 2019 we determined the recoverable amount to be US$8.3 billion on a post-tax basis which resulted in a pre-tax impairment charge of US$2.2
billion (100% basis). This was allocated to mining properties and the underground development assets under construction. The net adjustment to tax
represented an increase to deferred tax assets of US$320 million for the temporary difference corresponding to the impairment and a decrease in deferred
tax assets of US$359 million for tax losses that were expected to expire without utilisation.
Since June 2019, the carrying value of Oyu Tolgoi on the same basis has increased to US$10.1 billion (100% basis), mainly due to capital expenditure
completed in the interim. The execution of this capital expenditure also results in a corresponding increase in the value of the asset over this period. Prior
to completion of the underground project, the net present value of cash flows also increases by approximately US$1.1 billion per annum due to unwinding
of the discount for the time value of money. Such valuation increases are not indicative of impairment reversal.
On 16 December 2020 we confirmed the completion of the Definitive Estimate and selection of a preferred development option for the Oyu Tolgoi
underground project. Development capital assumptions of US$6.75 billion and forecast sustainable production by October 2022 incorporate the impacts of
COVID-19. The latest information is within the range of assumptions used to calculate the CGU's recoverable amount in the most recent impairment test,
described above, and is not indicative of an impairment loss. The next major milestone for the project development is the undercut, scheduled for
mid-2021, which initiates the caving process. Study work also continues on the Panel 1 and Panel 2 sections of the underground, with initial
recommendations expected mid-2021. These studies will also consider options and associated costs to recover the copper and gold contained within the
pillars added to the mine design of Panel 0.
230
230
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
On 4 January 2021, the Government of Mongolia advised Rio Tinto that they were dissatisfied with the results of the Definitive Estimate and the funding
implications for the sharing of economic benefits between the shareholders of Oyu Tolgoi LLC. The Government has also stressed the importance of
achieving a comprehensive solution which addresses the social issues of importance to Mongolia, such as water usage and the tax matters which have
been referred to International Arbitration. We are engaging with the Government in relation to the definitive estimate and are in active discussions with
them to address and close all outstanding issues and increase the project's benefit to all stakeholders. Should future negotiations with the Government of
Mongolia result in changes to the operating cash profile of the assets, an impairment test may be necessary.
The funding of equity contributions to the project have been accounted for in accordance with the accounting policy in note 1 (xii) and additional
information regarding the lending certificates and non-controlling interests are provided in note 32.
Aluminium – Yarwun alumina refinery
In 2019, our annual impairment assessment of the Yarwun CGU resulted in a pre-tax impairment charge of US$1,138 million to property, plant and
equipment as a result of this CGU being assessed on a stand-alone basis for the first time and a 30% year-on-year reduction in the spot price of alumina
to US$275/t at 31 December 2019.
In 2020, we continued to monitor the Yarwun CGU closely for additional indicators of impairment given the limited headroom as a consequence of
previous impairment, together with the sensitivity of the valuation to movements in the alumina price and headwinds faced by the aluminium sector since
the onset of the COVID-19 pandemic.
We have considered the impact of recent volatility in the alumina spot price through 2020, noting its recovery from a low of US$226/t in June 2020 to over
US$300/t by the end of the year, as well as valuation upside attributable to a reduction in input costs over the period under review. No impairment
triggers have been identified in 2020 and the carrying value remains supportable.
7 Share of profit after tax of equity accounted units
Sales revenue: Rio Tinto share(a)
Operating costs
Profit before finance items and taxation
Finance items
Share of profit after tax of equity accounted units
Profit before taxation
Taxation
Profit for the year (Rio Tinto share)
2020
US$m
2,490
(1,439)
1,051
(59)
23
1,015
(363)
652
2019
US$m
2,358
(1,812)
546
(65)
10
491
(190)
301
2018
US$m
2,497
(1,656)
841
(69)
14
786
(273)
513
(a) Sales revenue of equity accounted units includes sales by equity accounted units to Group subsidiaries.
Further information relating to the Group’s interests in joint ventures and associates is given in notes 34 and 35.
8 Finance income and finance costs
Finance income from equity accounted units
Other finance income (including bank deposits, net investment in leases, and other financial assets)
Total finance income
Interest on:
– Financial liabilities at amortised cost (excluding lease liabilities) and associated derivatives
– Lease liabilities
Fair value movements:
– Bonds designated as hedged items in fair value hedges
– Derivatives designated as hedging instruments in fair value hedges
Loss on early redemption of bonds(a)
Amounts capitalised
Total finance costs
Note
14
2020
US$m
4
137
141
(561)
(50)
(284)
287
—
340
(268)
2019
US$m
4
296
300
(816)
(55)
(185)
181
—
321
(554)
2018
US$m
7
242
249
(775)
(2)
96
(73)
(94)
296
(552)
(a)
In 2018 we completed a bond buy-back programme of US$1.9 billion (nominal value). Loss on early redemption of bonds included a premium charge of US$72 million, unamortised debt issuance
costs and fees of US$9 million, the write-off of the fair value hedge adjustment of US$16 million and the reclassification of a gain out of the cost of hedging reserve of US$3 million. Net interest paid
in the Group cash flow statement included the payment of the premiums and the accelerated interest associated with the bond redemptions (US$80 million). There was no bond buy-back
programme in 2020 or 2019.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
231
231
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
9 Taxation
Taxation charge
– Current
– Deferred
Total taxation charge
Prima facie tax reconciliation
Profit before taxation
Deduct: share of profit after tax of equity accounted units(a)
Add: impairment after tax of investments in equity accounted units (a)
Parent companies' and subsidiaries' profit before tax
Prima facie tax payable at UK rate of 19% (2019: 19%; 2018: 19%)
Higher rate of taxation on Australian underlying earnings
Impact of items excluded in arriving at underlying earnings(b):
– Impairment charges(c)
– Net gains and losses on consolidation and disposal of interests in businesses
– Exchange and gains/losses on derivatives
– Losses from increases to closure estimates (non-operating and fully impaired sites)
– Gain relating to surplus land at Kitimat
– Other exclusions
Impact of changes in tax rates and laws
Other tax rates applicable outside the UK and Australia on underlying earnings
Resource depletion and other depreciation allowances
Recognition of previously unrecognised deferred tax assets(d)
Write-down of previously recognised deferred tax assets(e)
Amounts under/(over) provided in prior years
Other items(f)
Total taxation charge(a)
Note
17
2020
US$m
5,169
(178)
4,991
2019
US$m
4,436
(289)
4,147
2018
US$m
3,726
516
4,242
2020
US$m
15,391
(652)
339
15,078
2019
US$m
11,119
(301)
—
10,818
2,865
1,779
44
—
260
(24)
—
—
—
(80)
(34)
(182)
173
9
181
4,991
2,055
1,495
340
55
(22)
—
—
38
1
(110)
(57)
—
42
83
227
4,147
2018
US$m
18,167
(513)
—
17,654
3,354
1,106
—
(251)
32
30
(81)
—
47
(47)
(46)
—
13
(108)
193
4,242
(a)
(b)
(c)
(d)
(e)
(f)
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$363 million (2019: US$190 million; 2018: US$273 million). Impairment after tax of investments in equity accounted units is net of tax credits of US$29 million (2019: US$nil; 2018:
US$nil).
The impact for each item includes the effect of tax rates applicable outside the UK.
The tax impact of impairments includes the write-down of deferred tax assets at ISAL and NZAS and non-recognition of deferred tax on those impairments. The tax impact also includes recognition at
local tax rates of deferred tax assets arising on the impairments of Bell Bay, Gladstone Power Station and Diavik. In the comparative period to 31 December 2019, the tax impact of impairment
includes the write down of deferred tax assets in respect of prior year tax losses in Mongolia and recognition of deferred tax on impaired assets. Refer to note 6.
The recognition of previously unrecognised deferred tax assets relates to the recognition of prior year deferred tax assets on losses and on impaired assets at Oyu Tolgoi due to improved deferred tax
asset recovery expectations.
Write down of previously recognised deferred tax assets relates primarily to the partial de-recognition of deferred tax assets in our Australian Aluminium business.
Other items include non-deductible costs and withholding taxes, and various adjustments to provisions for taxation, the most significant of which relate to transfer pricing matters, including issues
under discussion with the Australian Tax Office.
Tax on fair value movements:
– Cash flow hedge fair value gains
Tax credit/(charge) on actuarial gains and losses on post-retirement benefit plans
Tax relating to components of other comprehensive income/(loss) for the year(a)
2020
US$m
3
112
115
2019
US$m
(6)
83
77
2018
US$m
(54)
(271)
(325)
(a)
This comprises a deferred tax credit of US$115 million (2019: credit of US$77 million; 2018: charge of US$325 million) and a current tax charge of US$nil (2019: US$nil; 2018: US$nil), see note 17.
232
232
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Notes to the 2020 Financial Statements
10 Earnings per ordinary share
Basic earnings per share attributable to ordinary shareholders of Rio Tinto(a)
Diluted earnings per share attributable to ordinary shareholders of Rio Tinto(b)
Basic earnings per share attributable to ordinary shareholders of Rio Tinto(a)
Diluted earnings per share attributable to ordinary shareholders of Rio Tinto(b)
2020
Weighted
average
number of
shares
(millions)
1,617.4
1,628.6
2020
Per share
amount
(cents)
604.0
599.8
2020
Earnings
US$m
9,769
9,769
2019
Weighted
average
number of
shares
(millions)
1,630.1
1,642.1
2018
Weighted
average
number of
shares
(millions)
1,719.3
1,731.7
2019
Earnings
US$m
8,010
8,010
2018
Earnings
US$m
13,638
13,638
2019
Per share
amount
(cents)
491.4
487.8
2018
Per share
amount
(cents)
793.2
787.6
(a)
(b)
The weighted average number of shares is calculated as the average number of Rio Tinto plc shares outstanding not held as treasury shares of 1,246.5 million (2019: 1,259.4 million; 2018: 1,312.7
million) plus the average number of Rio Tinto Limited shares outstanding of 370.9 million (2019: 370.7 million; 2018: 406.6 million) over the relevant period. There were no cross holdings of shares
between Rio Tinto Limited and Rio Tinto plc at 31 December 2020 (31 December 2019: nil).
For the purposes of calculating diluted earnings per share, the effect of dilutive securities of 11.2 million shares in 2020 (2019: 12.0 million; 2018: 12.4 million) is added to the weighted average
number of shares described in (a) above. This effect is calculated under the treasury stock method, in accordance with IAS 33 “Earnings per Share”. The Group’s only potential dilutive ordinary shares
are share options for which terms and conditions are described in note 41.
11 Dividends
Rio Tinto plc previous year final dividend paid
Rio Tinto plc previous year special dividend paid
Rio Tinto plc interim dividend paid
Rio Tinto plc interim special dividend paid
Rio Tinto Limited previous year final dividend paid
Rio Tinto Limited previous year special dividend paid
Rio Tinto Limited interim dividend paid
Rio Tinto Limited interim special dividend paid
Dividends paid during the year
Dividends per share: paid during the year
Final dividends per share: proposed in the announcement of the results for the year
Special dividends per share: proposed in the announcement of the results for the year
Rio Tinto plc previous year final (pence)
Rio Tinto plc previous year special (pence)
Rio Tinto plc interim (pence)
Rio Tinto plc interim special (pence)
Rio Tinto Limited previous year final – fully franked at 30% (Australian cents)
Rio Tinto Limited previous year special – fully franked at 30% (Australian cents)
Rio Tinto Limited interim – fully franked at 30% (Australian cents)
Rio Tinto Limited interim special – fully franked at 30% (Australian cents)
Rio Tinto plc previous year final
Rio Tinto plc previous year special
Rio Tinto plc interim
Rio Tinto plc interim special
Rio Tinto Limited previous year final
Rio Tinto Limited previous year special
Rio Tinto Limited interim
Rio Tinto Limited interim special
2018
US$m
2,446
—
1,666
—
731
—
513
—
5,356
307.0 c
180.0 c
243.0 c
Dividends
per share
2018
129.43 p
—
96.82 p
—
228.53 c
—
170.84 c
—
2020
US$m
2,783
—
1,937
—
857
—
555
—
6,132
2019
US$m
2,245
3,032
1,930
780
666
900
556
225
10,334
386.0 c
309.0 c
93.0 c
635.0 c
231.0 c
—
Dividends
per share
2020
177.47 p
—
119.74 p
—
349.74 c
—
216.47 c
—
Number of
shares
2020
(millions)
1,246.4
N/A
1,246.5
N/A
371.2
N/A
371.2
N/A
Dividends
per share
2019
135.96 p
183.55 p
123.32 p
49.82 p
250.89 c
338.70 c
219.08 c
88.50 c
Number of
shares
2019
(millions)
Number of
shares
2018
(millions)
1,265.0
1,265.0
1,256.4
1,256.4
371.2
371.2
371.2
371.2
1,334.8
N/A
1,308.4
N/A
412.4
N/A
412.4
N/A
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
233
233
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
11 Dividends continued
The dividends paid in 2020 are based on the following US cents per share amounts: 2019 final – 231.0 cents, 2020 interim – 155.0 cents (2019 dividends
paid: 2018 final – 180.0 cents, 2018 final special – 243.0 cents, 2019 interim – 151.0 cents; 2019 interim special – 61.0 cents, 2018 dividends paid: 2017
final – 180.0 cents, 2018 interim – 127.0 cents).
The number of shares on which Rio Tinto plc dividends are based excludes those held as treasury shares and those held by employee share trusts which
waived the right to dividends. Employee share trusts waived dividends on 258,779 Rio Tinto plc ordinary shares and 28,743 American Depository Receipts
(ADRs) for the 2019 final dividend and on 171,213 Rio Tinto plc ordinary shares and 29,634 ADRs for the 2020 interim dividend (2019: on 852,283
Rio Tinto plc ordinary shares and 37,678 ADRs for the 2018 final dividend and on 564,099 Rio Tinto plc ordinary shares and 47,674 ADRs for the 2019
interim dividend; 2018: on 132,294 Rio Tinto plc ordinary shares and 22,824 ADRs for the 2017 final dividend and on 314,529 Rio Tinto plc ordinary shares
and 36,321 ADRs for the 2018 interim dividend). In 2020, 2019 and 2018, no Rio Tinto Limited shares were held by Rio Tinto plc.
The number of shares on which Rio Tinto Limited dividends are based excludes those held by shareholders who have waived the rights to dividends.
Employee share trusts waived dividends on 98,065 Rio Tinto Limited ordinary shares for the 2019 final dividend and on 84,377 shares for the 2020 interim
dividend (2019: on 628,566 shares for the 2018 final dividend and 342,062 shares for the 2019 interim dividend; 2018: on 130,129 shares for the 2017 final
dividend and 251,394 shares for the 2018 interim dividend).
In addition, the directors of Rio Tinto announced a final dividend of 309.0 cents per share and a special dividend of 93.0 cents per share on 17 February
2021. This is expected to result in payments of US$6.5 billion. The dividend will be paid on 15 April 2021 to Rio Tinto plc and Rio Tinto Limited
shareholders on the register at the close of business on 5 March 2021.
The proposed Rio Tinto Limited dividends will be franked out of existing franking credits or out of franking credits arising from the payment of income tax
during 2021.
The approximate amount of the Rio Tinto Limited consolidated tax group’s retained profits and reserves that could be distributed as dividends and franked
out of available credits that arose from net payments of income tax in respect of periods up to 31 December 2020 (after deducting franking credits
expected to be utilised on the 2020 final and special dividends declared) is US$11,014 million (2019: US$8,599 million; 2018: US$6,178 million).
2020
US$m
2019
US$m
922
24
946
17,341
(16,395)
912
10
922
16,926
(16,004)
16,926
(16,004)
15,861
(14,949)
2020
US$m
2019
US$m
468
383
95
946
487
349
86
922
12 Goodwill
Net book value
At 1 January
Adjustment on currency translation
At 31 December
– cost
– accumulated impairment
At 1 January
– cost
– accumulated impairment
At 31 December, goodwill has been allocated as follows:
Net book value
Richards Bay Minerals
Pilbara
Dampier Salt
234
234
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
12 Goodwill continued
Impairment tests for goodwill
Richards Bay Minerals
Richards Bay Minerals’ annual impairment review resulted in no impairment charge for 2020 (2019: no impairment charge). The recoverable amount has
been assessed by reference to fair value less cost of disposal (FVLCD), in line with the policy set out in note 1(i) and classified as level 3 under the fair
value hierarchy. FVLCD was determined by estimating cash flows until the end of the life-of-mine plan including anticipated expansions. In arriving at
FVLCD, a post-tax discount rate of 8.6% (2019: 8.6%) has been applied to the post-tax cash flows expressed in real terms.
The key assumptions to which the calculation of FVLCD for Richards Bay Minerals is most sensitive and the corresponding decrease in FVLCD are set
out below:
5% decrease in the titanium slag price
1% increase in the discount rate applied to post-tax cash flows
10% strengthening of the South African rand
US$m
182
213
393
Other assumptions include the long-term pig iron and zircon prices and operating costs. Future selling prices and operating costs have been estimated
in line with the policy set out in note 1(i). The recoverable amount of the cash-generating unit (CGU) exceeds the carrying value when each of these
sensitivities are applied whilst keeping all other assumptions constant.
Pilbara
The annual impairment review of the Pilbara CGU has been assessed by reference to FVLCD using discounted cash flows, which is in line with
the policy set out in note 1(i) and is classified as level 3 under the fair value hierarchy. In arriving at FVLCD, a post-tax discount rate of 6.6%
(2019: 6.6%) has been applied to the post-tax cash flows expressed in real terms. The recoverable amount was determined to be significantly in
excess of carrying value, and there are no reasonably possible changes in key assumptions that would cause the remaining goodwill to be
impaired.
13 Intangible assets
Year ended 31 December 2020
Net book value
At 1 January 2020
Adjustment on currency translation
Expenditure during the year
Amortisation for the year(c)
Impairment charges(d)
Disposals, transfers and other movements
At 31 December 2020
– cost
– accumulated amortisation and impairment
Year ended 31 December 2019
Net book value
At 1 January 2019
Adjustment on currency translation
Expenditure during the year
Amortisation for the year(c)
Impairment charges(d)
Disposals, transfers and other movements(e)
At 31 December 2019
– cost
– accumulated amortisation and impairment
Exploration
and
evaluation(a)
US$m
Trademarks,
patented and
non-patented
technology
US$m
Contract
based
intangible
assets(b)
US$m
Other
intangible
assets
US$m
173
17
87
—
—
(6)
271
2,415
(2,144)
44
3
—
(14)
—
—
33
232
(199)
1,947
56
—
(8)
—
(1)
1,994
3,070
(1,076)
473
35
69
(139)
(4)
23
457
1,710
(1,253)
Exploration
and
evaluation(a)
US$m
Trademarks,
patented and
non-patented
technology
US$m
Contract
based
intangible
assets(b)
US$m
Other
intangible
assets
US$m
233
(1)
57
—
—
(116)
173
2,306
(2,133)
59
(1)
—
(14)
—
—
44
214
(170)
1,982
74
—
(8)
—
(101)
1,947
3,002
(1,055)
505
(1)
34
(111)
(1)
47
473
1,516
(1,043)
Total
US$m
2,637
111
156
(161)
(4)
16
2,755
7,427
(4,672)
Total
US$m
2,779
71
91
(133)
(1)
(170)
2,637
7,038
(4,401)
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
235
235
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
13 Intangible assets continued
(a)
(b)
(c)
Exploration and evaluation assets’ useful lives are not determined until transferred to property, plant and equipment.
The Group benefits from certain intangible assets acquired with Alcan, including power supply contracts, customer contracts and water rights. The water rights are expected to contribute to the
efficiency and cost effectiveness of operations for the foreseeable future; accordingly, these rights are considered to have indefinite lives and are not subject to amortisation but are tested annually
for impairment. These water rights constitute the majority of the amounts in “Contract based intangible assets”.
The remaining carrying value of the water rights of US$1,798 million as at 31 December 2020 (31 December 2019: US$1,759 million) relates wholly to the Quebec smelters cash-generating unit
(CGU). The Quebec smelters CGU was tested for impairment by reference to fair value less cost of disposal (FVLCD) using discounted cash flows, which is in line with the policy set out in note 1(i).
The recoverable amount of the Quebec smelters is classified as level 3 under the fair value hierarchy. In arriving at FVLCD, post-tax cash flows expressed in real terms have been estimated over the
expected useful economic lives of the underlying smelting assets and discounted using a real post-tax discount rate of 6.6% (2019: 6.6%).
The recoverable amounts were determined to be significantly in excess of carrying value, and there are no reasonably possible changes in key assumptions that would cause the remaining water
rights to be impaired.
Finite life intangible assets are amortised over their useful economic lives on a straight line or units of production basis, as appropriate. Where amortisation is calculated on a straight line basis, the
following useful lives have been determined:
Trademarks, patented and non-patented technology:
Trademarks: 14 to 20 years
Patented and non-patented technology: ten to 20 years
Contract-based intangible assets:
Power contracts/water rights: two to 45 years
Other purchase and customer contracts: five to 15 years
Other intangible assets:
Internally generated intangible assets and computer software: two to five years
Other intangible assets: two to 20 years
(d)
(e)
Impairment charges in 2020 relate to the Diavik diamond mine. Impairment charges in 2019 relate to the ISAL smelter. See note 6.
In 2019, disposals, transfers and other movements included the transfer from exploration and evaluation of the Zulti South project at Richards Bay Minerals to construction in progress following
approval in April 2019 and reclassification of certain mineral rights from contract based intangibles to property, plant and equipment.
Exploration and evaluation expenditure
The charge for the year and the net amount of intangible assets capitalised during the year are as follows:
Net expenditure in the year (net of cash proceeds of US$1 million (2019: US$10 million; 2018: US$233 million) on disposal of
undeveloped projects)
Non-cash movements and non-cash proceeds on disposal of undeveloped projects
Amount capitalised during the year
Net charge for the year
Reconciliation to income statement:
Exploration and evaluation costs
Profit relating to interests in undeveloped projects(a)
Net charge for the year
2020
US$m
2019
US$m
2018
US$m
(711)
—
87
(624)
(625)
1
(624)
(671)
—
57
(614)
(624)
10
(614)
(345)
45
90
(210)
(488)
278
(210)
(a)
During 2018, profit relating to interests in undeveloped properties related to the gains on the sales of Valeria (US$83 million) and Winchester South (US$195 million) undeveloped properties which
were included within underlying earnings.
At 31 December 2020, a total of US$271 million has been capitalised related to projects which have not yet been approved to proceed (31 December
2019: US$173 million).
14 Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
Property, plant and equipment – owned
Right of use assets – leased
Net book value
2020
US$m
62,007
875
62,882
2019
US$m
56,307
1,065
57,372
236
236
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
14 Property, plant and equipment continued
Property, plant and equipment – Owned
Year ended 31 December 2020
Net book value
At 1 January 2020
Adjustment on currency translation(b)
Adjustments to capitalised closure costs
Interest capitalised(c)
Additions
Depreciation for the year(a)(d)
Impairment charges(e)
Disposals
Transfers and other movements(f)
At 31 December 2020
– cost
– accumulated depreciation and impairment
Non-current assets pledged as security(g)
Year ended 31 December 2019
Net book value
At 1 January 2019
Adjustment for transition to new accounting standard(h)
Restated opening balance
Adjustment on currency translation(b)
Adjustments to capitalised closure costs
Interest capitalised(c)
Additions
Depreciation for the year(a)(d)
Impairment charges(e)
Disposals
Transfers and other movements(f)
At 31 December 2019
– cost
– accumulated depreciation and impairment
Non-current assets pledged as security(g)
Mining
properties
and leases(a)
US$m
Land
and
buildings
US$m
Plant
and
equipment
US$m
Capital
works in
progress
US$m
Note
25
8
10,402
457
946
—
329
(666)
(327)
(2)
34
11,173
25,052
(13,879)
1,712
Mining
properties
and leases(a)
US$m
Note
25
8
11,063
—
11,063
27
840
—
433
(729)
(1,339)
—
107
10,402
24,875
(14,473)
1,805
6,403
307
—
—
45
(354)
(85)
(13)
66
6,369
12,178
(5,809)
494
Land
and
buildings
US$m
6,263
—
6,263
72
—
—
46
(381)
(96)
(9)
508
6,403
11,517
(5,114)
571
31,491
1,758
—
—
726
(2,776)
(369)
(64)
1,988
32,754
71,603
(38,849)
5,065
Plant
and
equipment
US$m
32,019
(31)
31,988
286
—
—
616
(2,869)
(1,115)
(44)
2,629
31,491
66,705
(35,214)
5,111
8,011
366
—
340
5,211
—
(82)
(16)
(2,119)
11,711
12,906
(1,195)
6,974
Capital
works in
progress
US$m
7,016
—
7,016
41
—
321
4,435
—
(926)
(19)
(2,857)
8,011
9,188
(1,177)
5,271
Total
US$m
56,307
2,888
946
340
6,311
(3,796)
(863)
(95)
(31)
62,007
121,739
(59,732)
14,245
Total
US$m
56,361
(31)
56,330
426
840
321
5,530
(3,979)
(3,476)
(72)
387
56,307
112,285
(55,978)
12,758
(a)
(b)
(c)
(d)
At 31 December 2020, the net book value of capitalised production phase stripping costs totalled US$2,398 million, with US$2,019 million within "Property, plant and equipment" and a further
US$379 million within "Investments in equity accounted units" (2019: total of US$2,276 million, with US$1,833 million in "Property, plant and equipment" and a further US$443 million within
"Investments in equity accounted units"). During the year, capitalisation of US$380 million was partly offset by depreciation of US$267 million (including amounts recorded within equity accounted
units). Depreciation of deferred stripping costs in respect of subsidiaries of US$145 million (2019: US$139 million; 2018: US$134 million) is included within “Depreciation for the year”.
Adjustment on currency translation represents the impact of exchange differences arising on the translation of the assets of entities with functional currencies other than the US dollar, recognised
directly in the currency translation reserve. The adjustment in 2020 arose from the strengthening of the Australian dollar and Canadian dollar against the US dollar.
Interest is capitalised at a rate based on the Group or relevant subsidiary’s cost of borrowing or at the rate on project specific debt, where applicable. The Group’s average borrowing rate used for
capitalisation of interest is 4.20% (2019: 5.30%).
Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on a
straight line basis as follows:
Land and buildings:
Land: not depreciated
Buildings: five to 50 years
Plant and equipment:
Other plant and equipment: three to 50 years
Power assets: 25 to 50 years
Capital work in progress: not depreciated
(e)
During 2020, impairment charges relate to Pacific Aluminium smelters, the ISAL smelter in Iceland and our interest in the Diavik diamond mine (see note 6). During 2019, impairment charges
primarily related to the Oyu Tolgoi underground project, Yarwun alumina refinery and the ISAL smelter (see note 6).
“Transfers and other movements” includes reclassifications between categories. In 2019, "Transfers and other movements" included ISAL assets held for sale as these assets no longer met the
criteria to be classified as assets held for sale.
Excludes assets held under capitalised lease arrangements. Non-current assets pledged as security represent amounts pledged as collateral against US$4,518 million (2019: US$4,540 million) of
loans, which are included in note 21.
The impact of the transition to new accounting standard IFRS 16 “Leases” on 1 January 2019.
(f)
(g)
(h)
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
237
237
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
Right-of-use assets – Leased
Net book value
31 December 2020
31 December 2019
Additions for the year
31 December 2020
31 December 2019
Depreciation for the year (included within operating costs)
31 December 2020
31 December 2019
Impairment charges(a)
31 December 2020
31 December 2019
Land
and
buildings
US$m
Plant
and
equipment
US$m
475
507
30
89
400
558
75
212
Total
US$m
875
1,065
105
301
(93)
(69)
(229)
(203)
(322)
(272)
(6)
(6)
(31)
(4)
(37)
(10)
(a)
Impairment charges in 2020 relate to Pacific Aluminium smelters, the ISAL smelter in Iceland and our interest in the Diavik diamond mine (see note 6). Impairment charges in 2019 related to the
ISAL smelter (see note 6).
The leased assets of the Group comprise land and buildings (mainly office buildings) and plant and equipment, the majority of which are marine vessels.
Lease terms are negotiated on an individual basis and contain a wide range of terms and conditions. Right of use assets are depreciated on a straight line
basis over the life of the lease, taking into account any extensions that are likely to be enacted.
15 Investments in equity accounted units
Summary balance sheet (Rio Tinto share)
Rio Tinto's share of assets
– Non-current assets
– Current assets
Rio Tinto's share of liabilities
– Current liabilities
– Non-current liabilities
Rio Tinto's share of net assets
2020
US$m
5,307
1,077
6,384
(785)
(1,835)
(2,620)
3,764
2019
US$m
5,820
831
6,651
(675)
(2,005)
(2,680)
3,971
Further details of investments in equity accounted units are set out in notes 34 and 35.
At 31 December 2020 and 2019, the Group had no investments in equity accounted units with shares listed on recognised stock exchanges.
At 31 December 2020, net debt of equity accounted units, excluding amounts due to Rio Tinto, was US$931 million (2019: US$1,248 million).
238
238
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
16 Inventories
Raw materials and purchased components
Consumable stores
Work in progress
Finished goods and goods for resale
Total inventories
Comprising:
Expected to be used within one year
Expected to be used after more than one year
Total inventories
2020
US$m
640
1,050
1,288
1,113
4,091
3,917
174
4,091
2019
US$m
675
925
1,066
936
3,602
3,463
139
3,602
During 2020, the Group recognised a net inventory write back of US$15 million (2019: net inventory write down of US$42 million). This comprised
inventory write-offs of US$35 million (2019: US$134 million) partly offset by write-back of previously written down inventory due to an increase in
realisable values amounting to US$50 million (2019: US$92 million).
At 31 December 2020, US$621 million (2019: US$611 million) of inventories were pledged as security for liabilities.
17 Deferred taxation
At 1 January – deferred tax liability
Adjustment on currency translation
Credited to the income statement
Credited to statement of comprehensive income(a)
Other movements(b)
At 31 December – deferred tax asset/(liability)
Comprising:
– deferred tax assets(c)(d)
– deferred tax liabilities(e)
2020
US$m
(118)
(43)
178
115
14
146
2019
US$m
(532)
(77)
289
77
125
(118)
3,385
(3,239)
3,102
(3,220)
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
239
239
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
17 Deferred taxation continued
Deferred tax balances for which there is a right of offset within the same tax jurisdiction are presented net on the face of the balance sheet as permitted
by IAS 12. The closing deferred tax assets and liabilities, prior to this offsetting of balances, are shown below.
Analysis of deferred tax
Deferred tax assets arising from:
Tax losses(c)
Provisions
Capital allowances
Post-retirement benefits
Unrealised exchange losses
Other temporary differences
Total
Deferred tax liabilities arising from:
Capital allowances
Unremitted earnings(e)
Capitalised interest
Post-retirement benefits
Unrealised exchange gains
Other temporary differences
Total
Credited /(charged) to the income statement
Unrealised exchange losses
Tax losses
Provisions
Capital allowances
Tax on unremitted earnings
Post-retirement benefits
Other temporary differences
Total
Total
2020
US$m
1,867
2,121
529
698
204
1,046
6,465
(4,966)
(402)
(351)
(224)
(7)
(369)
(6,319)
25
12
188
(82)
1
9
25
178
Total
2019
US$m
1,847
1,810
604
599
176
931
5,967
(4,742)
(411)
(387)
(253)
(3)
(289)
(6,085)
(21)
(164)
175
181
(5)
(18)
141
289
(a)
(b)
(c)
(d)
(e)
The amounts credited directly to the statement of comprehensive income include provisions for tax on exchange differences on intragroup loans qualifying for reporting as part of the net investment
in subsidiaries, on cash flow hedges and on actuarial gains and losses on pension schemes and on post-retirement healthcare plans.
“Other movements” include deferred tax relating to tax payable recognised by subsidiary holding companies on the profits of the equity accounted units to which it relates.
There is a limited time period, the shortest of which is one year, for the recovery of US$1,617 million (2019: US$1,186 million; six years) of tax losses and other tax assets which have been recognised
as deferred tax assets in the financial statements.
Recognised and unrecognised deferred tax assets are shown in the table below and totalled US$7,226 million at 31 December 2020 (2019: US$6,264 million). Of this total, US$3,385 million has been
recognised as deferred tax assets (2019: US$3,102 million), leaving US$3,841 million (2019: US$3,162 million) unrecognised, as recovery is not considered probable.
Deferred tax liabilities are not recognised on the unremitted earnings of subsidiaries and joint ventures totalling US$2,895 million (2019: US$3,861 million) where the Group is able to control the
timing of the remittance and it is probable that there will be no remittance in the foreseeable future. If these earnings were remitted, tax of US$112 million (2019: US$164 million) would be payable.
The recognised amounts in the table below do not include deferred tax assets that have been netted off against deferred tax liabilities.
Analysis of deferred tax assets
At 31 December
France
Canada
US
Australia
Mongolia(a)
Other
Total(b)
Recognised
Unrecognised
2020
US$m
—
617
938
649
974
207
3,385
2019
US$m
—
492
920
698
704
288
3,102
2020
US$m
1,284
574
84
528
540
831
3,841
2019
US$m
1,111
566
51
316
721
397
3,162
(a)
(b)
Deferred tax assets in Mongolia include US$292 million (2019: US$130 million) from tax losses that expire if not recovered against taxable profits within eight years. Tax losses have been calculated in
accordance with the tax stability provisions of the Oyu Tolgoi Investment Agreement and Mongolian laws. Recovery of the recognised deferred tax assets is expected to commence from 2021 based
on projected cash flows, consistent with the latest life of mine plan described in note 6. The interpretation of the stabilised tax laws by the Mongolian Tax Authority has been, and is expected to
continue to be, subject to dispute. Changes to agreements or their interpretation could have a material impact on the amount and period of recovery of deferred tax assets.
US$720 million (2019: US$695 million) of the unrecognised assets relate to realised or unrealised capital losses, the recovery of which depends on the existence of capital gains in future years. There
are time limits, the shortest of which is one year, for the recovery of US$551 million of the unrecognised assets (2019: US$491 million).
240
240
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
18 Receivables and other assets
Trade receivables(a)
Other financial receivables(a)
Receivables relating to net investment in finance leases(a)
Amounts due from equity accounted units(a)
Other receivables(b)
Prepayment of tolling charges to jointly controlled entities(c)
Pension surpluses (note 42)
Other prepayments
Total
Non-current
2020
US$m
1
339
29
—
369
218
782
58
1,796
Current
2020
US$m
2,543
332
9
33
422
—
—
305
3,644
Total
2020
US$m
2,544
671
38
33
791
218
782
363
5,440
Non-current
2019
US$m
1
286
52
—
123
221
984
49
1,716
Current
2019
US$m
2,097
453
11
38
209
—
—
219
3,027
Total
2019
US$m
2,098
739
63
38
332
221
984
268
4,743
(a)
(b)
(c)
At 31 December 2020, trade and other financial receivables, receivables relating to net investment in finance leases and amounts due from equity accounted units are stated net of allowances for
expected credit losses of US$59 million (2019: US$54 million).
At 31 December 2020, other non-current receivables included US$315 million (2019: US$53 million) and other current receivables US$95 million (2019: US$nil) related to Energy Resources of
Australia Ltd (ERA's) deposit held in a trust fund which is controlled by the Government of Australia. During 2020, ERA deposited US$299 million into the trust fund which is recorded in "Other
investing cash flows" in the Group cash flow statement. ERA are entitled to reimbursement from the fund once specific phases of rehabilitation relating to the Ranger Project are completed. The fund
is outside of the scope of IFRS 9 - "Financial Instruments" and therefore classified as an "other receivable" within "Receivables and other assets".
These prepayments will be charged to Group operating costs as tolling services are rendered and product processing occurs.
There is no material element of receivables and other assets that is interest-bearing or financing in nature.
The fair value of current trade and other receivables and the majority of amounts classified as non-current trade and other receivables approximates to
their carrying value.
19 Other financial assets
Derivative financial instruments
Equity shares and quoted funds
Other investments, including loans(a)
Loans to equity accounted units
Total
Non-current
2020
US$m
531
66
231
1
829
Current
2020
US$m
134
9
2,668
40
2,851
Total
2020
US$m
665
75
2,899
41
3,680
Non-current
2019
US$m
308
52
236
39
635
Current
2019
US$m
58
9
2,603
—
2,670
Total
2019
US$m
366
61
2,839
39
3,305
(a)
Current “Other investments, including loans” includes US$2,538 million (2019: US$2,584 million) of highly liquid financial assets held in managed investment funds classified as held for trading.
Detailed information relating to other financial assets is given in note 29.
20 Cash and cash equivalents
Cash at bank and in hand
Money market funds, reverse repurchase agreements and other cash equivalents(a)
Balance per Group balance sheet and Group cash flow statement
2020
US$m
1,150
9,231
10,381
2019
US$m
978
7,049
8,027
(a)
We continue to diversify the financial products we invest our surplus cash in. During the year, we purchased securities under resale agreements ("reverse repurchase agreements”). At 31 December
2020 we held US$1,200 million of reverse repurchase agreements, measured at amortised cost and reported within cash and cash equivalents as they are highly liquid products maturing within three
months. We accepted collateral of investment grade quality in respect of these reverse repurchase agreements, with a fair value of US$1,260 million as at 31 December 2020. Collateral is not
recognised on our balance sheet and in the event of counterparty's default we would be able to sell it.
Restricted cash and cash equivalent analysis
Cash and cash equivalents of US$295 million (2019: US$315 million) are held in countries where there are restrictions on remittances. Of this balance,
US$238 million (2019: US$245 million) could be used to repay subsidiaries’ third-party borrowings.
There are also restrictions on a further US$1,422 million (2019: US$1,644 million) of cash and cash equivalents, the majority of which is held by partially
owned subsidiaries and is not available for use in the wider Group due to legal and contractual restrictions currently in place. Of this balance US$1,215
million (2019: US$1,442 million) could be used to repay subsidiaries’ third-party borrowings.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
241
241
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
21 Borrowings and other financial liabilities
Borrowings at 31 December
Non-current
2020
US$m
Note
Current
2020
US$m
Total
2020
US$m
Non-current
2019
US$m
Current
2019
US$m
Rio Tinto Finance plc Euro Bonds 2.0% due 2020(a)(b)(c)
Rio Tinto Finance plc Euro Bonds 2.875% due 2024(a)(b)
Rio Tinto Finance (USA) Limited Bonds 3.75% 2025(a)
Rio Tinto Finance (USA) Limited Bonds 7.125% 2028(a)
Alcan Inc. Debentures 7.25% due 2028(a)
Rio Tinto Finance plc Sterling Bonds 4.0% due 2029(a)(b)
Alcan Inc. Debentures 7.25% due 2031(d)
Alcan Inc. Global Notes 6.125% due 2033(d)
Alcan Inc. Global Notes 5.75% due 2035(d)
Rio Tinto Finance (USA) Limited Bonds 5.2% 2040(a)
Rio Tinto Finance (USA) plc Bonds 4.75% 2042(a)
Rio Tinto Finance (USA) plc Bonds 4.125% 2042(a)
Oyu Tolgoi LLC MIGA Insured Loan LIBOR plus 2.65% due 2027(e)
Oyu Tolgoi LLC Commercial Banks "B Loan" LIBOR plus 3.4% due 2027(e)
Oyu Tolgoi LLC Export Credit Agencies Loan 2.3% due 2028(e)
Oyu Tolgoi LLC Export Credit Agencies Loan LIBOR plus 3.65% due 2029(e)
Oyu Tolgoi LLC International Financial Institutions "A Loan" LIBOR plus
3.78% due 2030(e)
Other secured loans
Other unsecured loans
Lease liabilities
Total borrowings including overdrafts(f)
—
555
1,299
1,005
109
717
438
744
292
1,173
501
743
674
1,571
275
867
771
246
322
945
13,247
22
—
—
—
—
—
—
—
—
—
—
—
—
4
10
2
5
6
68
256
233
584
—
555
1,299
1,005
109
717
438
744
292
1,173
501
743
678
1,581
277
872
777
314
578
1,178
13,831
—
508
1,229
958
104
647
419
742
289
1,137
483
716
676
1,581
273
869
771
302
382
1,007
13,093
455
—
—
—
—
—
—
—
—
—
—
—
3
8
3
5
4
45
197
302
1,022
Total
2019
US$m
455
508
1,229
958
104
647
419
742
289
1,137
483
716
679
1,589
276
874
775
347
579
1,309
14,115
(a)
(b)
(c)
(d)
(e)
(f)
These borrowings are subject to hedging arrangements and are summarised in the interest rate risk section of note 29.
Rio Tinto has a US$10 billion (2019: US$10 billion) European Debt Issuance Programme against which the cumulative amount utilised was US$1.2 billion equivalent at 31 December 2020 (2019:
US$1.6 billion). The carrying value of these bonds after hedge accounting adjustments amounted to US$1.3 billion (2019: US$1.6 billion) in aggregate.
On 11 May 2020, we repaid our €402 million (nominal value) Rio Tinto Finance plc Euro Bonds on their maturity. The cash outflow relating to the repayment of the bonds and the realised loss on the
derivatives have been recognised within "Repayment of borrowings and associated derivatives" in the Group cash flow statement and totalled US$526 million.
In 2020 we entered into new swaps to convert the interest payable in relation to these bonds from fixed to floating rates. Refer to Note 29 for more details.
These borrowings relate to the Oyu Tolgoi LLC project finance facility. The project finance facility provides for interest-only payments for the first five years from 2016 followed by minimum
repayments according to a stepped amortisation schedule for the remaining life of the facility. The due dates stated represent the final repayment date. The interest rates stated are pre-completion
and will increase by 1% post-completion.
The Group’s borrowings of US$13.8 billion (2019: US$14.1 billion) include US$4.5 billion (2019: US$4.5 billion) of subsidiary entity borrowings that are subject to various financial and general
covenants with which the respective borrowers were in compliance as at 31 December 2020.
Other financial liabilities
Derivative financial instruments
Other financial liabilities(a)
Total other financial liabilities
Total borrowings including overdrafts (as above)
Total borrowings and other financial liabilities
Non-current
2020
US$m
Current
2020
US$m
Total
2020
US$m
Non-current
2019
US$m
161
—
161
13,247
13,408
23
—
23
584
607
184
—
184
13,831
14,015
248
—
248
13,093
13,341
Current
2019
US$m
103
247
350
1,022
1,372
Total
2019
US$m
351
247
598
14,115
14,713
(a)
At 31 December 2019, other financial liabilities included US$207 million in relation to the share buy-back programme, which was completed in February 2020.
22 Leases
Lessee arrangements
We have made the following payments associated with leases:
Description of payment
Principal lease payments
Interest payments on leases
Payments for short-term leases
Payments for variable lease components
Payments for low value leases (>12 months in duration)
Total lease payments
2020
US$m
324
50
314
30
1
719
2019
US$m Included within
315 Cash flows from financing activities
53 Cash flows from operating activities
327 Net operating costs
15 Net operating costs
1 Net operating costs
711
242
242
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
22 Leases continued
Lease liabilities
The maturity profile of lease liabilities recognised at the balance sheet date is:
Lease liabilities
Due within 1 year
Between 1 and 3 years
Between 3 and 5 years
More than 5 years
Total undiscounted cash payments expected to be made
Effect of discounting
Present value of minimum lease payments
Note
2020
US$m
271
386
185
724
1,566
(388)
1,178
21
2019
US$m
349
424
226
671
1,670
(361)
1,309
At 31 December 2020, commitments for leases not yet commenced were US$125 million (2019: US$119 million); commitments relating to short-term
leases which had already commenced at 31 December 2020 were US$155 million (2019: US$108 million). Short-term and low value leases are not
recognised on the balance sheet as a lease liability and are expensed as incurred.
23 Consolidated net (debt)/cash
Year ended 31 December 2020
Analysis of changes in consolidated net debt
Opening balance
Foreign exchange adjustment
Cash movements excluding exchange movements
Other non-cash movements
Closing balance
Year ended 31 December 2019
Analysis of changes in consolidated net (debt)/cash
Opening balance
Adjustment for transition to new accounting standard(f)
Foreign exchange adjustment
Cash movements excluding exchange movements
Other non-cash movements
Closing balance
Financing liabilities
Other assets
Borrowings
excluding
overdrafts(a)
US$m
Lease
liabilities(b)
US$m
Debt-related
derivatives
(included in
Other financial
assets/
liabilities)(c)
US$m
Cash and cash
equivalents(d)
US$m
Other
investments(e)
US$m
(12,806)
(83)
505
(269)
(12,653)
(1,309)
(47)
324
(146)
(1,178)
(147)
39
91
265
248
8,027
165
2,189
—
10,381
2,584
—
(58)
12
2,538
Financing liabilities
Other assets
Net
debt
US$m
(3,651)
74
3,051
(138)
(664)
Borrowings
excluding
overdrafts(a)
US$m
Lease
liabilities(b)
US$m
Debt-related
derivatives
(included in
Other financial
assets/
liabilities)(c)
US$m
Cash and cash
equivalents(d)
US$m
Other
investments(e)
US$m
Net
(debt)/cash
US$m
(12,707)
—
(5)
123
(217)
(12,806)
(44)
(1,248)
(9)
315
(323)
(1,309)
(288)
—
3
—
138
(147)
10,772
—
(54)
(2,808)
117
8,027
2,522
—
—
28
34
2,584
255
(1,248)
(65)
(2,342)
(251)
(3,651)
(a)
(b)
(c)
(d)
(e)
(f)
Borrowings excluding overdrafts and including lease liabilities at 31 December 2020 of US$13,831 million (2019: US$14,115 million) differ from total borrowings and other financial liabilities of
US$14,015 million (2019: US$14,713 million) on the balance sheet as they exclude other current financial liabilities of US$23 million (2019: US$350 million) and other non-current financial liabilities
of US$161 million (2019: US$248 million).
Other movements in lease liabilities include the net impact of additions, modifications and terminations during the year.
Included within "Debt-related derivatives" are interest rate and cross currency interest rate swaps that are in hedge relationships with the Group's debt.
Other non-cash movements in the year ended 31 December 2019 of US$117 million represents the elimination of cash movements during the year in respect of assets held for sale which are
included in the cash flow statement.
Other investments comprise US$2,538 million (2019: US$2,584 million) of highly liquid financial assets held in managed investment funds classified as held for trading.
The impact of the transition to new accounting pronouncement IFRS 16 “Leases” on 1 January 2019.
Further information relating to the currency and interest rate exposures arising from net debt and related derivatives is given in note 29.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
243
243
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
24 Trade and other payables
Trade payables
Other financial payables
Other payables
Deferred income(a)
Accruals
Employee entitlements
Royalties and mining taxes
Amounts owed to equity accounted units
Government grants deferred
Total
Non-current
2020
US$m
1
298
97
133
27
—
3
190
71
820
Current
2020
US$m
3,124
862
115
344
1,294
762
863
51
6
7,421
Total
2020
US$m
3,125
1,160
212
477
1,321
762
866
241
77
8,241
Non-current
2019
US$m
—
272
110
143
27
—
4
167
71
794
Current
2019
US$m
2,855
668
97
200
1,305
650
596
104
5
6,480
Total
2019
US$m
2,855
940
207
343
1,332
650
600
271
76
7,274
(a)
Deferred income includes contract liabilities of US$338 million (2019: US$158 million).
The fair value of trade payables and financial instruments within other payables approximates their carrying value.
25 Provisions (including post-retirement benefits)
Note
14
At 1 January
Adjustment to opening balance on transition to new accounting
standard(d)
Restated opening balance
Adjustment on currency translation
Adjustments to mining properties/right of use assets:
– increases to existing and new provisions
– change in discount rate
Charged/(credited) to profit:
– increases to existing and new provisions
– change in discount rate
– unused amounts reversed
– exchange losses on provisions
– amortisation of discount
Utilised in year
Actuarial losses recognised in equity
Transfers and other movements
At 31 December
Balance sheet analysis:
Current
Non-current
Total
Pensions
and
post-
retirement
healthcare(a)
US$m
Other
employee
entitlements(b)
US$m
Close-down
and
restoration/
environmental
(c)
2,714
—
2,714
83
—
—
200
—
—
—
—
(192)
250
—
3,055
70
2,985
3,055
354
—
354
34
—
—
127
—
(19)
—
—
(77)
—
—
419
327
92
419
US$m
11,090
—
11,090
736
130
816
562
138
(123)
(21)
373
(366)
—
—
13,335
777
12,558
13,335
Other
US$m
945
—
945
37
11
—
185
2
(157)
(1)
4
(139)
—
(31)
856
555
301
856
Total
2020
US$m
Total
2019
US$m
15,103
13,608
—
15,103
890
141
816
1,074
140
(299)
(22)
377
(774)
250
(31)
17,665
1,729
15,936
17,665
(66)
13,542
65
840
—
850
—
(100)
3
387
(744)
235
25
15,103
1,399
13,704
15,103
Projected cash spend for the undiscounted close-down and restoration/environmental clean up provision
Undiscounted close-down and environmental restoration cash flows
At 31 December 2020
At 31 December 2019
<1yr
US$m
776
541
1-3 yrs
US$m
1,203
955
3-5 yrs
US$m
1,433
1,100
> 5 yrs
US$m
13,988
13,470
Total
US$m
17,400
16,066
(a)
(b)
(c)
(d)
The main assumptions used to determine the provision for pensions and post-retirement healthcare, and other information, including the expected level of future funding payments in respect of
those arrangements, are given in note 42.
The provision for other employee entitlements includes a provision for long service leave of US$283 million (2019: US$248 million), based on the relevant entitlements in certain Group operations
and includes US$62 million (2019: US$30 million) of provision for redundancy and severance payments.
The Group’s policy on close-down and restoration costs is described in note 1(l) and in paragraph (iii) under “Critical accounting policies and estimates” on page 219. Close-down
and restoration costs are a normal consequence of mining, and the majority of close-down and restoration expenditure is incurred in the years following closure of the mine, refinery or smelter.
Non-current provisions for close-down and restoration/environmental expenditure include amounts relating to environmental clean-up of US$468 million (2019: US$382 million) expected to take
place between one and five years from the balance sheet date, and US$937 million (2019: US$883 million) expected to take place later than five years after the balance sheet date.
Close-down and restoration/environmental liabilities at 31 December 2020 have not been adjusted for closure related receivables amounting to US$574 million (31 December 2019: US$166 million)
due from the ERA trust fund, the co-owners of the Diavik Joint Venture and other financial assets held for the purposes of meeting closure obligations.
Impact of the transition to new accounting pronouncement IFRS 16 “Leases” on 1 January 2019.
244
244
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Group balance sheet
25 Provisions (including post-retirement benefits) continued
Analysis of close-down and restoration/environmental clean up provisions
As at 31 December
Undiscounted close-down and environmental restoration obligations
Impact of discounting
Present closure obligation
Attributable to:
Operating sites
Non-operating sites
Total
2020
US$m
17,400
(4,065)
13,335
10,736
2,599
13,335
2019
US$m
16,066
(4,976)
11,090
9,255
1,835
11,090
Remaining lives of operations and infrastructure range from one to over 50 years with an average for all sites, weighted by present closure obligation, of
around 17 years (2019: 18 years). Although the ultimate cost to be incurred is uncertain, the Group’s businesses estimate their respective costs based on
current restoration standards, techniques and expected climate conditions.
Provisions of US$13,335 million (2019: US$11,090 million) for close-down and restoration costs and environmental clean-up obligations are based on risk-
adjusted cash flows. The Group completed a review of the discount rate used to present value the obligations on 30 September 2020 and updated it to a
real-rate of 1.5%, applied prospectively from that date. Prior to 30 September 2020 and in recent years, the close-down and restoration costs and
environmental clean-up obligations were discounted at a real-rate of 2.0%. To illustrate the sensitivity of the provision to discounting, if the discount rate
at 31 December 2020 was decreased to 1.0% then the provision would be US$1.3 billion higher, of which approximately US$1.2 billion would be
capitalised within "Property, plant and equipment" at operating sites and US$0.1 billion would be charged to the income statement for non-operating and
fully impaired sites. If the discount rate was increased to 3.0% then the provision would be US$2.6 billion lower, of which approximately US$2.4 billion
would result in a decrease within "Property, plant and equipment" at operating sites and US$0.2 billion would be credited to the income statement for
non-operating and fully impaired sites.
Closure cost composition as at 31 December
Decommissioning, decontamination and demolition
Closure and rehabilitation earthworks (a)
Long-term water management costs (b)
Post closure monitoring and maintenance
Indirect costs, owners' costs and contingency (c)
Total
2020
US$m
3,131
4,223
966
1,318
3,697
13,335
2019
US$m
2,066
3,889
920
855
3,360
11,090
The underlying costs for closure have been estimated with varying degrees of accuracy based on a function of the age of the underlying asset and
proximity to closure. For assets within ten years of closure, closure plans and cost estimates are supported by detailed studies which are refined as the
closure date approaches. These closure studies consider climate change and plan for resilience to expected climate conditions with a particular focus on
precipitation rates. For new developments, consideration of climate change and ultimate closure conditions are an important part of the approval process.
For longer-lived assets, closure provisions are typically based on conceptual level studies that are refreshed at least every five years; these are evolving to
incorporate greater consideration of forecast climate conditions at closure.
(a)
(b)
A key component of earthworks rehabilitation involves re-landscaping the area disturbed by mining activities utilising the largely diesel powered heavy mobile equipment. In developing low-carbon
solutions for our mobile fleet, this may include electrification of the vehicles during the mine life. The forecast cash flows for the heavy mobile equipment in the closure cost estimate are based on
existing fuel sources; these could reduce if this power is sourced from renewable energy.
Long-term water management relates to the post-closure treatment of water due to acid rock drainage and other environmental commitments and is an area of research and development focus for
our Closure team. The cost of this water processing can continue for many years after the bulk earthworks and demolition activities have completed and are therefore exposed to long-term climate
change. This could materially affect rates of precipitation and therefore change the volume of water requiring processing. It is not currently possible to forecast accurately the impact this could have
on the closure provision as some of our locations could experience drier conditions whereas others could experience greater rainfall. A further consideration relates to the alternative commercial use
for the processed water which could support ultimate transfer of these costs to a third party.
(c)
Indirect costs, owners' costs and contingency include adjustments to the underlying cash flows to align the closure provision with a central-case estimate. This excludes allowances for quantitative
estimation uncertainties which are allocated to the underlying cost driver and presented within the respective cost categories above.
Geographic composition as at 31 December
Australia
USA
Canada
Rest of World
Total
2020
US$m
7,076
3,819
1,482
958
13,335
2019
US$m
5,610
3,377
1,267
836
11,090
The geographic composition of the closure provision shows that our closure obligations are largely in countries with established levels of regulation in
respect of mine and site closure.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
245
245
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
26 Share capital – Rio Tinto plc
Issued and fully paid up share capital of 10p each
At 1 January
Ordinary shares issued(a)(c)
Shares purchased and cancelled(b)
At 31 December
Shares held by public
At 1 January
Shares reissued from treasury(a)
Ordinary shares issued(a)(c)
Shares purchased and cancelled(b)
At 31 December
Shares held in treasury
Shares held by public
Total share capital
Other share classes
Special Voting Share of 10p each(d)
DLC Dividend Share of 10p each(d)
Equalisation Share of 10p each(d)
2020
Number
(million)
2019
Number
(million)
2018
Number
(million)
2020
US$m
2019
US$m
2018
US$m
1,259.345
0.039
(3.628)
1,287.660
0.041
(28.356)
1,351.609
0.035
(63.984)
1,255.756
1,259.345
1,287.660
207
—
—
207
211
—
(4)
207
220
—
(9)
211
1,249.924
0.569
0.039
(3.628)
1,278.215
0.024
0.041
(28.356)
1,246.904
8.852
1,246.904
1,255.756
1,249.924
9.421
1,249.924
1,259.345
1,342.058
0.106
0.035
(63.984)
1,278.215
9.445
1,278.215
1,287.660
1 only
1 only
1 only
1 only
1 only
1 only
1 only
1 only
1 only
(a)
(b)
(c)
(d)
39,273 ordinary shares were issued in 2020 under the Global Employee Share Plan (GESP). 568,863 ordinary shares were reissued from treasury during the year resulting from the vesting of awards
under Rio Tinto plc employee share-based payment plans, with market values between £32.74 and £56.32 per share (2019: 40,974 ordinary shares were issued under the GESP and 23,659 ordinary
shares were reissued from treasury with exercise prices and market values between £36.33 and £49.74 per share; 2018: 35,380 ordinary shares were issued under the GESP and 106,045 ordinary
shares reissued from treasury with exercise prices and market values between £16.53 and £43.79 per share).
The authority for the company to buy back its ordinary shares was renewed at the 2020 annual general meeting. 3,627,568 shares were bought back and cancelled in 2020 under the on-market buy-
back programme. 28,356,034 shares were bought back and cancelled in 2019 under the on-market buy-back programme. 63,984,287 shares were bought back in 2018 under the on-market buy-
back programme.
The aggregate consideration for new shares issued under the GESP was US$1.3 million (2019: US$1.1 million; 2018: US$1.0 million). The difference between the nominal value and the issue price of
the shares issued was credited to the share premium account. The aggregate consideration received for treasury shares reissued was US$1 million (2019: US$1 million; 2018: US$6 million). No new
shares were issued as a result of the exercise of options under Rio Tinto plc employee share-based payment plans in 2020, 2019 and 2018.
The “Special Voting Share” was issued to facilitate the joint voting by shareholders of Rio Tinto plc and Rio Tinto Limited on Joint Decisions, following the DLC Merger. The “DLC Dividend Share” was
issued to facilitate the efficient management of funds within the DLC structure. Directors have the ability to issue an Equalisation Share if that is required under the terms of the DLC Merger Sharing
Agreement.
During 2020, US$31 million of shares and ADRs (2019: US$43 million; 2018: US$140 million) were purchased by employee share ownership trusts on
behalf of Rio Tinto plc to satisfy employee share awards on vesting. At 31 December 2020, 273,902 shares and 41,240 ADRs were held in the employee
share ownership trusts on behalf of Rio Tinto plc.
Information relating to share-based incentive schemes is given in note 41.
27 Share capital – Rio Tinto Limited
Issued and fully paid up share capital
At 1 January
Adjustment on currency translation
Ordinary shares purchased and cancelled(a)
At 31 December
– Special Voting Share(b)
– DLC Dividend Share(c)
Total share capital
2020
Number
(million)
2019
Number
(million)
2018
Number
(million)
371.21
371.21
412.41
—
371.21
1 only
1 only
371.21
—
371.21
1 only
1 only
371.21
(41.20)
371.21
1 only
1 only
371.21
2020
US$m
3,448
333
—
3,781
2019
US$m
3,477
(29)
—
3,448
2018
US$m
4,140
(382)
(281)
3,477
(a)
(b)
In November 2018, 41,198,134 Rio Tinto Limited ordinary shares were purchased at A$69.69 per share and cancelled under an off-market share buy-back programme carried out pursuant to the
shareholder approval granted at Rio Tinto Limited’s 2018 annual general meeting for off-market and on-market buy-backs of up to 41.2 million Rio Tinto Limited ordinary shares.
The “Special Voting Share” was issued to facilitate the joint voting by shareholders of Rio Tinto Limited and Rio Tinto plc on Joint Decisions following the DLC Merger. The “DLC Dividend Share” was
issued to facilitate the efficient management of funds within the DLC structure. Directors have the ability to issue an Equalisation Share if that is required under the terms of the DLC Merger
Sharing Agreement.
During 2020, US$76 million of shares (2019: US$63 million; 2018: US$114 million) were purchased by employee share ownership trusts on behalf of Rio
Tinto Limited to satisfy employee share awards on vesting. At 31 December 2020, 828,338 shares were held in the employee share ownership trusts on
behalf of Rio Tinto Limited.
Information relating to share-based incentive schemes is given in note 41.
246
246
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Capital and reserves
28 Other reserves and retained earnings
Capital redemption reserve(a)
At 1 January
Own shares purchased and cancelled
At 31 December
Cash flow hedge reserve
At 1 January
Adjustment for transition to new accounting pronouncements(b)
Cash flow hedge gains
Cash flow hedge (gains)/losses transferred to the income statement
Tax on the above
Transfers and other movements
At 31 December
Available for sale revaluation reserves
At 1 January
Adjustment for transition to new accounting pronouncements(b)
Gains on available for sale securities
Losses on available for sale securities transferred to the income statement
Tax on the above
Transfers and other movements
At 31 December
Fair value through other comprehensive income reserve
At 1 January
Adjustment for transition to new accounting pronouncements(b)
Losses on equity investments
Transfers to retained earnings
At 31 December
Cost of hedging reserve
At 1 January
Adjustment for transition to new accounting pronouncements(b)
Cost of hedging deferred to reserves during the year
Transfer of cost of hedging to the income statement
At 31 December
Other reserves(c)
At 1 January
Own shares purchased from Rio Tinto Limited shareholders to satisfy share options
Employee share options: value of services
Deferred tax on share options
At 31 December
Foreign currency translation reserve(d)
At 1 January
Parent and subsidiaries' currency translation and exchange adjustments
Equity accounted units currency translation adjustments
Currency translation reclassified on disposal
At 31 December
Total other reserves per balance sheet
2020
US$m
2019
US$m
2018
US$m
51
—
51
160
—
24
(63)
3
—
124
—
—
—
—
—
—
—
(11)
—
9
—
(2)
(10)
—
7
—
(3)
47
4
51
195
—
12
(41)
(6)
—
160
—
—
—
—
—
—
—
(6)
—
(5)
—
(11)
(13)
—
3
—
(10)
38
9
47
32
(4)
156
40
(54)
25
195
20
(20)
—
—
—
—
—
—
8
(11)
(3)
(6)
—
26
(36)
(3)
(13)
11,643
(76)
60
1
11,628
(2,656)
2,814
4
—
162
11,650
(63)
52
4
11,643
(3,212)
331
10
215
(2,656)
11,714
(114)
52
(2)
11,650
480
(3,658)
(48)
14
(3,212)
11,960
9,177
8,661
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
247
247
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
28 Other reserves and retained earnings continued
Retained earnings(e)
At 1 January
Adjustment for transition to new accounting pronouncements(b)
Parent and subsidiaries' profit for the year
Equity accounted units' profit after tax for the year
Actuarial (losses)/gains(f)
Tax relating to components of other comprehensive income
Total comprehensive income for the year
Share buy-back programme
Dividends paid
Change in equity interest held by Rio Tinto
Own shares purchased/treasury shares reissued for share options and other movements
Employee share options and other IFRS 2 charges taken to the income statement
Transfer from FVOCI reserve
Transfers and other movements
At 31 December
2020
US$m
2019
US$m
2018
US$m
23,387
—
9,456
313
(482)
116
9,403
(1)
(6,132)
84
(31)
82
—
—
26,792
27,025
(113)
7,709
301
(259)
81
7,832
(1,135)
(10,334)
85
(43)
70
—
—
23,387
23,761
(179)
13,125
513
894
(269)
14,263
(5,423)
(5,356)
60
(140)
61
3
(25)
27,025
(a)
(b)
(c)
(d)
(e)
(f)
The capital redemption reserve was set up to comply with section 733 of the UK Companies Act 2006 (previously section 170 of the UK Companies Act 1985) when shares of a company are redeemed
or purchased wholly out of the company’s profits. Balances reflect the amount by which the company’s issued share capital is diminished in accordance with this section.
The impact of the transition to new accounting pronouncements; IFRS 16 “Leases” and IFRIC 23 "Uncertainty over income tax treatments" on 1 January 2019 and IFRS 9 “Financial Instruments” and
IFRS 15 "Revenue from Contracts with Customers" on 1 January 2018.
Other reserves includes US$11,936 million which represents the difference between the nominal value and issue price of the shares issued arising from Rio Tinto plc’s rights issue completed in July
2009. No share premium was recorded in the Rio Tinto plc financial statements through the operation of the merger relief provisions of the UK Companies Act 1985.
Other reserves also include the cumulative amount recognised under IFRS 2 in respect of options granted but not exercised to acquire shares in Rio Tinto Limited, less, where applicable, the cost of
shares purchased to satisfy share options exercised. The cumulative amount recognised under IFRS 2 in respect of options granted but not exercised to acquire shares in Rio Tinto plc is recorded in
retained earnings.
Exchange differences arising on the translation of the Group’s net investment in foreign controlled companies are taken to the foreign currency translation reserve, as described in note 1(d). The
cumulative differences relating to an investment are transferred to the income statement when the investment is disposed of.
Retained earnings and movements in reserves of subsidiaries include those arising from the Group’s share of joint operations.
There were US$11 million actuarial losses relating to equity accounted units in 2020 (31 December 2019: US$7 million; 31 December 2018: US$nil).
248
248
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
29 Financial instruments and risk management
In this note, 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. We have grouped the information in the following sections:
A – Financial assets and liabilities by categories
B – Derivative financial instruments
C – Fair values
A (a) Financial assets and liabilities by categories
At 31 December 2020
Financial assets
Cash and cash equivalents
Trade and other financial receivables(a)(b)
Equity shares and quoted funds
Other investments, including loans(c)
Derivatives related to net debt: designated as hedges(d)
Derivatives and embedded derivatives not related to net debt: not designated as hedges(d)
Embedded derivatives not related to net debt: designated as hedges(d)
Loans to equity accounted units including quasi equity loans
Total financial assets
Financial liabilities
Trade and other financial payables(e)
Short-term borrowings and bank overdrafts
Medium-term and long-term borrowings
Derivatives related to net debt: designated as hedges(d)
Derivatives and embedded derivatives not related to net debt: not designated as hedges(d)
Embedded derivatives not related to net debt: designated as hedges(d)
Other financial liabilities
Total financial liabilities
At 31 December 2019
Financial assets
Cash and cash equivalents
Trade and other financial receivables(a)(b)
Equity shares and quoted funds
Other investments, including loans(c)
Derivatives related to net debt: designated as hedges(d)
Derivatives and embedded derivatives not related to net debt: not designated as hedges(d)
Embedded derivatives not related to net debt: designated as hedges(d)
Loans to equity accounted units including quasi equity loans
Total financial assets
Financial liabilities
Trade and other financial payables(e)
Short-term borrowings and bank overdrafts
Medium-term and long-term borrowings
Derivatives related to net debt: designated as hedges(d)
Derivatives and embedded derivatives not related to net debt: not designated as hedges(d)
Embedded derivatives not related to net debt: designated as hedges(d)
Other financial liabilities
Total financial liabilities
Fair value
through other
comprehensive
income
US$m
Amortised
cost
US$m
3,970
1,479
—
138
—
—
—
153
5,740
—
—
64
—
—
—
—
—
64
Total
US$m
10,381
3,286
75
2,899
388
204
73
153
17,459
(5,847)
(584)
(13,247)
(140)
(24)
(20)
—
(19,862)
(5,817)
(584)
(13,247)
—
—
—
—
(19,648)
Fair value
through
profit and
loss
US$m
6,411
1,807
11
2,761
388
204
73
—
11,655
(30)
—
—
(140)
(24)
(20)
—
(214)
Fair value
through other
comprehensive
income
US$m
Amortised
cost
US$m
Fair value
through
profit and
loss
US$m
2,707
1,801
—
21
—
—
—
152
4,681
(5,341)
(1,022)
(13,093)
—
—
—
(247)
(19,703)
—
—
50
—
—
—
—
—
50
5,320
1,137
11
2,818
151
149
66
—
9,652
(57)
—
—
(298)
(29)
(24)
—
(408)
Total
US$m
8,027
2,938
61
2,839
151
149
66
152
14,383
(5,398)
(1,022)
(13,093)
(298)
(29)
(24)
(247)
(20,111)
Note
20
18
19
19
19, 23
19
19
24
21
21
21, 23
21
21
21
Note
20
18
19
19
19, 23
19
19
24
21
21
21, 23
21
21
21
(a)
(b)
(c)
(d)
(e)
Trade and other financial receivables comprise trade receivables, other financial receivables, receivables relating to net investments in finance leases and amounts due from equity accounted units
within note 18.
Provisionally priced receivables are fair valued.
Other investments, including loans, include US$2,538 million (2019: US$2,584 million) of highly liquid financial assets in managed investment funds classified as held for trading.
These financial assets and liabilities in aggregate agree to the total derivative financial instruments disclosed in notes 19 and 21.
Trade and other financial payables comprise trade payables, other financial payables, accruals and amounts due to equity accounted units within note 24. The trade and other payables held at fair
value are valued using Level 2 inputs.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
249
249
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
29 Financial instruments and risk management continued
A (b) Financial risk management
Objectives and policy
Our financial risk management objectives are:
– to have in place a robust capital structure to manage the organisation through the commodity cycle; and
– to allow our financial exposures to float with the market.
Any exceptions to these require formal approval by the Board.
The Group operates a floating prices and rates policy for the management of our key economic exposure to commodity price, foreign exchange and
interest rates risks. We do not seek to hedge this floating exposure and will re-float, where possible, any material price or rates that are fixed. Where this is
impossible (or sub-optimal) any non-floating price risks are managed within defined market risk tolerances. Derivatives are used as and when required in
order to manage our exposure in accordance with this underlying financial risk management principle.
In the paragraphs below, we summarise the risks that we are exposed to, and outline how our Treasury and Commercial teams manage these risks in
accordance with agreed policies. These teams operate under a strong control environment, within approved limits. Our Board reviews and approves limits
at least annually.
(i) Capital and liquidity risk
Our overriding objective when managing capital and liquidity is to safeguard the business as a going concern. Capital is allocated in a consistent and
disciplined manner, prioritising sustaining capital expenditure, followed by the ordinary dividend and then an iterative allocation between investing in
compelling growth opportunities, maintaining balance sheet strength and delivering further returns to shareholders.
Our Board and senior management regularly review the capital structure and liquidity of the Group. They take into account our strategic priorities, the
economic and business conditions, and any identified investment opportunities, along with the expected returns to shareholders. We expect total cash
returns to shareholders over the longer term to be in a range of 40–60% of underlying earnings in aggregate through the commodity cycle.
We consider various financial metrics when managing our risk, including net debt, gearing, the overall level of borrowings and their maturity profile,
liquidity levels, total capital, future cash flows, underlying EBITDA and interest cover ratios.
Our total capital as at 31 December was:
Total capital
Equity attributable to owners of Rio Tinto (see Group balance sheet)
Equity attributable to non-controlling interests (see Group balance sheet)
Net debt
Total capital
Note
23
2020
US$m
47,054
4,849
664
52,567
2019
US$m
40,532
4,710
3,651
48,893
Our net debt decreased to US$0.7 billion at 31 December 2020 from US$3.7 billion at 31 December 2019. This was driven by operating cash inflows,
partially offset by capital expenditure and cash returns to shareholders during the year. At 31 December 2020 net gearing was 1% (2019: 7%) and interest
cover was 39 times (2019: 28 times).
We have access to various forms of financing including our US Shelf Programme, European Debt Issuance Programme, Commercial Paper and credit
facilities. We did not issue any debt in 2020 or 2019 under these programmes.
We have US$7.5 billion fully committed Revolving Credit Facilities, which were extended in 2020 to November 2023 and remained undrawn throughout
the year. The funds available can be used for general corporate purposes. Advances under these revolving facilities bear an interest rate per annum based
on LIBOR (or EURIBOR, CDOR or BBSW in relation to any euro, Canadian dollar or Australian dollar loans respectively) plus a margin (which is dependent
on our long-term credit rating as determined by Moody’s and Standard & Poor’s and the level of drawdown). The facility agreements contain no financial
covenants.
Our credit ratings, as provided by Standard & Poor’s and Moody’s investor services, as at 31 December were:
Long-term rating
Short-term rating
Outlook
2020
2019
A/A2
A-1/P-1
Stable/Stable
A/A2
A-1/P-1
Stable/Stable
Our unified credit status is maintained through cross guarantees, which mean the contractual obligations of Rio Tinto plc and Rio Tinto Limited are
automatically guaranteed by the other.
250
250
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
In the table below, we summarise the maturity profile of our financial liabilities based on contractual undiscounted payments, which will therefore not
necessarily agree with the amounts disclosed in the balance sheet.
Financial liability analysis
At 31 December 2020
(Outflows)/Inflows
Non-derivative financial liabilities
Trade and other financial payables(a)
Expected lease liability payments
Borrowings before swaps
Expected future interest payments(a)
Derivative financial liabilities(b)
Derivatives related to net debt – net settled
Derivatives related to net debt – gross settled(a):
– gross inflows
– gross outflows
Derivatives not related to net debt – net settled
Derivatives not related to net debt – gross settled:
– gross inflows
– gross outflows
Total
At 31 December 2019
(Outflows)/Inflows
Non-derivative financial liabilities
Trade and other financial payables(a)
Expected lease liability payments
Borrowings before swaps
Expected future interest payments(a)
Other financial liabilities
Derivative financial liabilities(b)
Derivatives related to net debt – net settled
Derivatives related to net debt – gross settled(a):
– gross inflows
– gross outflows
Derivatives not related to net debt – net settled
Derivatives not related to net debt – gross settled:
– gross inflows
– gross outflows
Total
Within 1
year or on
demand
US$m
Between
1 and 2
years
US$m
Between
2 and 3
years
US$m
Between
3 and 4
years
US$m
Between
4 and 5
years
US$m
After
5 years
US$m
Total
US$m
(5,251)
(271)
(351)
(525)
(53)
(231)
(667)
(522)
(15)
(155)
(743)
(495)
(34)
(101)
(1,256)
(469)
(19)
(84)
(1,892)
(427)
(394)
(724)
(7,477)
(2,999)
(5,766)
(1,566)
(12,386)
(5,437)
—
—
—
—
—
—
—
27
(34)
(20)
290
(291)
(6,426)
27
(34)
(7)
—
—
27
(34)
(2)
—
—
27
(34)
(2)
—
—
27
(34)
(2)
—
—
790
(943)
(9)
925
(1,113)
(42)
—
—
(1,487)
(1,417)
(1,869)
(2,431)
(11,756)
Within 1
year or on
demand
US$m
Between
1 and 2
years
US$m
Between
2 and 3
years
US$m
Between
3 and 4
years
US$m
Between
4 and 5
years
US$m
(4,841)
(349)
(723)
(607)
(247)
(45)
(267)
(171)
(594)
—
(12)
(157)
(665)
(590)
—
(14)
(133)
(741)
(551)
—
(15)
(93)
(1,209)
(514)
—
After
5 years
US$m
(380)
(671)
(9,320)
(3,518)
—
290
(291)
(25,386)
Total
US$m
(5,307)
(1,670)
(12,829)
(6,374)
(247)
(16)
(16)
(16)
9
(3)
3
(39)
495
(588)
(31)
699
(703)
(6,911)
40
(53)
—
40
(53)
—
40
(53)
(2)
507
(599)
(4)
788
(977)
(23)
—
—
(1,106)
—
—
(1,453)
—
—
(1,445)
—
—
(1,930)
—
—
(14,098)
1,910
(2,323)
(60)
699
(703)
(26,943)
(a)
(b)
The interest payable at year end was removed from trade and other financial payables and is shown within expected future interest payments. Interest payments have been projected using interest
rates applicable at the end of the applicable financial year. Where debt is subject to variable interest rates, future interest payments are subject to change in line with market rates.
The maturity grouping is based on the earliest payment date.
Offsetting and enforceable master netting agreements
When we have a legally enforceable right to offset our financial assets and liabilities and an intention to settle on a net basis, or realise the asset and
settle the liability simultaneously, we report the net amount in the consolidated balance sheet. Agreements with derivative counterparties are based on
the International Swaps and Derivatives Association master netting agreements that do not meet the criteria for offsetting, but allow for the related
amounts to be set-off in certain circumstances. During the year, there were no material amounts offset in the balance sheet.
(ii) Commodity price risk
Our broad commodity base means our exposure to commodity prices is diversified. Our normal policy is to sell our products at prevailing market prices.
Exceptions to this rule are subject to strict limits laid down by the Board, and to defined market risk tolerances and internal controls.
We sell our products to customers under contracts which vary in tenure and pricing mechanisms, including some volumes sold in the spot market. Sales
revenue may be subject to adjustment if product specifications do not conform to the terms specified in a sales contract.
Pricing for iron ore is on a range of terms, the majority being either monthly or quarterly average pricing mechanisms. We sell a smaller proportion of iron
ore volumes on the spot market.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
251
251
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
29 Financial instruments and risk management continued
(ii) Commodity price risk (continued)
We generally sell copper and aluminium under contracts which vary in tenure and pricing mechanisms, with some volumes sold in the spot market. The
prices are determined by reference to prevailing market prices on terminal markets, such as the London Metal Exchange (LME) and the Commodities
Exchange (COMEX) in New York. Prices fluctuate widely in response to changing levels of supply and demand but, in the long run, prices are related to
the marginal cost of supply. Gold is also priced in an active market in which prices respond to daily changes in quantities offered and sought. Newly mined
gold is only one source of supply; investment and disinvestment can be important elements of supply and demand.
At the date revenue is recognised, certain of our products are provisionally priced, based on the amount we expect to receive in the future. After initial
recognition of revenue, we record any change in revenue relating to market prices separately in "Other revenue" (refer to note 3). Substantially all iron ore
and aluminium sales are reflected at final prices at each reporting period. Final prices for copper concentrate, however, are normally determined between
30 and 180 days after delivery to our customer.
At 31 December 2020, we had 261 million pounds of copper sales, including share of equity accounted unit (31 December 2019: 220 million pounds), that
were provisionally priced at US 336 cents per pound (2019: US 271 cents per pound). The final price of these sales will be determined during the first half
of 2021. A 10% change in the price of copper realised on the provisionally priced sales, all other factors held constant, would increase or reduce net
earnings by US$58 million (2019: US$38 million).
For some products, particularly aluminium, we are also exposed to fluctuations in power prices.
Hedging strategy
We do not generally consider that using derivatives to fix commodity prices would provide a long-term benefit to our shareholders. However, for certain
physical commodity transactions for which the price was fixed at the contract date, we enter into derivatives to achieve the prevailing market prices at the
point of revenue recognition.
To mitigate our exposure to changes in the relationship between aluminium prices and power prices, we have a number of electricity purchase contracts
which are directly linked to the daily official LME cash ask price for high grade aluminium (“LME price”) and to the US Midwest Transaction Premium
(“Midwest premium”).
In accordance with IFRS 9, we apply hedge accounting to two embedded derivatives within our power contracts. The embedded derivatives (notional
aluminium forward sales) have been designated as the hedging instrument. The forecasted aluminium sales, priced using the LME price and the Midwest
premium, represent the hedged item.
The hedging ratio is 1:1, as the quantity of sales designated as being hedged matches the notional amount of the hedging instrument. The hedging
instrument’s notional amount, expressed in equivalent metric tonnes of aluminium, is derived from our expected electricity consumption under the power
contracts as well as other relevant contract parameters.
When we designate such embedded derivatives as the hedging instrument in a cash flow hedge, we recognise the effective portion of the change in the
fair value of the hedging instrument in other comprehensive income, and it is accumulated in the cash flow hedge reserve. The amount that is recognised
in other comprehensive income is limited to the lesser of the cumulative change in the fair value of the hedging instrument and the cumulative change in
the fair value of the hedged item, in absolute terms.
We recognise any ineffectiveness relating to the hedging relationship immediately in the income statement.
Sources of ineffectiveness include: differences in the timing of the cash flows between the hedged item and the hedging instrument, non-zero initial fair
value of the hedging instrument, the existence of a cap on the Midwest premium in the hedging instrument and counterparty credit risk.
We held the following notional aluminium forward sales contracts embedded in the power contracts:
At 31 December 2020
Notional amount (in tonnes)
Notional amount (in US$ millions)
Average hedged rate (in US$ per tonne)
At 31 December 2019
Notional amount (in tonnes)
Notional amount (in US$ millions)
Average hedged rate (in US$ per tonne)
Total Within 1 year
640,963
1,522
2,375
72,548
159
2,189
Between 1
and 5 years
287,587
663
2,305
Between 5
and 10 years After 10 years
280,828
701
2,495
—
—
—
Total
Within 1 year
Between 1
and 5 years
Between 5
and 10 years
After 10 years
704,370
1,656
2,351
65,226
138
2,114
286,617
647
2,257
352,527
871
2,471
—
—
—
252
252
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
The impact on our financial statements of these hedging instruments and hedging items are:
Aluminium embedded derivatives separated
from the power contract
(Hedging instrument)(a)
Highly probable forecast aluminium sales (Hedged item)
Carrying
amount
US$m
Change in fair
value in the
period
US$m
Cash flow
hedge
reserve(b)
US$m
Change in
fair value in
the period
US$m
Total hedging
gain/(loss)
recognised
in reserves
US$m
Hedge
ineffective-
ness in the
period(c)
US$m
Amount
reclassified
from reserves
to income
statement(d)
US$m
46
42
23
29
184
196
(49)
(50)
27
36
(4)
(7)
40
19
Nominal
US$m
1,522
1,656
2020
2019
(a)
(b)
(c)
(d)
Aluminium embedded derivatives (forward contracts and options) are contained within certain aluminium smelter electricity purchase contracts. US$66 million (2019: US$66 million) of the carrying
value is shown within "Other financial assets" and US$20 million (2019: US$24 million) shown within "Other financial liabilities".
The difference between this amount and the total cash flow hedge reserve of the Group (shown in note 28) relates to our cash flow hedge on the sterling bond (refer to interest rate risk section).
Hedge ineffectiveness is included in net operating costs (raw materials, consumables, repairs and maintenance) in the income statement.
On realisation of the hedge, realised amounts are reclassified from reserves to consolidated sales revenue in the income statement.
There was no cost of hedging recognised in 2020 or 2019 relating to this hedge relationship.
We set out details of our commodity derivatives that are not designated as hedges in section B.
Sensitivities
Our commodity derivatives are impacted by changes in market prices. The table below summarises the impact that changes in aluminium market prices
have on aluminium forward and option contracts embedded in power supply agreements outstanding at 31 December 2020. Any change in price will
result in an offsetting change in our future earnings.
Effect on net earnings
Effect on equity
Change in
market prices
+10 %
(10) %
+10 %
(10) %
2020
US$m
(19)
19
(98)
100
2019
US$m
(28)
27
(97)
101
We exclude our “own use contracts” from this sensitivity analysis as they are outside the scope of IFRS 9. Our business units continue to hold these types
of contracts to satisfy their expected purchase, sale or usage requirements.
(iii) Credit risk
We are exposed to credit risk in our operating activities (primarily from customer trade receivables); and from our investing activities (primarily
investments in separately managed funds). We are also exposed to credit risk arising from our deposits in treasury and liquidity funds, deposits with
banks and financial institutions and from our interest rate and currency derivative contracts.
Credit risks related to receivables
Our Commercial team manages customer credit risk subject to our established policy, procedures and controls. The team establishes credit limits
for all of our customers. Where customers are rated by an independent credit rating agency, these ratings are used as a guide to set credit limits.
Where there are no independent credit ratings available, we assess the credit quality of the customer through a credit rating model and assign
appropriate credit limit. The Commercial team monitors outstanding customer receivables regularly and highlights any credit concerns to senior
management. Receivables to high risk customers are often secured by letters of credit or other forms of credit enhancement.
The expected credit loss on our trade receivable portfolio is insignificant (see note 18).
Credit risk related to financial instruments and cash deposits
Our Treasury team manages credit risk from investments in government securities (primarily US Government), corporate and asset-backed securities,
reverse re-purchase agreements, money market funds, and balances with banks and financial institutions in accordance with a Board-approved credit
risk framework which sets the risk appetite. Our Board reviews this annually. We make investments of surplus funds only with approved investment
grade (BBB- and above) counterparties who have been assigned specific credit limits. The limits are set to minimise the concentration of credit risk and
therefore mitigate the potential for financial loss through counterparty failure.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
253
253
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
29 Financial instruments and risk management continued
The maximum credit risk exposure arising on our financial assets at the balance sheet date is as follows:
Cash and cash equivalents
Trade and other financial receivables
Investments
Derivative assets
Loans to equity accounted units
Total
Note
20
18
19
19
2020
US$m
10,381
3,286
2,899
665
41
17,272
2019
US$m
8,027
2,938
2,839
366
39
14,209
(iv) Foreign exchange risk
The broad geographic spread of our sales and operations means that our earnings, cash flows and shareholders’ equity are influenced by a wide variety
of currencies.
The majority of our sales are denominated in the US dollar.
Our operating costs are influenced by the currencies of those countries where our mines and processing plants are located, and by those currencies in
which we buy imported equipment and services. The US dollar, the Australian dollar and the Canadian dollar are the most important currencies
influencing our costs. In any particular year, currency fluctuations may have a significant impact on our financial results. A strengthening of the US dollar
against the currencies in which our costs are partly denominated has a positive effect on our underlying earnings. However, a strengthening of the US
dollar reduces the value of non-US dollar denominated net assets, and therefore total equity.
Our external borrowings and cash are mainly denominated in US dollars, either directly or through the use of derivatives, as we consider the US dollar the
most appropriate currency for financing our operations.
In most cases our debt and other financial assets and liabilities, including intragroup balances, is held in the functional currency of the relevant
subsidiary. There are instances where these balances are held in currencies other than the functional currency of the relevant subsidiary. This means we
recognise exchange gains and losses in our income statement (except where they can be taken to equity) as these balances are translated into the
functional currency of the relevant subsidiary. Our income statement also includes exchange gains and losses arising on US dollar net debt and
intragroup balances. On consolidation, these balances are retranslated to our US dollar presentation currency and there is a corresponding and offsetting
exchange difference recognised directly in the currency translation reserve. There is no impact on total equity.
The table below summarises, by currency, our net debt, after taking into account relevant cross currency interest rate swaps and foreign
exchange contracts:
Net debt by currency
US dollar
Australian dollar
Euro
South African rand
Canadian dollar
Other
Total
Total
borrowings
excluding
overdrafts
US$m
(12,102)
(375)
(4)
—
(170)
(2)
(12,653)
Lease
liabilities
US$m
Derivatives
related to net
debt
US$m
Cash and
cash
equivalents
US$m
Other
investments
US$m
Net debt
2020
US$m
(342)
(350)
(25)
(1)
(199)
(261)
(1,178)
248
—
—
—
—
—
248
9,517
439
43
141
36
205
10,381
2,538
—
—
—
—
—
2,538
(141)
(286)
14
140
(333)
(58)
(664)
Net debt
2019
US$m
(2,843)
(561)
10
171
(322)
(106)
(3,651)
Hedging strategy
Under normal market conditions, we do not consider that active currency hedging of transactions would provide long-term benefits to shareholders. We
review our exposure on a regular basis and will undertake hedging if deemed appropriate. We may deem currency protection measures appropriate in
specific commercial circumstances. Capital expenditures and other significant financial items such as acquisitions, disposals, tax and dividend cash flows
may be economically hedged subject to strict limits laid down by the Board. Details of the cross-currency interest rate swaps and the currency forward
contracts used to manage our currency risk exposures at 31 December 2020 are in section B.
254
254
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Sensitivities
The table below shows the estimated retranslation effect on financial assets and financial liabilities, including intragroup balances, of a 10%
strengthening in the closing exchange rate of the US dollar against significant currencies. We deem 10% to be the annual exchange rate movement
that is reasonably probable (on an annual basis over the long run) for any of our significant currencies and therefore an appropriate representation.
We calculate sensitivities in relation to the functional currencies of our individual entities. We translate the impact of these on net earnings and
underlying earnings into US dollars at the exchange rates on which the sensitivities are based. The impact to net earnings associated with a 10%
weakening of a particular currency, shown below, is broadly offset within equity through movements in the currency translation reserve and therefore
generally has no impact on our net assets. The impact is expressed in terms of the effect on net earnings, underlying earnings, and equity, assuming
that each exchange rate moves in isolation. The sensitivities are based on financial assets and financial liabilities held at 31 December 2020, where
balances are not denominated in the functional currency of the subsidiary or joint operation, and exclude financial assets and liabilities held by equity
accounted units. These balances will not remain constant throughout 2021, and therefore the following information should be used with care.
At 31 December 2020
Gains/(losses) associated with 10% strengthening of the US dollar
Currency exposure
Australian dollar
Canadian dollar
Euro
At 31 December 2019
Gains/(losses) associated with 10% strengthening of the US dollar
Currency exposure
Australian dollar
Canadian dollar
Euro
Closing
exchange
rate
US cents
77
78
123
Closing
exchange
rate
US cents
70
77
112
Of which
amount
impacting
underlying
earnings
US$m
(11)
6
3
Effect on
net
earnings
US$m
625
(167)
139
Impact
directly
on equity
US$m
(1,105)
—
—
Of which
amount
impacting
underlying
earnings
US$m
(4)
7
4
Effect on
net
earnings
US$m
453
(143)
178
Impact
directly
on equity
US$m
(1,002)
—
—
(v) Interest rate risk
Our interest rate management policy is generally to borrow and invest at floating interest rates. This approach is based on the historically lower cost of
borrowing at floating rates, and the historical correlation between interest rates and commodity prices. It does mean, however, that movements in market
interest rates impact our earnings. In certain circumstances, we may elect to maintain a higher proportion of fixed-rate funding.
Hedging strategy
Because we aim to borrow and invest at floating interest rates, we enter into interest rate swaps and review these positions on a regular basis. During
2020, we entered into US$1.5 billion of interest rate swaps to convert the remaining fixed Alcan debt to floating interest rates. This is in accordance with
our floating interest rate policy. We have put these swaps into fair value hedge relationships with the respective tranches of debt.
At 31 December 2020, US$5.9 billion (2019: US$4.5 billion) US dollar notional fixed-rate US dollar borrowings continue to be swapped to floating US dollar
rates and €417 million (2019: €818 million) euro notional fixed-rate borrowings continue to be fully swapped to floating US dollar interest rates at an
effective exchange rate of 1.3105. These swaps are in fair value hedge relationships.
Since 2012, we have also held cross-currency interest rate swaps to convert the principal and annual interest coupons of the Rio Tinto Finance plc £500m
Sterling Bond to a US dollar notional with fixed US dollar annual interest coupons. We applied cash flow hedge accounting to this relationship to limit our
US dollar cash flow exposure on the principal and interest payments. The hedge was fully effective in the 2020 and 2019 financial years as the notional
amount, maturity, payment and reset dates match.
Nominal amount
of the bond
Nominal amount
of the hedging
instrument
Maturity
Effective
exchange rate
2020
2019
Gain in fair value of
the interest
component of the
hedged item
US$m
Loss in fair value of
the interest
component of the
hedging instrument
US$m
Loss in fair value of
the interest
component of the
hedged item
US$m
Gain in fair value of
the interest
component of the
hedging instrument
US$m
£500 million
US$807 million
November 2029
1.6132
7
(7)
(24)
24
In 2019, we swapped the resulting fixed US dollar annual interest coupon payments to floating rates. Fair value hedge accounting has been applied to this
relationship in addition to the pre-existing cash flow hedge.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
255
255
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
29 Financial instruments and risk management continued
The effective interest rates of our borrowings, impacted by swaps, are summarised below. All nominal values are fully hedged unless otherwise stated:
Borrowings in a hedge relationship
Rio Tinto Finance plc Euro Bonds 2.0% due 2020(a)
Rio Tinto Finance plc Euro Bonds 2.875% due 2024
Rio Tinto Finance (USA) Limited Bonds 3.75% 2025
Rio Tinto Finance (USA) Limited Bonds 7.125% 2028
Alcan Inc. Debentures 7.25% due 2028
Rio Tinto Finance plc Sterling Bonds 4.0% due 2029
Alcan Inc. US$400m Debentures 7.25% due 2031(b)
Alcan Inc. US$750m Global Notes 6.125% due 2033(b)
Alcan Inc. US$300m Global Notes 5.75% due 2035(b)
Rio Tinto Finance (USA) Limited Bonds 5.2% 2040
Rio Tinto Finance (USA) plc Bonds 4.75% 2042
Rio Tinto Finance (USA) plc Bonds 4.125% 2042
Nominal
value
US$m
526
546
1,200
750
100
807
400
750
300
1,150
500
750
Weighted average
interest rate
after swaps
Swap
maturity
Carrying
value
2020
US$m
Carrying
value
2019
US$m
3 month LIBOR +1.35%
3 month LIBOR +1.64%
3 month LIBOR +1.39%
3 month LIBOR +3.27%
3 month LIBOR +5.43%
3 month LIBOR +2.65%
3 month LIBOR +5.72%
3 month LIBOR +5.67%
3 month LIBOR +5.18%
3 month LIBOR +3.79%
3 month LIBOR +3.42%
3 month LIBOR +2.83%
2020
2024
2025
2028
2024
2024
2025
2025
2025
2022
2023
2023
—
555
1,299
1,005
109
717
438
744
292
1,173
501
743
455
508
1,229
958
104
647
—
—
—
1,137
483
716
(a)
(b)
On 11 May 2020 we repaid, in full, the nominal amount of the Rio Tinto Finance plc Euro Bonds 2% due 2020.
In 2020 we entered into new swaps to convert the interest payable in relation to these bonds from fixed to floating rates.
The fair value of interest rate and cross currency interest rate swaps at 31 December 2020 was US$388 million (2019: US$151 million) asset and US$140
million (2019: US$298 million) liability, respectively. These are included within “Other financial assets” and “Other financial liabilities” in the
balance sheet.
The main sources of ineffectiveness of the fair value hedges include changes in the timing of the cash flows of the hedging instrument compared to the
underlying hedged item, and changes in the credit risk of parties to the hedging relationships. Refer to Note 8 for the changes in fair value of the bonds
and the swaps as well as the ineffectiveness recognised in the period. Refer to Note 1 "New standards Issued not yet effective" for the impacts of IBOR
reform.
Taking into account the interest and currency interest rate swaps, at 31 December 2020, US$11.7 billion (2019: US$10.8 billion) of our adjusted gross
borrowings were at floating rates. This has resulted in a floating to fixed debt ratio of 86% floating to 14% fixed (2019: 76% floating to 24% fixed). Our
weighted average debt maturity was approximately 9 years (2019: 10 years) based on current interest rates and the carrying value of gross borrowings at
the year end.
Sensitivities
Based on our floating rate financial instruments outstanding at 31 December 2020, the effect on our net earnings of a 100 basis point increase in US
dollar LIBOR interest rates, with all other variables held constant, would be an expense of US$7 million (2019: expense of US$20 million), reflecting the
lower net debt position in 2020 compared to 2019. We have an exposure to interest rate volatility within shareholders’ equity arising from fair value
movements on derivatives in the cash flow hedge reserve. These derivatives have an underlying exposure to sterling and US dollars. With all factors
remaining constant, and based on the composition of derivatives impacting the cash flow reserve at 31 December 2020, the sensitivity of a 100 basis point
increase in interest rates in each of the currencies in isolation would impact equity, before tax, by a charge of US$68 million (2019: US$68 million charge)
for sterling and a credit of US$78 million (2019: US$78 million credit) for US dollars. A 100 basis point decrease would have broadly the same impact in
the opposite direction.
256
256
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
(cid:27)(cid:1)(cid:29)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:1)(cid:55)(cid:58)(cid:63)(cid:50)(cid:63)(cid:52)(cid:58)(cid:50)(cid:61)(cid:1)(cid:58)(cid:63)(cid:68)(cid:69)(cid:67)(cid:70)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)(cid:1)
(cid:23)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:1)(cid:42)(cid:45)(cid:52)(cid:55)(cid:63)(cid:1)(cid:63)(cid:45)(cid:1)(cid:59)(cid:61)(cid:53)(cid:53)(cid:41)(cid:58)(cid:49)(cid:59)(cid:45)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:44)(cid:45)(cid:58)(cid:49)(cid:62)(cid:41)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:45)(cid:53)(cid:42)(cid:45)(cid:44)(cid:44)(cid:45)(cid:44)(cid:1)(cid:44)(cid:45)(cid:58)(cid:49)(cid:62)(cid:41)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:95)(cid:1)(cid:41)(cid:59)(cid:1)(cid:41)(cid:60)(cid:1)(cid:6)(cid:4)(cid:1)(cid:18)(cid:45)(cid:43)(cid:45)(cid:53)(cid:42)(cid:45)(cid:58)(cid:96)(cid:1)
(cid:19)(cid:46)(cid:59)(cid:50)(cid:63)(cid:42)(cid:61)(cid:50)(cid:63)(cid:46)(cid:60)(cid:1)(cid:45)(cid:46)(cid:60)(cid:50)(cid:48)(cid:55)(cid:42)(cid:61)(cid:46)(cid:45)(cid:1)(cid:42)(cid:60)(cid:1)(cid:49)(cid:46)(cid:45)(cid:48)(cid:46)(cid:60)
(cid:24)(cid:55)(cid:61)(cid:46)(cid:59)(cid:46)(cid:60)(cid:61)(cid:1)(cid:59)(cid:42)(cid:61)(cid:46)(cid:1)(cid:60)(cid:64)(cid:42)(cid:57)(cid:60)(cid:92)(cid:42)(cid:94)
(cid:18)(cid:59)(cid:56)(cid:60)(cid:60)(cid:98)(cid:44)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:44)(cid:66)(cid:1)(cid:50)(cid:55)(cid:61)(cid:46)(cid:59)(cid:46)(cid:60)(cid:61)(cid:1)(cid:59)(cid:42)(cid:61)(cid:46)(cid:1)(cid:60)(cid:64)(cid:42)(cid:57)(cid:60)(cid:92)(cid:43)(cid:94)
(cid:16)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:46)(cid:54)(cid:43)(cid:46)(cid:45)(cid:45)(cid:46)(cid:45)(cid:1)(cid:45)(cid:46)(cid:59)(cid:50)(cid:63)(cid:42)(cid:61)(cid:50)(cid:63)(cid:46)(cid:60)(cid:92)(cid:44)(cid:94)
(cid:18)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:44)(cid:66)(cid:1)(cid:47)(cid:56)(cid:59)(cid:64)(cid:42)(cid:59)(cid:45)(cid:1)(cid:44)(cid:56)(cid:55)(cid:61)(cid:59)(cid:42)(cid:44)(cid:61)(cid:60)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:53)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:68)(cid:1)(cid:53)(cid:54)(cid:68)(cid:58)(cid:56)(cid:63)(cid:50)(cid:69)(cid:54)(cid:53)(cid:1)(cid:50)(cid:68)(cid:1)(cid:57)(cid:54)(cid:53)(cid:56)(cid:54)(cid:68)
(cid:19)(cid:46)(cid:59)(cid:50)(cid:63)(cid:42)(cid:61)(cid:50)(cid:63)(cid:46)(cid:60)(cid:1)(cid:55)(cid:56)(cid:61)(cid:1)(cid:45)(cid:46)(cid:60)(cid:50)(cid:48)(cid:55)(cid:42)(cid:61)(cid:46)(cid:45)(cid:1)(cid:42)(cid:60)(cid:1)(cid:49)(cid:46)(cid:45)(cid:48)(cid:46)(cid:60)
(cid:18)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:44)(cid:66)(cid:1)(cid:47)(cid:56)(cid:59)(cid:64)(cid:42)(cid:59)(cid:45)(cid:1)(cid:44)(cid:56)(cid:55)(cid:61)(cid:59)(cid:42)(cid:44)(cid:61)(cid:60)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:60)(cid:64)(cid:42)(cid:57)(cid:60)
(cid:16)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:46)(cid:54)(cid:43)(cid:46)(cid:45)(cid:45)(cid:46)(cid:45)(cid:1)(cid:45)(cid:46)(cid:59)(cid:50)(cid:63)(cid:42)(cid:61)(cid:50)(cid:63)(cid:46)(cid:60)(cid:92)(cid:44)(cid:94)
(cid:30)(cid:61)(cid:49)(cid:46)(cid:59)(cid:1)(cid:46)(cid:54)(cid:43)(cid:46)(cid:45)(cid:45)(cid:46)(cid:45)(cid:1)(cid:45)(cid:46)(cid:59)(cid:50)(cid:63)(cid:42)(cid:61)(cid:50)(cid:63)(cid:46)(cid:60)
(cid:30)(cid:61)(cid:49)(cid:46)(cid:59)(cid:1)(cid:44)(cid:56)(cid:54)(cid:54)(cid:56)(cid:45)(cid:50)(cid:61)(cid:66)(cid:1)(cid:44)(cid:56)(cid:55)(cid:61)(cid:59)(cid:42)(cid:44)(cid:61)(cid:60)(cid:92)(cid:45)(cid:94)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:53)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:68)(cid:1)(cid:63)(cid:64)(cid:69)(cid:1)(cid:53)(cid:54)(cid:68)(cid:58)(cid:56)(cid:63)(cid:50)(cid:69)(cid:54)(cid:53)(cid:1)(cid:50)(cid:68)(cid:1)(cid:57)(cid:54)(cid:53)(cid:56)(cid:54)(cid:68)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:53)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:1)(cid:58)(cid:63)(cid:68)(cid:69)(cid:67)(cid:70)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)
(cid:16)(cid:55)(cid:42)(cid:53)(cid:66)(cid:60)(cid:46)(cid:45)(cid:1)(cid:43)(cid:66)(cid:1)(cid:54)(cid:42)(cid:61)(cid:62)(cid:59)(cid:50)(cid:61)(cid:66)(cid:13)
(cid:27)(cid:46)(cid:60)(cid:60)(cid:1)(cid:61)(cid:49)(cid:42)(cid:55)(cid:1)(cid:4)(cid:1)(cid:66)(cid:46)(cid:42)(cid:59)
(cid:17)(cid:46)(cid:61)(cid:64)(cid:46)(cid:46)(cid:55)(cid:1)(cid:4)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:8)(cid:1)(cid:66)(cid:46)(cid:42)(cid:59)(cid:60)
(cid:28)(cid:56)(cid:59)(cid:46)(cid:1)(cid:61)(cid:49)(cid:42)(cid:55)(cid:1)(cid:8)(cid:1)(cid:66)(cid:46)(cid:42)(cid:59)(cid:60)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:63)(cid:54)(cid:69)(cid:1)(cid:53)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:1)(cid:58)(cid:63)(cid:68)(cid:69)(cid:67)(cid:70)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)
(cid:42)(cid:54)(cid:52)(cid:64)(cid:63)(cid:52)(cid:58)(cid:61)(cid:58)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:1)(cid:69)(cid:64)(cid:1)(cid:51)(cid:50)(cid:61)(cid:50)(cid:63)(cid:52)(cid:54)(cid:1)(cid:68)(cid:57)(cid:54)(cid:54)(cid:69)
(cid:29)(cid:56)(cid:55)(cid:98)(cid:44)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:42)(cid:60)(cid:60)(cid:46)(cid:61)(cid:60)
(cid:18)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:42)(cid:60)(cid:60)(cid:46)(cid:61)(cid:60)
(cid:18)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:53)(cid:50)(cid:42)(cid:43)(cid:50)(cid:53)(cid:50)(cid:61)(cid:50)(cid:46)(cid:60)
(cid:29)(cid:56)(cid:55)(cid:98)(cid:44)(cid:62)(cid:59)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:53)(cid:50)(cid:42)(cid:43)(cid:50)(cid:53)(cid:50)(cid:61)(cid:50)(cid:46)(cid:60)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:63)(cid:54)(cid:69)(cid:1)(cid:53)(cid:54)(cid:67)(cid:58)(cid:71)(cid:50)(cid:69)(cid:58)(cid:71)(cid:54)(cid:1)(cid:58)(cid:63)(cid:68)(cid:69)(cid:67)(cid:70)(cid:62)(cid:54)(cid:63)(cid:69)(cid:68)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)(cid:1)(cid:55)(cid:50)(cid:58)(cid:67)(cid:1)(cid:71)(cid:50)(cid:61)(cid:70)(cid:54)
(cid:15)(cid:13)(cid:15)(cid:13)
(cid:26)(cid:68)(cid:68)(cid:54)(cid:69)
(cid:45)(cid:43)(cid:2)(cid:62)
(cid:37)(cid:58)(cid:50)(cid:51)(cid:58)(cid:61)(cid:58)(cid:69)(cid:74)
(cid:45)(cid:43)(cid:2)(cid:62)
(cid:9)(cid:7)(cid:8)(cid:16)
(cid:18)(cid:59)(cid:59)(cid:45)(cid:60)
(cid:37)(cid:35)(cid:72)(cid:53)
(cid:29)(cid:49)(cid:41)(cid:42)(cid:49)(cid:52)(cid:49)(cid:60)(cid:65)
(cid:37)(cid:35)(cid:72)(cid:53)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:16)(cid:21)(cid:19)(cid:1)
(cid:15)(cid:1)
(cid:19)(cid:19)(cid:1)
(cid:20)(cid:1)
(cid:17)(cid:19)(cid:14)(cid:1)
(cid:19)(cid:16)(cid:1)
(cid:21)(cid:13)(cid:1)
(cid:15)(cid:21)(cid:1)
(cid:16)(cid:16)(cid:1)
(cid:15)(cid:13)(cid:17)(cid:1)
(cid:19)(cid:19)(cid:18)(cid:1)
(cid:14)(cid:16)(cid:17)(cid:1)
(cid:16)(cid:16)(cid:13)(cid:1)
(cid:15)(cid:13)(cid:14)(cid:1)
(cid:19)(cid:19)(cid:18)(cid:1)
(cid:17)(cid:21)(cid:14)(cid:1)
(cid:6)(cid:14)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:16)(cid:22)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:15)(cid:13)(cid:7)(cid:1) (cid:1)
(cid:80)(cid:1)
(cid:1)
(cid:6)(cid:14)(cid:19)(cid:13)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:7)(cid:1) (cid:1)
(cid:80)(cid:1)
(cid:1)
(cid:6)(cid:14)(cid:19)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:20)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:15)(cid:17)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:21)(cid:17)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:15)(cid:16)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:17)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:17)(cid:20)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:21)(cid:17)(cid:7)(cid:1) (cid:1)
(cid:1)
(cid:31)(cid:55)(cid:60)(cid:45)
(cid:4)(cid:12) (cid:1)
(cid:4)(cid:12) (cid:1)
(cid:5)(cid:4) (cid:1)
(cid:5)(cid:4) (cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:4)(cid:8)(cid:4)(cid:1)
(cid:73)(cid:1)
(cid:9)(cid:9)(cid:1)
(cid:73)(cid:1)
(cid:5)(cid:4)(cid:10)(cid:1)
(cid:4)(cid:6)(cid:1)
(cid:12)(cid:9)(cid:1)
(cid:4)(cid:7)(cid:1)
(cid:5)(cid:9)(cid:1)
(cid:4)(cid:7)(cid:12)(cid:1)
(cid:6)(cid:9)(cid:9)(cid:1)
(cid:8)(cid:11)(cid:1)
(cid:12)(cid:9)(cid:1)
(cid:5)(cid:4)(cid:5)(cid:1)
(cid:6)(cid:9)(cid:9)(cid:1)
(cid:4)(cid:8)(cid:1)
(cid:15)(cid:13)(cid:15)(cid:13)(cid:1)
(cid:45)(cid:43)(cid:2)(cid:62)
(cid:1)
(cid:18)(cid:16)(cid:14)(cid:1)
(cid:1)
(cid:14)(cid:16)(cid:17)(cid:1)
(cid:6)(cid:15)(cid:16)(cid:7)(cid:1) (cid:1)
(cid:6)(cid:14)(cid:19)(cid:14)(cid:7)(cid:1) (cid:1)
(cid:1)
(cid:17)(cid:21)(cid:14)(cid:1)
(cid:92)(cid:6)(cid:11)(cid:94)(cid:1)
(cid:92)(cid:5)(cid:9)(cid:3)(cid:94)(cid:1)
(cid:92)(cid:5)(cid:7)(cid:94)(cid:1)
(cid:73)(cid:1)
(cid:92)(cid:6)(cid:5)(cid:5)(cid:94)(cid:1)
(cid:92)(cid:8)(cid:94)(cid:1)
(cid:73)(cid:1)
(cid:73)(cid:1)
(cid:92)(cid:5)(cid:7)(cid:94)(cid:1)
(cid:92)(cid:5)(cid:12)(cid:94)(cid:1)
(cid:92)(cid:6)(cid:8)(cid:4)(cid:94)(cid:1)
(cid:92)(cid:4)(cid:3)(cid:6)(cid:94)(cid:1)
(cid:92)(cid:11)(cid:9)(cid:94)(cid:1)
(cid:92)(cid:4)(cid:9)(cid:5)(cid:94)(cid:1)
(cid:92)(cid:6)(cid:8)(cid:4)(cid:94)(cid:1)
(cid:9)(cid:7)(cid:8)(cid:16)
(cid:37)(cid:35)(cid:72)(cid:53)
(cid:6)(cid:3)(cid:11)(cid:1)
(cid:8)(cid:11)(cid:1)
(cid:92)(cid:4)(cid:3)(cid:6)(cid:94)(cid:1)
(cid:92)(cid:5)(cid:7)(cid:11)(cid:94)(cid:1)
(cid:4)(cid:8)(cid:1)
(cid:92)(cid:41)(cid:94)
(cid:92)(cid:42)(cid:94)
(cid:92)(cid:43)(cid:94)
(cid:92)(cid:44)(cid:94)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:49)(cid:54)(cid:60)(cid:45)(cid:58)(cid:45)(cid:59)(cid:60)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:1)(cid:59)(cid:63)(cid:41)(cid:56)(cid:59)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:61)(cid:59)(cid:45)(cid:44)(cid:1)(cid:60)(cid:55)(cid:1)(cid:43)(cid:55)(cid:54)(cid:62)(cid:45)(cid:58)(cid:60)(cid:1)(cid:43)(cid:45)(cid:58)(cid:60)(cid:41)(cid:49)(cid:54)(cid:1)(cid:46)(cid:49)(cid:64)(cid:45)(cid:44)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:1)(cid:42)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:60)(cid:55)(cid:1)(cid:41)(cid:1)(cid:46)(cid:52)(cid:55)(cid:41)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:96)(cid:1)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:43)(cid:58)(cid:55)(cid:59)(cid:59)(cid:97)(cid:43)(cid:61)(cid:58)(cid:58)(cid:45)(cid:54)(cid:43)(cid:65)(cid:1)(cid:49)(cid:54)(cid:60)(cid:45)(cid:58)(cid:45)(cid:59)(cid:60)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:1)(cid:59)(cid:63)(cid:41)(cid:56)(cid:59)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:61)(cid:59)(cid:45)(cid:44)(cid:1)(cid:60)(cid:55)(cid:1)(cid:43)(cid:55)(cid:54)(cid:62)(cid:45)(cid:58)(cid:60)(cid:1)(cid:54)(cid:55)(cid:54)(cid:97)(cid:35)(cid:33)(cid:1)(cid:44)(cid:55)(cid:52)(cid:52)(cid:41)(cid:58)(cid:1)(cid:44)(cid:45)(cid:54)(cid:55)(cid:53)(cid:49)(cid:54)(cid:41)(cid:60)(cid:45)(cid:44)(cid:1)(cid:42)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:60)(cid:55)(cid:1)(cid:45)(cid:49)(cid:60)(cid:48)(cid:45)(cid:58)(cid:1)(cid:46)(cid:49)(cid:64)(cid:45)(cid:44)(cid:1)(cid:55)(cid:58)(cid:1)(cid:46)(cid:52)(cid:55)(cid:41)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:35)(cid:33)(cid:1)(cid:44)(cid:55)(cid:52)(cid:52)(cid:41)(cid:58)(cid:1)(cid:42)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:96)(cid:1)
(cid:15)(cid:52)(cid:61)(cid:53)(cid:49)(cid:54)(cid:49)(cid:61)(cid:53)(cid:1)(cid:45)(cid:53)(cid:42)(cid:45)(cid:44)(cid:44)(cid:45)(cid:44)(cid:1)(cid:44)(cid:45)(cid:58)(cid:49)(cid:62)(cid:41)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:1)(cid:92)(cid:46)(cid:55)(cid:58)(cid:63)(cid:41)(cid:58)(cid:44)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:41)(cid:43)(cid:60)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:55)(cid:56)(cid:60)(cid:49)(cid:55)(cid:54)(cid:59)(cid:94)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:41)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:49)(cid:54)(cid:1)(cid:43)(cid:45)(cid:58)(cid:60)(cid:41)(cid:49)(cid:54)(cid:1)(cid:41)(cid:52)(cid:61)(cid:53)(cid:49)(cid:54)(cid:49)(cid:61)(cid:53)(cid:1)(cid:59)(cid:53)(cid:45)(cid:52)(cid:60)(cid:45)(cid:58)(cid:1)(cid:45)(cid:52)(cid:45)(cid:43)(cid:60)(cid:58)(cid:49)(cid:43)(cid:49)(cid:60)(cid:65)(cid:1)(cid:56)(cid:61)(cid:58)(cid:43)(cid:48)(cid:41)(cid:59)(cid:45)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:41)(cid:43)(cid:60)(cid:59)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:59)(cid:45)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:41)(cid:43)(cid:60)(cid:59)(cid:1)(cid:58)(cid:45)(cid:44)(cid:61)(cid:43)(cid:45)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:53)(cid:41)(cid:58)(cid:47)(cid:49)(cid:54)(cid:1)(cid:45)(cid:64)(cid:56)(cid:55)(cid:59)(cid:61)(cid:58)(cid:45)(cid:1)(cid:60)(cid:55)(cid:1)
(cid:53)(cid:55)(cid:62)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:41)(cid:52)(cid:61)(cid:53)(cid:49)(cid:54)(cid:49)(cid:61)(cid:53)(cid:1)(cid:56)(cid:58)(cid:49)(cid:43)(cid:45)(cid:96)(cid:1)
(cid:29)(cid:60)(cid:48)(cid:45)(cid:58)(cid:1)(cid:43)(cid:55)(cid:53)(cid:53)(cid:55)(cid:44)(cid:49)(cid:60)(cid:65)(cid:1)(cid:44)(cid:45)(cid:58)(cid:49)(cid:62)(cid:41)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:1)(cid:53)(cid:41)(cid:49)(cid:54)(cid:52)(cid:65)(cid:1)(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:45)(cid:1)(cid:60)(cid:55)(cid:1)(cid:46)(cid:55)(cid:58)(cid:63)(cid:41)(cid:58)(cid:44)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:41)(cid:43)(cid:60)(cid:59)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:63)(cid:45)(cid:1)(cid:48)(cid:41)(cid:62)(cid:45)(cid:1)(cid:45)(cid:54)(cid:60)(cid:45)(cid:58)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:60)(cid:55)(cid:1)(cid:60)(cid:55)(cid:1)(cid:59)(cid:63)(cid:41)(cid:56)(cid:1)(cid:59)(cid:55)(cid:53)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:46)(cid:49)(cid:64)(cid:45)(cid:44)(cid:1)(cid:56)(cid:58)(cid:49)(cid:43)(cid:45)(cid:44)(cid:1)(cid:56)(cid:58)(cid:55)(cid:44)(cid:61)(cid:43)(cid:60)(cid:1)(cid:59)(cid:41)(cid:52)(cid:45)(cid:59)(cid:1)(cid:60)(cid:55)(cid:1)(cid:56)(cid:58)(cid:45)(cid:62)(cid:41)(cid:49)(cid:52)(cid:49)(cid:54)(cid:47)(cid:1)(cid:53)(cid:41)(cid:58)(cid:51)(cid:45)(cid:60)(cid:1)(cid:56)(cid:58)(cid:49)(cid:43)(cid:45)(cid:59)(cid:1)(cid:41)(cid:60)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:55)(cid:49)(cid:54)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:58)(cid:45)(cid:62)(cid:45)(cid:54)(cid:61)(cid:45)(cid:1)
(cid:58)(cid:45)(cid:43)(cid:55)(cid:47)(cid:54)(cid:49)(cid:60)(cid:49)(cid:55)(cid:54)(cid:96)(cid:1)(cid:28)(cid:55)(cid:54)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:59)(cid:45)(cid:1)(cid:44)(cid:45)(cid:58)(cid:49)(cid:62)(cid:41)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:1)(cid:49)(cid:59)(cid:1)(cid:49)(cid:54)(cid:1)(cid:41)(cid:1)(cid:48)(cid:45)(cid:44)(cid:47)(cid:45)(cid:1)(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:59)(cid:48)(cid:49)(cid:56)(cid:96)(cid:1)
(cid:28)(cid:1)(cid:31)(cid:50)(cid:58)(cid:67)(cid:1)(cid:71)(cid:50)(cid:61)(cid:70)(cid:54)(cid:68)(cid:1)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:46)(cid:55)(cid:52)(cid:52)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:1)(cid:59)(cid:48)(cid:55)(cid:63)(cid:59)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:65)(cid:49)(cid:54)(cid:47)(cid:1)(cid:41)(cid:53)(cid:55)(cid:61)(cid:54)(cid:60)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:42)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:48)(cid:55)(cid:59)(cid:45)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:54)(cid:55)(cid:60)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:49)(cid:45)(cid:44)(cid:1)(cid:41)(cid:60)(cid:1)(cid:41)(cid:54)(cid:1)(cid:41)(cid:53)(cid:55)(cid:61)(cid:54)(cid:60)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:41)(cid:56)(cid:56)(cid:58)(cid:55)(cid:64)(cid:49)(cid:53)(cid:41)(cid:60)(cid:45)(cid:59)(cid:1)
(cid:60)(cid:48)(cid:45)(cid:49)(cid:58)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:41)(cid:60)(cid:1)(cid:6)(cid:4)(cid:87)(cid:18)(cid:45)(cid:43)(cid:45)(cid:53)(cid:42)(cid:45)(cid:58)(cid:1)(cid:5)(cid:3)(cid:5)(cid:3)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:6)(cid:4)(cid:87)(cid:18)(cid:45)(cid:43)(cid:45)(cid:53)(cid:42)(cid:45)(cid:58)(cid:1)(cid:5)(cid:3)(cid:4)(cid:12)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:43)(cid:41)(cid:59)(cid:48)(cid:1)(cid:45)(cid:57)(cid:61)(cid:49)(cid:62)(cid:41)(cid:52)(cid:45)(cid:54)(cid:60)(cid:59)(cid:95)(cid:1)(cid:52)(cid:55)(cid:41)(cid:54)(cid:59)(cid:1)(cid:60)(cid:55)(cid:1)(cid:45)(cid:57)(cid:61)(cid:49)(cid:60)(cid:65)(cid:1)(cid:41)(cid:43)(cid:43)(cid:55)(cid:61)(cid:54)(cid:60)(cid:45)(cid:44)(cid:1)(cid:61)(cid:54)(cid:49)(cid:60)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:55)(cid:60)(cid:48)(cid:45)(cid:58)(cid:1)(cid:46)(cid:49)(cid:54)(cid:41)(cid:54)(cid:43)(cid:49)(cid:41)(cid:52)(cid:1)
(cid:52)(cid:49)(cid:41)(cid:42)(cid:49)(cid:52)(cid:49)(cid:60)(cid:49)(cid:45)(cid:59)(cid:1)(cid:41)(cid:56)(cid:56)(cid:58)(cid:55)(cid:64)(cid:49)(cid:53)(cid:41)(cid:60)(cid:45)(cid:1)(cid:60)(cid:48)(cid:45)(cid:49)(cid:58)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:65)(cid:49)(cid:54)(cid:47)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:59)(cid:1)(cid:42)(cid:45)(cid:43)(cid:41)(cid:61)(cid:59)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:49)(cid:58)(cid:1)(cid:59)(cid:48)(cid:55)(cid:58)(cid:60)(cid:1)(cid:53)(cid:41)(cid:60)(cid:61)(cid:58)(cid:49)(cid:60)(cid:65)(cid:95)(cid:1)(cid:55)(cid:58)(cid:1)(cid:42)(cid:45)(cid:43)(cid:41)(cid:61)(cid:59)(cid:45)(cid:1)(cid:60)(cid:48)(cid:45)(cid:65)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:65)(cid:1)(cid:46)(cid:52)(cid:55)(cid:41)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:49)(cid:54)(cid:60)(cid:45)(cid:58)(cid:45)(cid:59)(cid:60)(cid:96)
(cid:17)(cid:56)(cid:59)(cid:59)(cid:56)(cid:64)(cid:50)(cid:55)(cid:48)(cid:60)
(cid:15)(cid:13)(cid:15)(cid:13)
(cid:28)(cid:50)(cid:67)(cid:67)(cid:74)(cid:58)(cid:63)(cid:56)
(cid:71)(cid:50)(cid:61)(cid:70)(cid:54)
(cid:45)(cid:43)(cid:2)(cid:62)
(cid:31)(cid:50)(cid:58)(cid:67)
(cid:71)(cid:50)(cid:61)(cid:70)(cid:54)
(cid:45)(cid:43)(cid:2)(cid:62)
(cid:9)(cid:7)(cid:8)(cid:16)
(cid:20)(cid:41)(cid:58)(cid:58)(cid:65)(cid:49)(cid:54)(cid:47)
(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)
(cid:37)(cid:35)(cid:72)(cid:53)
(cid:23)(cid:41)(cid:49)(cid:58)
(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)
(cid:37)(cid:35)(cid:72)(cid:53)
(cid:31)(cid:55)(cid:60)(cid:45)
(cid:5)(cid:4) (cid:1)
(cid:14)(cid:15)(cid:9)(cid:19)(cid:18)(cid:16)(cid:1)
(cid:1)
(cid:14)(cid:18)(cid:9)(cid:13)(cid:20)(cid:19)(cid:1)
(cid:1)
(cid:4)(cid:5)(cid:95)(cid:11)(cid:3)(cid:9)(cid:1)
(cid:1)
(cid:4)(cid:7)(cid:95)(cid:9)(cid:10)(cid:11)(cid:1)
(cid:34)(cid:55)(cid:60)(cid:41)(cid:52)(cid:1)(cid:42)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:41)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:65)(cid:49)(cid:54)(cid:47)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:35)(cid:33)(cid:89)(cid:10)(cid:96)(cid:9)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:10)(cid:96)(cid:10)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:94)(cid:1)(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:45)(cid:1)(cid:60)(cid:55)(cid:1)(cid:52)(cid:49)(cid:59)(cid:60)(cid:45)(cid:44)(cid:1)(cid:42)(cid:55)(cid:54)(cid:44)(cid:59)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:41)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:35)(cid:33)(cid:89)(cid:12)(cid:96)(cid:8)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:12)(cid:96)(cid:4)(cid:1)
(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:94)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:43)(cid:41)(cid:60)(cid:45)(cid:47)(cid:55)(cid:58)(cid:49)(cid:59)(cid:45)(cid:44)(cid:1)(cid:41)(cid:59)(cid:1)(cid:52)(cid:45)(cid:62)(cid:45)(cid:52)(cid:1)(cid:4)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:48)(cid:49)(cid:45)(cid:58)(cid:41)(cid:58)(cid:43)(cid:48)(cid:65)(cid:96)(cid:1)
(cid:16)(cid:55)(cid:58)(cid:58)(cid:55)(cid:63)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:41)(cid:1)(cid:43)(cid:41)(cid:58)(cid:58)(cid:65)(cid:49)(cid:54)(cid:47)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:35)(cid:33)(cid:89)(cid:7)(cid:96)(cid:5)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:7)(cid:96)(cid:5)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:94)(cid:1)(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:45)(cid:1)(cid:60)(cid:55)(cid:1)(cid:56)(cid:58)(cid:55)(cid:50)(cid:45)(cid:43)(cid:60)(cid:1)(cid:46)(cid:49)(cid:54)(cid:41)(cid:54)(cid:43)(cid:45)(cid:1)(cid:44)(cid:58)(cid:41)(cid:63)(cid:54)(cid:1)(cid:44)(cid:55)(cid:63)(cid:54)(cid:1)(cid:42)(cid:65)(cid:1)(cid:29)(cid:65)(cid:61)(cid:1)(cid:34)(cid:55)(cid:52)(cid:47)(cid:55)(cid:49)(cid:95)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:41)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:35)(cid:33)(cid:89)(cid:7)(cid:96)(cid:10)(cid:1)
(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:7)(cid:96)(cid:10)(cid:1)(cid:42)(cid:49)(cid:52)(cid:52)(cid:49)(cid:55)(cid:54)(cid:94)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:43)(cid:41)(cid:60)(cid:45)(cid:47)(cid:55)(cid:58)(cid:49)(cid:59)(cid:45)(cid:44)(cid:1)(cid:41)(cid:59)(cid:1)(cid:52)(cid:45)(cid:62)(cid:45)(cid:52)(cid:1)(cid:6)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:48)(cid:49)(cid:45)(cid:58)(cid:41)(cid:58)(cid:43)(cid:48)(cid:65)(cid:96)(cid:1)(cid:37)(cid:45)(cid:1)(cid:61)(cid:59)(cid:45)(cid:1)(cid:44)(cid:49)(cid:46)(cid:46)(cid:45)(cid:58)(cid:45)(cid:54)(cid:60)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:49)(cid:54)(cid:56)(cid:61)(cid:60)(cid:59)(cid:1)(cid:46)(cid:55)(cid:58)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)(cid:41)(cid:54)(cid:44)(cid:1)(cid:56)(cid:55)(cid:59)(cid:60)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)
(cid:56)(cid:48)(cid:41)(cid:59)(cid:45)(cid:59)(cid:1)(cid:60)(cid:55)(cid:1)(cid:58)(cid:45)(cid:46)(cid:52)(cid:45)(cid:43)(cid:60)(cid:1)(cid:32)(cid:49)(cid:55)(cid:1)(cid:34)(cid:49)(cid:54)(cid:60)(cid:55)(cid:93)(cid:59)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:59)(cid:61)(cid:56)(cid:56)(cid:55)(cid:58)(cid:60)(cid:1)(cid:47)(cid:61)(cid:41)(cid:58)(cid:41)(cid:54)(cid:60)(cid:45)(cid:45)(cid:1)(cid:44)(cid:61)(cid:58)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:56)(cid:48)(cid:41)(cid:59)(cid:45)(cid:96)(cid:1)(cid:34)(cid:55)(cid:1)(cid:53)(cid:45)(cid:41)(cid:59)(cid:61)(cid:58)(cid:45)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:55)(cid:50)(cid:45)(cid:43)(cid:60)(cid:1)(cid:46)(cid:49)(cid:54)(cid:41)(cid:54)(cid:43)(cid:45)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)
(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:55)(cid:61)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:49)(cid:54)(cid:56)(cid:61)(cid:60)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:59)(cid:1)(cid:53)(cid:41)(cid:58)(cid:51)(cid:45)(cid:60)(cid:1)(cid:65)(cid:49)(cid:45)(cid:52)(cid:44)(cid:1)(cid:55)(cid:62)(cid:45)(cid:58)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:56)(cid:45)(cid:58)(cid:49)(cid:55)(cid:44)(cid:95)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:62)(cid:41)(cid:58)(cid:49)(cid:41)(cid:42)(cid:49)(cid:52)(cid:49)(cid:60)(cid:65)(cid:1)(cid:55)(cid:46)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:63)(cid:45)(cid:1)(cid:43)(cid:55)(cid:54)(cid:59)(cid:49)(cid:44)(cid:45)(cid:58)(cid:1)(cid:41)(cid:1)(cid:58)(cid:45)(cid:41)(cid:59)(cid:55)(cid:54)(cid:41)(cid:42)(cid:52)(cid:45)(cid:1)(cid:49)(cid:54)(cid:44)(cid:49)(cid:43)(cid:41)(cid:60)(cid:55)(cid:58)(cid:1)(cid:55)(cid:46)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)
(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:53)(cid:55)(cid:62)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:1)(cid:55)(cid:54)(cid:1)(cid:41)(cid:53)(cid:55)(cid:61)(cid:54)(cid:60)(cid:59)(cid:1)(cid:55)(cid:61)(cid:60)(cid:59)(cid:60)(cid:41)(cid:54)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:61)(cid:54)(cid:44)(cid:45)(cid:58)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:55)(cid:50)(cid:45)(cid:43)(cid:60)(cid:1)(cid:46)(cid:49)(cid:54)(cid:41)(cid:54)(cid:43)(cid:45)(cid:1)(cid:46)(cid:41)(cid:43)(cid:49)(cid:52)(cid:49)(cid:60)(cid:65)(cid:96)(cid:1)(cid:30)(cid:55)(cid:59)(cid:60)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:95)(cid:1)(cid:63)(cid:45)(cid:1)(cid:45)(cid:59)(cid:60)(cid:49)(cid:53)(cid:41)(cid:60)(cid:45)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:49)(cid:58)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:45)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:58)(cid:45)(cid:46)(cid:45)(cid:58)(cid:45)(cid:54)(cid:43)(cid:45)(cid:1)(cid:60)(cid:55)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:41)(cid:54)(cid:54)(cid:61)(cid:41)(cid:52)(cid:1)
(cid:49)(cid:54)(cid:60)(cid:45)(cid:58)(cid:45)(cid:59)(cid:60)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:1)(cid:55)(cid:54)(cid:1)(cid:45)(cid:41)(cid:43)(cid:48)(cid:1)(cid:60)(cid:58)(cid:41)(cid:54)(cid:43)(cid:48)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:46)(cid:41)(cid:43)(cid:49)(cid:52)(cid:49)(cid:60)(cid:65)(cid:95)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:41)(cid:46)(cid:60)(cid:45)(cid:58)(cid:1)(cid:43)(cid:55)(cid:54)(cid:59)(cid:49)(cid:44)(cid:45)(cid:58)(cid:49)(cid:54)(cid:47)(cid:1)(cid:46)(cid:41)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:60)(cid:48)(cid:41)(cid:60)(cid:1)(cid:43)(cid:55)(cid:61)(cid:52)(cid:44)(cid:1)(cid:49)(cid:54)(cid:44)(cid:49)(cid:43)(cid:41)(cid:60)(cid:45)(cid:1)(cid:41)(cid:1)(cid:43)(cid:48)(cid:41)(cid:54)(cid:47)(cid:45)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:43)(cid:58)(cid:45)(cid:44)(cid:49)(cid:60)(cid:1)(cid:41)(cid:59)(cid:59)(cid:45)(cid:59)(cid:59)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:29)(cid:65)(cid:61)(cid:1)(cid:34)(cid:55)(cid:52)(cid:47)(cid:55)(cid:49)(cid:1)(cid:26)(cid:26)(cid:17)(cid:1)(cid:41)(cid:59)(cid:1)(cid:41)(cid:1)
(cid:43)(cid:55)(cid:61)(cid:54)(cid:60)(cid:45)(cid:58)(cid:56)(cid:41)(cid:58)(cid:60)(cid:65)(cid:1)(cid:60)(cid:55)(cid:1)(cid:56)(cid:58)(cid:55)(cid:50)(cid:45)(cid:43)(cid:60)(cid:1)(cid:46)(cid:49)(cid:54)(cid:41)(cid:54)(cid:43)(cid:45)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:59)(cid:45)(cid:1)(cid:46)(cid:41)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:1)(cid:49)(cid:54)(cid:97)(cid:43)(cid:55)(cid:61)(cid:54)(cid:60)(cid:58)(cid:65)(cid:1)(cid:58)(cid:49)(cid:59)(cid:51)(cid:1)(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:55)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:29)(cid:65)(cid:61)(cid:1)(cid:34)(cid:55)(cid:52)(cid:47)(cid:55)(cid:49)(cid:1)(cid:56)(cid:58)(cid:55)(cid:50)(cid:45)(cid:43)(cid:60)(cid:95)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:41)(cid:59)(cid:59)(cid:61)(cid:53)(cid:45)(cid:44)(cid:1)(cid:44)(cid:41)(cid:60)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:58)(cid:41)(cid:54)(cid:59)(cid:49)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:46)(cid:58)(cid:55)(cid:53)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)
(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:60)(cid:55)(cid:1)(cid:56)(cid:55)(cid:59)(cid:60)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:59)(cid:45)(cid:1)(cid:62)(cid:41)(cid:52)(cid:61)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:49)(cid:54)(cid:56)(cid:61)(cid:60)(cid:59)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:43)(cid:55)(cid:54)(cid:59)(cid:49)(cid:44)(cid:45)(cid:58)(cid:45)(cid:44)(cid:1)(cid:60)(cid:55)(cid:1)(cid:42)(cid:45)(cid:1)(cid:52)(cid:45)(cid:62)(cid:45)(cid:52)(cid:1)(cid:6)(cid:96)(cid:1)(cid:34)(cid:58)(cid:41)(cid:54)(cid:59)(cid:49)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:46)(cid:58)(cid:55)(cid:53)(cid:1)(cid:56)(cid:58)(cid:45)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:60)(cid:55)(cid:1)(cid:56)(cid:55)(cid:59)(cid:60)(cid:97)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:49)(cid:59)(cid:1)(cid:44)(cid:45)(cid:60)(cid:45)(cid:58)(cid:53)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:42)(cid:65)(cid:1)
(cid:41)(cid:1)(cid:59)(cid:45)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:45)(cid:59)(cid:60)(cid:59)(cid:1)(cid:46)(cid:55)(cid:58)(cid:1)(cid:42)(cid:55)(cid:60)(cid:48)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:52)(cid:45)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:55)(cid:46)(cid:1)(cid:56)(cid:48)(cid:65)(cid:59)(cid:49)(cid:43)(cid:41)(cid:52)(cid:1)(cid:49)(cid:54)(cid:46)(cid:58)(cid:41)(cid:59)(cid:60)(cid:58)(cid:61)(cid:43)(cid:60)(cid:61)(cid:58)(cid:45)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:41)(cid:42)(cid:49)(cid:52)(cid:49)(cid:60)(cid:65)(cid:1)(cid:60)(cid:55)(cid:1)(cid:45)(cid:64)(cid:60)(cid:58)(cid:41)(cid:43)(cid:60)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:56)(cid:58)(cid:55)(cid:43)(cid:45)(cid:59)(cid:59)(cid:1)(cid:55)(cid:58)(cid:45)(cid:1)(cid:55)(cid:46)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:47)(cid:58)(cid:41)(cid:44)(cid:45)(cid:59)(cid:1)(cid:55)(cid:62)(cid:45)(cid:58)(cid:1)(cid:41)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:56)(cid:45)(cid:58)(cid:49)(cid:55)(cid:44)(cid:96)(cid:1)
Annual Report 2020 | riotinto.com
(cid:26)(cid:63)(cid:63)(cid:70)(cid:50)(cid:61)(cid:1)(cid:42)(cid:54)(cid:65)(cid:64)(cid:67)(cid:69)(cid:1)(cid:15)(cid:13)(cid:15)(cid:13)(cid:1)(cid:67)(cid:1)(cid:58)(cid:49)(cid:55)(cid:60)(cid:49)(cid:54)(cid:60)(cid:55)(cid:96)(cid:43)(cid:55)(cid:53)(cid:1)(cid:1)
(cid:5)(cid:8)(cid:10) 257
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
29 Financial instruments and risk management continued
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.
C (a) Valuation hierarchy
The tables below show the financial instruments by valuation method in accordance with IFRS 9 at 31 December 2020 and 31 December 2019.
At 31 December 2020
Assets
Cash and cash equivalents(d)
Investments in equity shares and funds
Other investments, including loans(e)
Trade and other financial receivables(f)
Derivatives (net)
Forward contracts and option contracts: designated as hedges(g) (Section B)
Forward contracts and option contracts, not designated as hedges(g) (Section B)
Derivatives related to net debt(h) (Section B)
Liabilities
Trade and other financial payables
Total
At 31 December 2019
Assets
Cash and cash equivalents(d)
Investments in equity shares and funds
Other investments, including loans(e)
Trade and other financial receivables(f)
Derivatives (net)
Forward contracts and option contracts: designated as hedges(g) (Section B)
Forward contracts and option contracts, not designated as hedges(g) (Section B)
Derivatives related to net debt(h) (Section B)
Held at fair value
Note
Total
US$m
Level 1(a)
US$m
Level 2(b)
US$m
Level 3(c)
US$m
19
18
10,381
75
2,899
3,286
53
180
248
6,411
35
2,563
5
—
—
—
—
—
—
1,802
7
69
248
24
(5,847)
11,275
—
9,014
(30)
2,096
Held at fair value
—
40
198
—
46
111
—
—
395
Level 1(a)
US$m
Level 2(b)
US$m
Level 3(c)
US$m
Note
19
18
Total
US$m
8,027
61
2,839
2,938
42
120
(147)
5,320
26
2,607
15
—
—
—
—
—
—
1,122
—
25
(147)
(57)
943
—
35
211
—
42
95
—
—
383
Held at
amortised
cost
US$m
3,970
—
138
1,479
—
—
—
(5,817)
(230)
Held at
amortised
costs
US$m
2,707
—
21
1,801
—
—
—
(5,341)
(812)
Liabilities
Trade and other financial payables
Total
24
(5,398)
8,482
—
7,968
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Valuation is based on unadjusted quoted prices in active markets for identical financial instruments. This category includes listed equity shares and other quoted funds.
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.
Valuation is based on inputs that are not based on observable market data (unobservable inputs).
Cash and cash equivalents include 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.
Other investments, including loans, comprise: cash deposits in rehabilitation funds, government bonds, managed investment funds and royalty receivables. The royalty receivables are valued based
on future expected output as well as forward commodity prices.
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 31 December 2020, US$1,671 million (31 December 2019: US$1,040 million) of provisionally priced receivables were recognised.
Level 3 derivatives consist of derivatives embedded in electricity purchase contracts linked to the LME with terms expiring between 2025 and 2029 (2019: 2025 and 2030). The embedded derivatives
are measured using discounted cash flows and option model valuation techniques.
Interest rate and currency interest rate swaps are valued using applicable market quoted swap yield curves adjusted for relevant basis and credit default spreads. Currency interest rate swap
valuations also use market quoted foreign exchange rates. A discounted cash flow approach is used to derive fair value from these inputs to the underlying cash flows.
There were no material transfers between level 1 and level 2, or between level 2 and level 3 in the year ended 31 December 2020 or in the year ended
31 December 2019.
258
258
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
C (b) Level 3 financial assets and financial liabilities
The table below shows the summary of changes in the fair value of the Group's level 3 financial assets and financial liabilities.
Opening balance
Currency translation adjustments
Total realised gains/(losses) included in:
– consolidated sales revenue
– net operating costs
Total unrealised (losses)/gains included in:
– net operating costs
Total unrealised gains transferred into other comprehensive income through cash flow hedges
Additions
Disposals/maturity of financial instruments
Closing balance
Net losses for the year included in the income statement for assets and liabilities held at year end(a)
2020
Level 3
financial assets
and financial
liabilities
US$m
2019
Level 3
financial assets
and financial
liabilities
US$m
383
16
11
(39)
24
26
1
(27)
395
—
637
(1)
—
(7)
(254)
28
1
(21)
383
(263)
(a)
In 2020 gains and losses included in the income statement offset each other to the extent that the net result is less than US$1 million.
Sensitivity analysis in respect of level 3 derivatives
Forward contracts and options whose fair value is determined using unobservable inputs are calculated using appropriate discounted cash flow and option
model valuation techniques.
To value the long-term aluminium embedded derivatives, we use unobservable inputs when the term of the derivative extends beyond observable market
prices. In 2020 and 2019, 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. The fair value of the long-term aluminium embedded derivatives is US$126 million at
31 December 2020 (2019: US$120 million).
We also have royalty receivables, with a carrying value of US$113 million (2019: US$124 million), arising from the sale of our coal assets in prior periods.
These are classified as "Other investments", including loans within "Other financial assets". The fair values are determined using level 3 unobservable
inputs.
The main unobservable input is the long-term coal price used over the life of the royalty receivable. A 15% increase in the coal spot price would result in
a US$198 million increase (2019: US$214 million increase) in the carrying value. A 15% decrease in the coal spot price would result in a US$46 million
decrease (2019: US$57 million decrease) in the carrying value. We have used a 15% assumption to calculate our exposure as it represents the annual coal
price movement that we deem to be reasonably probable (on an annual basis over the long run).
30 Contingencies and commitments
Capital commitments excluding the Group's share of joint venture capital commitments
Within 1 year
Between 1 and 3 years
Between 3 and 5 years
After 5 years
Total
Group's share of joint venture capital commitments
Within 1 year
Between 1 and 3 years
Total
2020
US$m
3,021
97
—
34
3,152
9
—
9
2019
US$m
3,069
851
133
—
4,053
92
1
93
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. On a legally enforceable basis, capital commitments would be approximately US$1.5 billion (2019: US$0.9
billion) as many of the contracts relating to the Group’s projects have various cancellation clauses.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
259
259
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
30 Contingencies and commitments continued
Unrecognised commitments to contribute funding or resources to joint ventures
We have a commitment to purchase and market a portion (in excess of the Group’s ownership interest) of the output of Sohar Aluminium Company L.L.C.,
an aluminium smelter in which the Group is a joint venture partner. The Group immediately sells the purchased products to third parties.
Along with the other joint venture partners, we have commitments to provide emergency funding (ie funding required to preserve the life or assets of the
company or to comply with applicable laws) if required by Sohar Aluminium Company L.L.C., subject to approved thresholds.
At 31 December 2020, Minera Escondida Ltda held an undrawn shareholder line of credit for US$225 million (Rio Tinto share) (31 December 2019:
US$225 million). The current facility will mature in September 2022.
Purchase obligations
The aggregate amount of future payment commitments under purchase obligations outstanding at 31 December was:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
Total
2020
US$m
3,100
1,715
1,291
1,242
848
8,437
16,633
2019
US$m
2,920
1,705
1,431
1,084
1,082
8,697
16,919
Purchase obligations are enforceable and legally binding agreements to buy goods or services. They specify all significant terms, including: fixed or
minimum quantities to be purchased or consumed; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
Purchase obligations for goods mainly relate to purchases of raw materials and consumables and purchase obligations for services mainly relate to
charges for the use of infrastructure, commitments to purchase power and freight contracts. These goods and services are expected to be used in the
business. To the extent that this changes, a provision for onerous obligations may be made as described in note 1- critical policy (vii).
Purchases from joint arrangements or associates are included if the quantity purchased is in excess of our ownership interest in the entity. However,
purchase obligations exclude contracted purchases of bauxite, alumina and aluminium from joint arrangements and associates and contracted purchases
of alumina from third parties. This is because these purchases are made for commercial reasons and the Group is, overall, a net seller of
these commodities.
As described above, we also have a commitment to buy and market a portion (in excess of our ownership interest) of the output of Sohar Aluminium
Company L.L.C.
Contingent liabilities (subsidiaries and joint operations)
Indemnities and other performance guarantees(a)(b)
2020
US$m
146
2019
US$m
204
(a)
(b)
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 guarantees or indemnities being called is assessed as possible rather than
probable or remote.
There were no material contingent liabilities arising in relation to the Group’s joint ventures and associates.
260
260
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Contingent liabilities
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 case is with the trial court for further consideration.
In March 2018, the Australian Securities and Investments Commission (ASIC) filed civil proceedings in the NSW District Registry of the Federal Court of
Australia against Rio Tinto Limited, Albanese, and Elliott. On 1 May 2018, ASIC expanded its proceedings. ASIC alleges that Rio Tinto committed violations
of the disclosure, accounting, and misleading or deceptive conduct provisions of the Corporations Act by making misleading or deceptive statements
related to RTCM in its 2011 Annual Report and its 2012 interim financial statements, not complying with accounting standards in respect of its 2012
interim financial statements, and not disclosing an impairment of RTCM in its 2012 interim financial statements. ASIC further alleges Albanese and Elliott
breached their duties as directors or officers, and failed to take all reasonable steps to comply with relevant accounting requirements.
Rio Tinto believes that the SEC case and the ASIC proceedings are unwarranted and will defend the allegations vigorously. Hence, no provisions have been
recognised for these cases.
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. No provision has been recognised for this case.
The outcomes of these matters remain uncertain, but they could ultimately expose the Group to material financial cost. The Board is giving these matters
its full and proper attention and a dedicated Board committee continues to monitor the progress of these matters, as appropriate.
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.
Guarantees by parent companies
Rio Tinto plc and Rio Tinto Limited have, jointly and severally, fully and unconditionally guaranteed the following securities issued by the following 100%
owned finance subsidiaries: US$4.4 billion (31 December 2019: US$4.4 billion) Rio Tinto Finance (USA) Limited and Rio Tinto Finance (USA) plc bonds
with maturity dates up to 2042; and US$1.2 billion (31 December 2019: US$1.6 billion) on the European Debt Issuance Programme. In addition, Rio Tinto
Finance plc and Rio Tinto Finance Limited have entered into facility arrangements for an aggregate amount of US$7.5 billion (31 December 2019: US$7.5
billion). The facilities are guaranteed by Rio Tinto plc and Rio Tinto Limited.
Rio Tinto plc has provided a guarantee, known as the completion support undertaking (CSU), in favour of the Oyu Tolgoi LLC project finance lenders. At
31 December 2020, US$4.3 billion of project finance debt was outstanding under this facility (2019: US$4.3 billion). Oyu Tolgoi LLC is jointly owned by
Erdenes Oyu Tolgoi LLC (34%), which is controlled by the Government of Mongolia, and Turquoise Hill Resources Ltd (66%, of which Rio Tinto owns 51%).
The project finance has been raised for development of the underground mine and the CSU will terminate on the completion of the underground mine
according to a set of completion tests set out in the project finance facility.
The Rio Tinto guarantee applies to the extent that Turquoise Hill Resources Ltd cannot satisfy Oyu Tolgoi LLC’s project finance debt servicing obligations
under its own guarantee to the lenders, called the sponsor debt service undertaking (DSU). Both the CSU and DSU contain a carve-out for certain political
risk events.
Contingent assets
The Group has, from time to time, various insurance claims outstanding with reinsurers.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
261
261
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
31 Average number of employees
Principal locations of employment:
Australia and New Zealand
Canada
UK
Europe
Africa
US
Mongolia
Indonesia
South America
India
Singapore
Other countries(a)
Total
Subsidiaries and joint operations
Equity accounted units
(Rio Tinto share)
Group total
2020
2019
2018
2020
2019
2018
2020
2019
2018
20,482
11,814
172
1,020
2,559
3,543
3,465
—
220
324
456
278
44,333
19,195
11,576
190
959
3,121
3,400
3,215
—
243
272
430
267
42,868
19,017
10,620
287
1,418
3,496
3,792
2,886
1,615
210
288
422
278
44,329
634
—
—
—
1,214
—
—
—
1,293
—
—
—
3,141
619
—
—
—
1,250
—
—
—
1,270
—
—
—
3,139
578
—
—
—
1,262
—
—
—
1,289
—
—
—
3,129
21,116
11,814
172
1,020
3,773
3,543
3,465
—
1,513
324
456
278
47,474
19,814
11,576
190
959
4,371
3,400
3,215
—
1,513
272
430
267
46,007
19,595
10,620
287
1,418
4,758
3,792
2,886
1,615
1,499
288
422
278
47,458
(a)
“Other countries” primarily includes employees in the Middle East (excluding Oman which is included in Africa), and other countries in Asia which are not shown separately in the table above.
Employee numbers, which represent the average for the year, include 100% of employees of subsidiary companies. Employee numbers for joint
operations and equity accounted units are proportional to the Group’s interest under contractual agreements. Average employee numbers include a part-
year effect for companies acquired or disposed of during the year.
Part-time employees are included on a full-time-equivalent basis. Temporary employees are included in employee numbers.
People employed by contractors are not included.
262
262
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
(cid:16)(cid:15)(cid:1)(cid:41)(cid:67)(cid:58)(cid:63)(cid:52)(cid:58)(cid:65)(cid:50)(cid:61)(cid:1)(cid:68)(cid:70)(cid:51)(cid:68)(cid:58)(cid:53)(cid:58)(cid:50)(cid:67)(cid:58)(cid:54)(cid:68)(cid:1)
(cid:26)(cid:69)(cid:1)(cid:16)(cid:14)(cid:1)(cid:29)(cid:54)(cid:52)(cid:54)(cid:62)(cid:51)(cid:54)(cid:67)(cid:1)(cid:15)(cid:13)(cid:15)(cid:13)(cid:1)
(cid:28)(cid:64)(cid:62)(cid:65)(cid:50)(cid:63)(cid:74)(cid:1)(cid:50)(cid:63)(cid:53)(cid:1)(cid:52)(cid:64)(cid:70)(cid:63)(cid:69)(cid:67)(cid:74)(cid:1)(cid:64)(cid:55)(cid:1)(cid:58)(cid:63)(cid:52)(cid:64)(cid:67)(cid:65)(cid:64)(cid:67)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:12)(cid:64)(cid:65)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)
(cid:41)(cid:67)(cid:58)(cid:63)(cid:52)(cid:58)(cid:65)(cid:50)(cid:61)(cid:1)(cid:50)(cid:52)(cid:69)(cid:58)(cid:71)(cid:58)(cid:69)(cid:58)(cid:54)(cid:68)
(cid:28)(cid:61)(cid:50)(cid:68)(cid:68)(cid:1)(cid:64)(cid:55)(cid:1)(cid:68)(cid:57)(cid:50)(cid:67)(cid:54)(cid:68)
(cid:57)(cid:54)(cid:61)(cid:53)
(cid:41)(cid:67)(cid:64)(cid:65)(cid:64)(cid:67)(cid:69)(cid:58)(cid:64)(cid:63)(cid:1)
(cid:64)(cid:55)(cid:1)(cid:52)(cid:61)(cid:50)(cid:68)(cid:68)(cid:1)
(cid:57)(cid:54)(cid:61)(cid:53)(cid:1)(cid:6)(cid:3)(cid:7)
(cid:32)(cid:67)(cid:64)(cid:70)(cid:65)(cid:1)
(cid:58)(cid:63)(cid:69)(cid:54)(cid:67)(cid:54)(cid:68)(cid:69)
(cid:6)(cid:3)(cid:7)
(cid:39)(cid:64)(cid:63)(cid:10)
(cid:52)(cid:64)(cid:63)(cid:69)(cid:67)(cid:64)(cid:61)(cid:61)(cid:58)(cid:63)(cid:56)
(cid:58)(cid:63)(cid:69)(cid:54)(cid:67)(cid:54)(cid:68)(cid:69)(cid:1)(cid:6)(cid:3)(cid:7)
(cid:26)(cid:70)(cid:68)(cid:69)(cid:67)(cid:50)(cid:61)(cid:58)(cid:50)
(cid:16)(cid:59)(cid:48)(cid:66)(cid:53)(cid:46)(cid:1)(cid:19)(cid:50)(cid:42)(cid:54)(cid:56)(cid:55)(cid:45)(cid:60)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)
(cid:19)(cid:42)(cid:54)(cid:57)(cid:50)(cid:46)(cid:59)(cid:1)(cid:34)(cid:42)(cid:53)(cid:61)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)
(cid:20)(cid:55)(cid:46)(cid:59)(cid:48)(cid:66)(cid:1)(cid:33)(cid:46)(cid:60)(cid:56)(cid:62)(cid:59)(cid:44)(cid:46)(cid:60)(cid:1)(cid:56)(cid:47)(cid:1)(cid:16)(cid:62)(cid:60)(cid:61)(cid:59)(cid:42)(cid:53)(cid:50)(cid:42)(cid:1)(cid:27)(cid:61)(cid:45)(cid:92)(cid:42)(cid:94)
(cid:23)(cid:42)(cid:54)(cid:46)(cid:59)(cid:60)(cid:53)(cid:46)(cid:66)(cid:1)(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:31)(cid:61)(cid:66)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)
(cid:29)(cid:56)(cid:59)(cid:61)(cid:49)(cid:1)(cid:28)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)(cid:92)(cid:43)(cid:94)
(cid:33)(cid:50)(cid:56)(cid:1)(cid:35)(cid:50)(cid:55)(cid:61)(cid:56)(cid:1)(cid:16)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:92)(cid:23)(cid:56)(cid:53)(cid:45)(cid:50)(cid:55)(cid:48)(cid:60)(cid:94)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)
(cid:28)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:57)(cid:59)(cid:56)(cid:44)(cid:46)(cid:60)(cid:60)(cid:50)(cid:55)(cid:48)(cid:1)(cid:56)(cid:47)(cid:1)(cid:45)(cid:50)(cid:42)(cid:54)(cid:56)(cid:55)(cid:45)(cid:60)
(cid:34)(cid:42)(cid:53)(cid:61)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:48)(cid:66)(cid:57)(cid:60)(cid:62)(cid:54)(cid:1)(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)
(cid:36)(cid:59)(cid:42)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:57)(cid:59)(cid:56)(cid:44)(cid:46)(cid:60)(cid:60)(cid:50)(cid:55)(cid:48)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:17)(cid:42)(cid:62)(cid:65)(cid:50)(cid:61)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:14)(cid:1)(cid:42)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:42)(cid:1)(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)(cid:14)(cid:1)
(cid:57)(cid:59)(cid:50)(cid:54)(cid:42)(cid:59)(cid:66)(cid:1)(cid:42)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:60)(cid:54)(cid:46)(cid:53)(cid:61)(cid:50)(cid:55)(cid:48)
(cid:33)(cid:56)(cid:43)(cid:46)(cid:1)(cid:33)(cid:50)(cid:63)(cid:46)(cid:59)(cid:1)(cid:28)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:18)(cid:56)(cid:1)(cid:31)(cid:61)(cid:66)(cid:1)(cid:27)(cid:61)(cid:45)(cid:92)(cid:43)(cid:94)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:18)(cid:53)(cid:42)(cid:60)(cid:60)(cid:1)(cid:16)
(cid:18)(cid:53)(cid:42)(cid:60)(cid:60)(cid:1)(cid:17)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:9)(cid:11)(cid:97)(cid:6)(cid:9)(cid:1)
(cid:1)(cid:11)(cid:9)(cid:97)(cid:6)(cid:6)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:7)(cid:3)(cid:1)
(cid:1)(cid:10)(cid:9)(cid:97)(cid:6)(cid:9)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:9)(cid:11)(cid:97)(cid:6)(cid:9)(cid:1)
(cid:1)(cid:11)(cid:9)(cid:97)(cid:6)(cid:6)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:9)(cid:3)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:6)(cid:4)(cid:97)(cid:9)(cid:7)(cid:1)
(cid:1)(cid:4)(cid:6)(cid:97)(cid:9)(cid:10)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:7)(cid:3)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:27)(cid:67)(cid:50)(cid:75)(cid:58)(cid:61)
(cid:16)(cid:53)(cid:44)(cid:42)(cid:55)(cid:1)(cid:16)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:42)(cid:1)(cid:27)(cid:61)(cid:45)(cid:42)(cid:97)(cid:92)(cid:44)(cid:94)
(cid:28)(cid:50)(cid:63)(cid:50)(cid:53)(cid:50)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:30)(cid:59)(cid:46)(cid:1)(cid:18)(cid:56)(cid:54)(cid:57)(cid:42)(cid:55)(cid:66)(cid:1)(cid:56)(cid:47)(cid:1)(cid:18)(cid:42)(cid:55)(cid:42)(cid:45)(cid:42)(cid:92)(cid:45)(cid:94)
(cid:33)(cid:50)(cid:56)(cid:1)(cid:35)(cid:50)(cid:55)(cid:61)(cid:56)(cid:1)(cid:21)(cid:46)(cid:59)(cid:1)(cid:46)(cid:61)(cid:1)(cid:35)(cid:50)(cid:61)(cid:42)(cid:55)(cid:46)(cid:1)(cid:24)(cid:55)(cid:44)(cid:97)
(cid:33)(cid:50)(cid:56)(cid:1)(cid:35)(cid:50)(cid:55)(cid:61)(cid:56)(cid:1)(cid:16)(cid:53)(cid:44)(cid:42)(cid:55)(cid:1)(cid:24)(cid:55)(cid:44)(cid:97)
(cid:19)(cid:50)(cid:42)(cid:63)(cid:50)(cid:52)(cid:1)(cid:19)(cid:50)(cid:42)(cid:54)(cid:56)(cid:55)(cid:45)(cid:1)(cid:28)(cid:50)(cid:55)(cid:46)(cid:60)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:5)(cid:94)(cid:1)(cid:24)(cid:55)(cid:44)(cid:97)(cid:92)(cid:46)(cid:94)
(cid:32)(cid:70)(cid:58)(cid:63)(cid:54)(cid:50)
(cid:34)(cid:50)(cid:54)(cid:47)(cid:46)(cid:59)(cid:1)(cid:25)(cid:46)(cid:59)(cid:60)(cid:46)(cid:66)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)(cid:92)(cid:47)(cid:94)
(cid:38)(cid:50)(cid:53)(cid:50)(cid:56)(cid:50)(cid:68)(cid:52)(cid:50)(cid:67)
(cid:16)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:42)(cid:1)(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:43)(cid:42)(cid:62)(cid:65)(cid:50)(cid:61)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:32)(cid:62)(cid:56)(cid:61)(cid:42)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:14)(cid:1)(cid:50)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:57)(cid:46)(cid:53)(cid:53)(cid:46)(cid:61)(cid:60)(cid:1)
(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)
(cid:35)(cid:50)(cid:61)(cid:42)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:45)(cid:50)(cid:56)(cid:65)(cid:50)(cid:45)(cid:46)(cid:1)(cid:47)(cid:46)(cid:46)(cid:45)(cid:60)(cid:61)(cid:56)(cid:44)(cid:52)(cid:14)(cid:1)(cid:49)(cid:50)(cid:48)(cid:49)(cid:1)(cid:57)(cid:62)(cid:59)(cid:50)(cid:61)(cid:66)(cid:1)
(cid:50)(cid:59)(cid:56)(cid:55)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:60)(cid:61)(cid:46)(cid:46)(cid:53)(cid:1)(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)
(cid:17)(cid:42)(cid:62)(cid:65)(cid:50)(cid:61)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:14)(cid:1)(cid:42)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:42)(cid:1)(cid:59)(cid:46)(cid:47)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:14)(cid:1)
(cid:42)(cid:53)(cid:62)(cid:54)(cid:50)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:60)(cid:54)(cid:46)(cid:53)(cid:61)(cid:50)(cid:55)(cid:48)
(cid:19)(cid:50)(cid:42)(cid:54)(cid:56)(cid:55)(cid:45)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:57)(cid:59)(cid:56)(cid:44)(cid:46)(cid:60)(cid:60)(cid:50)(cid:55)(cid:48)
(cid:24)(cid:59)(cid:56)(cid:55)(cid:1)(cid:56)(cid:59)(cid:46)(cid:1)(cid:57)(cid:59)(cid:56)(cid:51)(cid:46)(cid:44)(cid:61)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:1)(cid:8)(cid:11)(cid:97)(cid:10)(cid:5)(cid:1)
(cid:1)(cid:8)(cid:11)(cid:97)(cid:10)(cid:5)(cid:1)
(cid:1)(cid:7)(cid:4)(cid:97)(cid:5)(cid:11)(cid:1)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:18)(cid:53)(cid:42)(cid:60)(cid:60)(cid:1)(cid:17)(cid:1)(cid:57)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:46)(cid:55)(cid:44)(cid:46)
(cid:18)(cid:16)(cid:19)(cid:1)(cid:3)(cid:97)(cid:3)(cid:4)(cid:1)(cid:57)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:59)(cid:46)(cid:45)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:24)(cid:55)(cid:63)(cid:46)(cid:60)(cid:61)(cid:54)(cid:46)(cid:55)(cid:61)(cid:1)(cid:44)(cid:46)(cid:59)(cid:61)(cid:50)(cid:47)(cid:50)(cid:44)(cid:42)(cid:61)(cid:46)(cid:60)
(cid:37)(cid:56)(cid:61)(cid:50)(cid:55)(cid:48)(cid:1)(cid:44)(cid:46)(cid:59)(cid:61)(cid:50)(cid:47)(cid:50)(cid:44)(cid:42)(cid:61)(cid:46)(cid:60)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:8)(cid:6)(cid:1)
(cid:1)(cid:11)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:11)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:8)(cid:6)(cid:1)
(cid:1)(cid:11)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:11)(cid:3)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:7)(cid:10)(cid:1)
(cid:1)(cid:4)(cid:8)(cid:1)
(cid:1)(cid:5)(cid:3)(cid:1)
(cid:32)(cid:24)(cid:35)(cid:1)(cid:28)(cid:42)(cid:45)(cid:42)(cid:48)(cid:42)(cid:60)(cid:44)(cid:42)(cid:59)(cid:1)(cid:28)(cid:50)(cid:55)(cid:46)(cid:59)(cid:42)(cid:53)(cid:60)(cid:1)(cid:34)(cid:16)(cid:92)(cid:48)(cid:94)
(cid:24)(cid:53)(cid:54)(cid:46)(cid:55)(cid:50)(cid:61)(cid:46)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:38)(cid:64)(cid:63)(cid:56)(cid:64)(cid:61)(cid:58)(cid:50)
(cid:35)(cid:62)(cid:59)(cid:58)(cid:62)(cid:56)(cid:50)(cid:60)(cid:46)(cid:1)(cid:23)(cid:50)(cid:53)(cid:53)(cid:1)(cid:33)(cid:46)(cid:60)(cid:56)(cid:62)(cid:59)(cid:44)(cid:46)(cid:60)(cid:1)(cid:27)(cid:61)(cid:45)(cid:1)
(cid:92)(cid:50)(cid:55)(cid:44)(cid:53)(cid:62)(cid:45)(cid:50)(cid:55)(cid:48)(cid:1)(cid:30)(cid:66)(cid:62)(cid:1)(cid:35)(cid:56)(cid:53)(cid:48)(cid:56)(cid:50)(cid:1)(cid:27)(cid:27)(cid:18)(cid:94)(cid:92)(cid:49)(cid:94)
(cid:43)(cid:64)(cid:70)(cid:69)(cid:57)(cid:1)(cid:26)(cid:55)(cid:67)(cid:58)(cid:52)(cid:50)
(cid:18)(cid:56)(cid:57)(cid:57)(cid:46)(cid:59)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:48)(cid:56)(cid:53)(cid:45)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)
(cid:1)(cid:8)(cid:3)(cid:97)(cid:10)(cid:12)(cid:1)
(cid:1)(cid:8)(cid:3)(cid:97)(cid:10)(cid:12)(cid:1)
(cid:1)(cid:7)(cid:12)(cid:97)(cid:5)(cid:4)(cid:1)
(cid:33)(cid:50)(cid:44)(cid:49)(cid:42)(cid:59)(cid:45)(cid:60)(cid:1)(cid:17)(cid:42)(cid:66)(cid:1)(cid:35)(cid:50)(cid:61)(cid:42)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:92)(cid:31)(cid:59)(cid:56)(cid:57)(cid:59)(cid:50)(cid:46)(cid:61)(cid:42)(cid:59)(cid:66)(cid:94)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)(cid:92)(cid:50)(cid:94)
(cid:35)(cid:50)(cid:61)(cid:42)(cid:55)(cid:50)(cid:62)(cid:54)(cid:1)(cid:45)(cid:50)(cid:56)(cid:65)(cid:50)(cid:45)(cid:46)(cid:14)(cid:1)(cid:49)(cid:50)(cid:48)(cid:49)(cid:1)(cid:57)(cid:62)(cid:59)(cid:50)(cid:61)(cid:66)(cid:1)(cid:50)(cid:59)(cid:56)(cid:55)(cid:1)
(cid:57)(cid:59)(cid:56)(cid:45)(cid:62)(cid:44)(cid:61)(cid:50)(cid:56)(cid:55)
(cid:33)(cid:50)(cid:44)(cid:49)(cid:42)(cid:59)(cid:45)(cid:60)(cid:1)(cid:17)(cid:42)(cid:66)(cid:1)(cid:28)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:92)(cid:31)(cid:59)(cid:56)(cid:57)(cid:59)(cid:50)(cid:46)(cid:61)(cid:42)(cid:59)(cid:66)(cid:94)(cid:1)(cid:27)(cid:50)(cid:54)(cid:50)(cid:61)(cid:46)(cid:45)(cid:92)(cid:50)(cid:94)
(cid:24)(cid:53)(cid:54)(cid:46)(cid:55)(cid:50)(cid:61)(cid:46)(cid:95)(cid:1)(cid:59)(cid:62)(cid:61)(cid:50)(cid:53)(cid:46)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:67)(cid:50)(cid:59)(cid:44)(cid:56)(cid:55)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)
(cid:17)(cid:1)(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:17)(cid:1)(cid:57)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:46)(cid:55)(cid:44)(cid:46)
(cid:31)(cid:42)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:31)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:46)(cid:55)(cid:44)(cid:46)
(cid:17)(cid:1)(cid:30)(cid:59)(cid:45)(cid:50)(cid:55)(cid:42)(cid:59)(cid:66)
(cid:17)(cid:1)(cid:57)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:46)(cid:55)(cid:44)(cid:46)
(cid:31)(cid:42)(cid:59)(cid:46)(cid:55)(cid:61)(cid:1)(cid:31)(cid:59)(cid:46)(cid:47)(cid:46)(cid:59)(cid:46)(cid:55)(cid:44)(cid:46)
(cid:45)(cid:43)
(cid:26)(cid:46)(cid:55)(cid:55)(cid:46)(cid:44)(cid:56)(cid:61)(cid:61)(cid:1)(cid:23)(cid:56)(cid:53)(cid:45)(cid:50)(cid:55)(cid:48)(cid:60)(cid:1)(cid:18)(cid:56)(cid:59)(cid:57)(cid:56)(cid:59)(cid:42)(cid:61)(cid:50)(cid:56)(cid:55)(cid:1)(cid:92)(cid:50)(cid:55)(cid:44)(cid:53)(cid:62)(cid:45)(cid:50)(cid:55)(cid:48)(cid:1)(cid:26)(cid:46)(cid:55)(cid:55)(cid:46)(cid:44)(cid:56)(cid:61)(cid:61)(cid:1)
(cid:36)(cid:61)(cid:42)(cid:49)(cid:1)(cid:18)(cid:56)(cid:57)(cid:57)(cid:46)(cid:59)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:26)(cid:46)(cid:55)(cid:55)(cid:46)(cid:44)(cid:56)(cid:61)(cid:61)(cid:1)(cid:20)(cid:65)(cid:57)(cid:53)(cid:56)(cid:59)(cid:42)(cid:61)(cid:50)(cid:56)(cid:55)(cid:94)
(cid:36)(cid:97)(cid:34)(cid:97)(cid:1)(cid:17)(cid:56)(cid:59)(cid:42)(cid:65)(cid:1)(cid:24)(cid:55)(cid:44)(cid:97)
(cid:18)(cid:56)(cid:57)(cid:57)(cid:46)(cid:59)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:48)(cid:56)(cid:53)(cid:45)(cid:1)(cid:54)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:95)(cid:1)(cid:60)(cid:54)(cid:46)(cid:53)(cid:61)(cid:50)(cid:55)(cid:48)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)
(cid:59)(cid:46)(cid:47)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:46)(cid:65)(cid:57)(cid:53)(cid:56)(cid:59)(cid:42)(cid:61)(cid:50)(cid:56)(cid:55)(cid:1)(cid:42)(cid:44)(cid:61)(cid:50)(cid:63)(cid:50)(cid:61)(cid:50)(cid:46)(cid:60)
(cid:28)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:95)(cid:1)(cid:59)(cid:46)(cid:47)(cid:50)(cid:55)(cid:50)(cid:55)(cid:48)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:54)(cid:42)(cid:59)(cid:52)(cid:46)(cid:61)(cid:50)(cid:55)(cid:48)(cid:1)(cid:56)(cid:47)(cid:1)(cid:43)(cid:56)(cid:59)(cid:42)(cid:61)(cid:46)(cid:60)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)(cid:1)(cid:36)(cid:34)(cid:88)(cid:3)(cid:97)(cid:3)(cid:4)
(cid:18)(cid:56)(cid:54)(cid:54)(cid:56)(cid:55)(cid:1)(cid:36)(cid:34)(cid:88)(cid:3)(cid:97)(cid:4)(cid:3)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:10)(cid:7)(cid:1)
(cid:1)(cid:10)(cid:7)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:4)(cid:3)(cid:3)(cid:1)
(cid:1)(cid:5)(cid:9)(cid:1)
(cid:1)(cid:5)(cid:9)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:1)(cid:71)(cid:1)
(cid:34)(cid:48)(cid:49)(cid:59)(cid:1)(cid:52)(cid:49)(cid:59)(cid:60)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:59)(cid:1)(cid:55)(cid:54)(cid:52)(cid:65)(cid:1)(cid:60)(cid:48)(cid:55)(cid:59)(cid:45)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:41)(cid:54)(cid:49)(cid:45)(cid:59)(cid:1)(cid:60)(cid:48)(cid:41)(cid:60)(cid:1)(cid:48)(cid:41)(cid:62)(cid:45)(cid:1)(cid:41)(cid:1)(cid:53)(cid:55)(cid:58)(cid:45)(cid:1)(cid:59)(cid:49)(cid:47)(cid:54)(cid:49)(cid:46)(cid:49)(cid:43)(cid:41)(cid:54)(cid:60)(cid:1)(cid:49)(cid:53)(cid:56)(cid:41)(cid:43)(cid:60)(cid:1)(cid:55)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:58)(cid:55)(cid:46)(cid:49)(cid:60)(cid:1)(cid:55)(cid:58)(cid:1)(cid:55)(cid:56)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:41)(cid:59)(cid:59)(cid:45)(cid:60)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:21)(cid:58)(cid:55)(cid:61)(cid:56)(cid:96)(cid:1)(cid:1)(cid:32)(cid:45)(cid:46)(cid:45)(cid:58)(cid:1)(cid:60)(cid:55)(cid:1)(cid:54)(cid:55)(cid:60)(cid:45)(cid:1)(cid:7)(cid:7)(cid:1)(cid:46)(cid:55)(cid:58)(cid:1)(cid:41)(cid:1)(cid:52)(cid:49)(cid:59)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)
(cid:58)(cid:45)(cid:52)(cid:41)(cid:60)(cid:45)(cid:44)(cid:1)(cid:61)(cid:54)(cid:44)(cid:45)(cid:58)(cid:60)(cid:41)(cid:51)(cid:49)(cid:54)(cid:47)(cid:59)(cid:96)(cid:1)
Annual Report 2020 | riotinto.com
(cid:26)(cid:63)(cid:63)(cid:70)(cid:50)(cid:61)(cid:1)(cid:42)(cid:54)(cid:65)(cid:64)(cid:67)(cid:69)(cid:1)(cid:15)(cid:13)(cid:15)(cid:13)(cid:1)(cid:67)(cid:1)(cid:58)(cid:49)(cid:55)(cid:60)(cid:49)(cid:54)(cid:60)(cid:55)(cid:96)(cid:43)(cid:55)(cid:53)(cid:1)(cid:1)
(cid:5)(cid:9)(cid:6) 263
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
32 Principal subsidiaries continued
The Group’s principal subsidiaries are mostly held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
In February 2020, Rio Tinto's interest in Energy Resources of Australia (ERA) increased from 68.4% to 86.3% as a result of new ERA shares issued to Rio Tinto under the Entitlement Offer and
Underwriting Agreement to raise funds for the rehabilitation of the Ranger Project Area.
Robe River Mining Co Pty Ltd (which is 60% owned by the Group) holds a 30% interest in Robe River Iron Associates (Robe River). North Mining Ltd (which is wholly owned by the Group) holds a 35%
interest in Robe River. Through these companies the Group recognises a 65% share of the assets, liabilities, revenues and expenses of Robe River, with a 12% non-controlling interest. The Group
therefore has a 53% beneficial interest in Robe River.
Alcan Alumina Ltda holds the Group’s 10% interest in Consórcio De Alumínio Do Maranhão, a joint operation in which the Group participates but is not a joint operator. The Group recognises its share
of assets, liabilities, revenues and expenses relating to this arrangement.
Iron Ore Company of Canada is incorporated in the US, but operates in Canada.
Diavik Diamond Mines (2012) Inc. (DDMI) is the legal entity that owns the Group’s 60% interest in the Diavik Joint Venture, an unincorporated arrangement. The Group recognises its share of assets,
revenue and expenses relating to this arrangement. Liabilities are recognised according to DDMI’s contractual obligations, with a corresponding 40% receivable or contingent asset representing the
co-owner’s share where applicable.
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 operates the Simandou mining 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.
The Group’s shareholding in QIT Madagascar Minerals SA carries an 80% economic interest and 80% of the total voting rights; a further 5% economic interest is held through non-voting investment
certificates to give an economic interest of 85%. The non-controlling interests have a 15% economic interest and 20% of the total voting rights.
The Group has a 50.79% interest in Turquoise Hill Resources Ltd, which holds a 66% interest in Oyu Tolgoi LLC (OT) which is a subsidiary of Turquoise Hill Resources Ltd. The Group therefore has a
33.5% indirect interest in OT. Turquoise Hill Resources Ltd is incorporated in Canada but operates principally in Mongolia.
Additional classes of shares issued by Richards Bay Titanium (Proprietary) Limited and Richards Bay Mining (Proprietary) Limited representing non-controlling interests are not shown. The Group’s
total legal and beneficial interest in Richards Bay Titanium (Proprietary) Limited and Richards Bay Mining (Proprietary) Limited is 74%.
Summary financial information for subsidiaries that have non-controlling interests that are material to the Group
This summarised financial information is shown on a 100% basis. It represents the amounts shown in the subsidiaries’ financial statements prepared in
accordance with IFRS under Group accounting policies, including fair value adjustments, and before intercompany eliminations.
Income statement summary for the year ended 31 December
Revenue
Profit/(loss) after tax
– attributable to non-controlling interests
– attributable to Rio Tinto
Other comprehensive income
Total comprehensive income/(loss)
Balance sheet summary as at 31 December
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities)
– attributable to non-controlling interests
– attributable to Rio Tinto
Cash flow statement summary for the year ended 31 December
Cash flow from operations
Dividends paid to non-controlling interests
Iron Ore
Company of
Canada
2020
US$m
Iron Ore
Company of
Canada
2019
US$m
Energy
Resources of
Australia
2020
US$m
Energy
Resources of
Australia
2019
US$m
Turquoise
Hill(j)(k)(l)
2020
US$m
Turquoise
Hill(j)(k)(l)
2019
US$m
2,269
611
252
359
56
667
2020
US$m
2,733
670
(462)
(993)
1,948
804
1,144
2020
US$m
1,027
(180)
2,014
543
224
319
57
600
2019
US$m
2,585
610
(532)
(927)
1,736
718
1,018
2019
US$m
1,039
(228)
162
9
3
5
20
29
2020
US$m
329
371
(176)
(427)
97
18
79
2020
US$m
(15)
—
145
5
2
3
2
7
2019
US$m
76
258
(127)
(462)
(255)
—
(255)
2019
US$m
(73)
—
1,078
357
130
227
2
359
2020
US$m
10,930
1,496
(540)
(4,404)
7,482
2,424
5,058
2020
US$m
380
—
1,166
(2,137)
(1,490)
(647)
—
(2,137)
2019
US$m
9,589
2,449
(493)
(4,405)
7,140
2,369
4,771
2019
US$m
298
—
(j)
(k)
(l)
Turquoise Hill Resources Ltd holds a controlling interest in Oyu Tolgoi LLC (OT).
Under the terms of the project finance facility held by OT, there are certain restrictions on the ability of OT to make shareholder distributions.
Since 2011, Turquoise Hill has funded common share investments in OT on behalf of Erdenes Oyu Tolgoi LLC (“Erdenes”). In accordance with the Amended and Restated Shareholders Agreement
dated 8 June 2011, such funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and are repayable to them via a pledge over Erdenes’ share of future OT common share
dividends. Erdenes also has the right to reduce the outstanding balance by making payments directly to Turquoise Hill. Common share investments funded on behalf of Erdenes, including accrued
interest, are recorded as a reduction to the net carrying value of their component of non-controlling interests. As at 31 December 2020, the cumulative amount of such funding was US$1,378 million
(31 December 2019: US$1,241 million), excluding accrued interest of US$804 million (31 December 2019: US$655 million) relating to this funding.
264
264
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Income statement summary for the year ended 31 December
Revenue
Profit after tax
– attributable to non-controlling interests
– attributable to Rio Tinto
Other comprehensive income/(loss)
Total comprehensive income
Balance sheet summary as at 31 December
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
– attributable to non-controlling interests
– attributable to Rio Tinto
Cash flow statement summary for the year ended 31 December
Cash flow from operations
Dividends paid to non-controlling interests
Robe River
Mining Co Pty
2020
US$m
Robe River
Mining Co Pty
2019
US$m
Other
companies
and
eliminations(m)
2020
US$m
Other
companies and
eliminations(m)
2019
US$m
Robe River
2020
US$m
Robe River
2019
US$m
1,738
939
376
563
294
1,233
2020
US$m
3,452
865
(380)
(255)
3,682
1,397
2,285
2020
US$m
1,491
(332)
1,493
808
312
496
(13)
795
2019
US$m
2,622
1,161
(173)
(84)
3,526
1,404
2,122
2019
US$m
1,255
(139)
2,028
1,019
—
1,019
136
1,155
2020
US$m
4,247
2,239
(414)
(4,752)
1,320
—
1,320
2020
US$m
1,771
(165)
1,743
825
—
825
(12)
813
2019
US$m
3,687
1,873
(303)
(3,392)
1,865
—
1,865
2019
US$m
1,447
—
3,766
1,958
376
1,582
430
2,388
2020
US$m
7,699
3,104
(794)
(5,007)
5,002
1,397
3,605
2020
US$m
3,262
(497)
3,236
1,633
312
1,321
(25)
1,608
2019
US$m
6,309
3,034
(476)
(3,476)
5,391
1,404
3,987
2019
US$m
2,702
(139)
(m)
"Other companies and eliminations” includes North Mining Limited (a wholly owned subsidiary of the Group which accounts for its interest in Robe River) and goodwill of US$383 million (2019:
US$349 million) that arose on the Group’s acquisition of its interest in Robe River.
33 Principal joint operations
At 31 December 2020
Company and country of incorporation/operation
Australia
Tomago Aluminium Joint Venture
Gladstone Power Station
Hope Downs Joint Venture
Queensland Alumina Limited(a) (b)
Pilbara Iron Arrangements
New Zealand
New Zealand Aluminium Smelters Limited(a) (b)
Canada
Aluminerie Alouette Inc.
US
Pechiney Reynolds Quebec Inc(b) (d)
Principal activities
Group interest (%)
Aluminium smelting
Power generation
Iron ore mining
Alumina production
Infrastructure, corporate and mining services
Aluminium smelting
Aluminium production
Aluminium smelting
51.6
42.1
50
80
(c)
79.4
40
50.2
This list includes only those joint operations that have a more significant impact on the profit or operating assets of the Group. Refer to note 44 for a list
of related undertakings.
The Group’s joint operations are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited.
(a)
(b)
(c)
(d)
Although the Group has a 79.4% interest in New Zealand Aluminium Smelters Limited and an 80% interest in Queensland Alumina Limited, decisions about activities that significantly affect the
returns that are generated require agreement of both parties to the arrangements, giving rise to joint control.
Queensland Alumina Limited, New Zealand Aluminium Smelters Limited and Pechiney Reynolds Quebec Inc. are joint arrangements that are primarily designed for the provision of output to the
parties sharing joint control; this indicates that the parties have rights to substantially all the economic benefits of the assets. The liabilities of the arrangements are in substance satisfied by cash
flows received from the parties; this dependence indicates that the parties in effect have obligations for the liabilities. It is these facts and circumstances that give rise to the classification of these
entities as joint operations.
A number of arrangements are in place between the Australian Iron Ore operations managed by Rio Tinto which allow their respective assets to be operated as a single integrated network across the
Pilbara region. The arrangements are managed through two wholly owned subsidiaries: Pilbara Iron (Company) Services Pty Ltd and Pilbara Iron Pty Ltd. In assessing the Pilbara Iron Arrangements, it
has been concluded that they collectively constitute a joint operation on the basis that decisions about relevant activities require unanimous consent. The resulting efficiencies are shared between
Rio Tinto and Robe River Iron Associates (Robe River), and the parties fund all of the cash flow requirements of Pilbara Iron (Company) Services Pty Ltd and Pilbara Iron Pty Ltd.
Pechiney Reynolds Quebec Inc. has a 50.1% interest in the Aluminerie de Bécancour, Inc. aluminium smelter, which is located in Canada.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
265
265
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
34 Principal joint ventures
At 31 December 2020
Company and country of incorporation/operation
Principal activities
Number of
shares held
Class of
shares
held
Proportion
of class
held (%)
Group
interest
(%)
Chile
Minera Escondida Ltda(a)
Oman
Sohar Aluminium Co. L.L.C.(b)
Copper mining and refining
—
—
Aluminium smelting; power generation
37,500
Ordinary
—
20
30
20
This list includes only those joint ventures that have a more significant impact on the profit or operating assets of the Group. Refer to note 44 for a list of
related undertakings.
The Group’s principal joint ventures are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited.
(a)
(b)
Although the Group has a 30% interest in Minera Escondida Ltda, participant and management agreements provide for an Owners’ Council whereby significant commercial and operational decisions
about the relevant activities that significantly affect the returns that are generated in effect require the joint approval of both Rio Tinto and BHP Billiton (holders of a 57.5% interest). It is therefore
determined that Rio Tinto has joint control.
The year end of Minera Escondida Ltda is 30 June. The amounts included in the consolidated financial statements of Rio Tinto are, however, based on accounts of Minera Escondida Limitada that are
coterminous with those of the Group.
Although the Group holds a 20% interest in Sohar Aluminium Co. L.L.C, decisions about relevant activities that significantly affect the returns that are generated require agreement of all parties to the
arrangement. It is therefore determined that Rio Tinto has joint control.
Summary information for joint ventures that are material to the Group
This summarised financial information is shown on a 100% basis. It represents the amounts shown in the joint ventures’ financial statements prepared in
accordance with IFRS under Group accounting policies, including fair value adjustments and amounts due to and from Rio Tinto.
Revenue
Depreciation and amortisation
Impairment charges (note 6)
Other operating costs
Operating profit/(loss)
Finance expense
Income tax
Profit/(loss) after tax
Other comprehensive loss
Total comprehensive income/(loss)
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Assets and liabilities above include:
– cash and cash equivalents
– current financial liabilities
– non-current financial liabilities
Dividends received from joint venture (Rio Tinto share)
Reconciliation of the above amounts to the investment recognised in the Group balance sheet
Group interest
Net assets
Group’s ownership interest
Carrying value of Group’s interest
Minera
Escondida
Ltda(c)
2020
US$m
Minera
Escondida
Ltda(c)
2019
US$m
Sohar
Aluminum
Co.L.L.C.(d)
2020
US$m
Sohar
Aluminum
Co.L.L.C.(d)
2019
US$m
7,650
(1,427)
—
(2,756)
3,467
(137)
(1,197)
2,133
(40)
2,093
11,833
3,107
(1,813)
(4,560)
8,567
1,103
(790)
(2,560)
585
30%
8,567
2,570
2,570
7,120
(1,693)
—
(3,670)
1,757
(157)
(627)
973
(17)
956
12,450
2,250
(1,827)
(4,670)
8,203
603
(807)
(2,380)
666
30%
8,203
2,461
2,461
640
(115)
(1,100)
(430)
(1,005)
(20)
(15)
(1,040)
—
(1,040)
1,850
270
(675)
(200)
1,245
30
(565)
(30)
—
20%
1,245
249
249
715
(115)
—
(505)
95
(35)
(10)
50
—
50
3,045
290
(205)
(845)
2,285
20
(110)
(675)
—
20%
2,285
457
457
(c)
(d)
In addition to its “Investment in equity accounted units”, the Group recognises deferred tax liabilities of US$358 million (2019: US$362 million) relating to tax on unremitted earnings of equity
accounted units.
Under covenants stipulated in the agreement to Sohar Aluminium Co. L.L.C.’s secured loan facilities, Sohar Aluminium Co. L.L.C. is currently restricted from making any shareholder distributions until
2021 unless a specified amount of the loan facilities is funded.
266
266
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
35 Principal associates
At 31 December 2020
Company and country of incorporation/operation Principal activities
Number of
shares held
Class of
shares held
Proportion
of class
held (%)
Group
interest
(%)
Australia
Boyne Smelters Limited(a)
Brazil
Aluminium smelting
153,679,560
Ordinary
59.4
59.4
Mineração Rio do Norte S.A.(b)
Bauxite mining
25,000,000,000
47,000,000,000
Ordinary
Preferred
12.5
11.75
US
Halco (Mining) Inc.(c)
Bauxite mining
4,500
Common
45
12
45
This list includes only those associates that have a more significant impact on the profit or operating assets of the Group. Refer to note 44 for a list of
related undertakings.
The Group’s principal associates are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited.
(a)
(b)
(c)
The parties that collectively control Boyne Smelters Limited do so through decisions that are determined on an aggregate voting interest that can be achieved by several combinations of the parties.
Although each combination requires Rio Tinto’s approval, this is not joint control as defined under IFRS 11. Rio Tinto is therefore determined to have significant influence over this company.
Although the Group holds only 12% of Mineração Rio do Norte S.A., it has representation on its board of directors and a consequent ability to participate in the financial and operating policy
decisions. It is therefore determined that Rio Tinto has significant influence.
Halco (Mining) Inc. has a 51% indirect interest in Compagnie des Bauxites de Guinée, a bauxite mine, the core assets of which are located in Guinea.
Summary information for associates that are material to the Group
This summarised financial information is shown on a 100% basis. It represents the amounts shown in the associate’s financial statements prepared in
accordance with IFRS under Group accounting policies, including fair value adjustments and amounts due to and from Rio Tinto.
Revenue
Loss after tax(b)
Other comprehensive income/(loss)(c)
Total comprehensive loss
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Reconciliation of the above amount to the investment recognised in the Group balance sheet
Group interest
Net assets
Group's ownership interest
Loans to equity accounted units
Carrying value of Group's interest
Boyne
Smelters
Limited(a)
2020
US$m
Boyne
Smelters
Limited(a)
2019
US$m
—
(198)
30
(168)
1,037
98
(146)
(779)
210
59.4%
210
125
112
237
—
(7)
(3)
(10)
1,229
96
(114)
(814)
397
59.4%
397
236
113
349
(a)
(b)
(c)
Boyne Smelters Limited is a tolling operation; as such it is dependent on its participants for funding which is provided through cash calls. Rio Tinto has made certain prepayments to Boyne for toll
processing of alumina. These are charged to Group operating costs as processing takes place.
In 2020, includes US$200 million of impairment changes. Refer to note 6.
"Other comprehensive income/(loss)” is net of amounts recognised by subsidiaries in relation to quasi equity loans.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
267
267
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
35 Principal associates continued
Summary information for joint ventures and associates that are not individually material to the Group
Carrying value of Group's interest
Profit after tax
Other comprehensive income
Total comprehensive income
There were no individually material joint ventures in 2019 or 2020.
Associates
2020
US$m
Associates
2019
US$m
708
704
—
(5)
(5)
3
10
13
36 Purchases and sales of subsidiaries, joint ventures, associates and
other interests in businesses
Acquisitions
We have made no material acquisitions over the last three years.
Also on 1 August 2018, we completed the sale of our entire interest in the
Kestrel underground coal mine (80.0%) for US$2.25 billion to a consortium
comprising EMR Capital (EMR) and PT Adaro Energy Tbk (Adaro). We
received net cash proceeds of US$2,270 million, resulting in a pre-tax gain
of US$1,010 million.
On 14 December 2018 we completed the sale of the Dunkerque aluminium
smelter in northern France to Liberty House for US$500 million, subject to
final adjustments. In 2018 we received net cash proceeds of US$385
million. We recognised a pre-tax gain on disposal of US$128 million.
On 21 December 2018 we sold our interest in the Grasberg mine for
US$3.5 billion as part of a series of transactions involving Inalum (PT
Indonesia Asahan Aluminium (Persero)) and Freeport-McMoRan Inc. Of the
US$3.5 billion received, US$107 million related to our attributable share of
copper and gold revenues for 2018, net of our capital contribution for the
year. The remaining net proceeds of US$3,392 million were included in
investing cash flows and gave rise to a gain on disposal of US$2,146
million.
On 1 September 2017, we disposed of our 100% shareholding in Coal &
Allied Industries Limited to Yancoal Australia Limited for a total
consideration of US$2.69 billion (before working capital adjustments). This
comprised US$2.45 billion in cash paid on the closing date and a further
US$240 million of unconditional guaranteed royalty payments. Total net
cash proceeds received in 2017, net of working capital adjustments,
transaction costs and cash transferred, were US$2.54 billion. This included
receipt of US$110 million of the unconditional royalty payments. In 2018
we received a further US$90 million of unconditional royalty payments and
in 2019 an additional US$20 million. We received US$10 million in 2020
and the final US$10 million was received in early 2021.
In 2018, we created a joint venture, ELYSIS, with Alcoa and other partners
to develop a carbon-free aluminium smelting process. We treated this as
an acquisition and accounted for our interest in ELYSIS using the equity
method. We invested cash of US$5 million and contributed patents and
licensed intellectual property (IP) to the venture. The patents and IP had
no carrying value; however, on formation of the arrangement, they were
recorded at fair value to reflect the contributions of the other parties in the
joint venture. This value was US$171 million (US$141 million after tax).
Disposals
We have made no material disposals in 2020.
On 16 July 2019 we disposed of our entire 68.62% interest in Rössing
Uranium to China National Uranium Corporation Limited for gross cash
proceeds of US$6.5 million. After adjusting for cash held on Rössing's
balance sheet at the date of disposal and included in the sale, we reported
a net cash outflow of US$118 million and recognised a loss on disposal of
US$289 million. This includes cumulative currency translation losses of
US$212 million recycled from the currency translation reserve on sale of
the business.
On 1 June 2018 we disposed of our entire 75% interest in the Winchester
South coal development project in Queensland, Australia to Whitehaven
Coal Limited for US$200 million. This comprised US$150 million cash
which was received during 2018 and an unconditional cash payment of
US$50 million which was subsequently received in June 2019. Both
receipts were recognised within “net cash generated from operating
activities” within the cash flow statement. We recognised a gain on
disposal of US$195 million within “profit relating to interests in
undeveloped projects” in the income statement.
On 1 August 2018 we completed the sale of our entire interest in the Hail
Creek coal mine (82.0%) and the Valeria coal development project (71.2%)
in Queensland, Australia to Glencore for a total consideration of
US$1.7 billion.
We received net proceeds of US$1,545 million after completion
adjustments in respect of the Hail Creek component of this transaction,
resulting in a pre-tax gain of US$1,141 million. During 2019 we received a
further US$26 million relating to working capital adjustments in respect of
this sale. We also received cash proceeds in 2018 of US$170 million in
respect of Valeria. Of this amount, US$87 million, relating to the sale of
land and investments in associates, was included in investing cash flow,
resulting in a pre-tax gain of US$18 million. The remaining US$83 million
proceeds were recognised in operating cash flow, resulting in a pre-tax
gain of US$83 million in “profit relating to interests in undeveloped
projects”.
268
268
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
(cid:16)(cid:20)(cid:1)(cid:29)(cid:58)(cid:67)(cid:54)(cid:52)(cid:69)(cid:64)(cid:67)(cid:68)(cid:76)(cid:1)(cid:50)(cid:63)(cid:53)(cid:1)(cid:60)(cid:54)(cid:74)(cid:1)(cid:62)(cid:50)(cid:63)(cid:50)(cid:56)(cid:54)(cid:62)(cid:54)(cid:63)(cid:69)(cid:1)(cid:67)(cid:54)(cid:62)(cid:70)(cid:63)(cid:54)(cid:67)(cid:50)(cid:69)(cid:58)(cid:64)(cid:63)(cid:1)
(cid:15)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:58)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:95)(cid:1)(cid:43)(cid:41)(cid:52)(cid:43)(cid:61)(cid:52)(cid:41)(cid:60)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:1)(cid:41)(cid:43)(cid:43)(cid:55)(cid:58)(cid:44)(cid:41)(cid:54)(cid:43)(cid:45)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:35)(cid:25)(cid:1)(cid:17)(cid:55)(cid:53)(cid:56)(cid:41)(cid:54)(cid:49)(cid:45)(cid:59)(cid:1)(cid:15)(cid:43)(cid:60)(cid:1)(cid:5)(cid:3)(cid:3)(cid:9)(cid:95)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:56)(cid:41)(cid:58)(cid:45)(cid:54)(cid:60)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:41)(cid:54)(cid:49)(cid:45)(cid:59)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)(cid:41)(cid:59)(cid:1)(cid:46)(cid:55)(cid:52)(cid:52)(cid:55)(cid:63)(cid:59)(cid:13)(cid:1)
(cid:20)(cid:54)(cid:56)(cid:53)(cid:62)(cid:54)(cid:46)(cid:55)(cid:61)(cid:60)
(cid:27)(cid:56)(cid:55)(cid:48)(cid:98)(cid:61)(cid:46)(cid:59)(cid:54)(cid:1)(cid:50)(cid:55)(cid:44)(cid:46)(cid:55)(cid:61)(cid:50)(cid:63)(cid:46)(cid:1)(cid:57)(cid:53)(cid:42)(cid:55)(cid:60)
(cid:31)(cid:46)(cid:55)(cid:60)(cid:50)(cid:56)(cid:55)(cid:1)(cid:44)(cid:56)(cid:55)(cid:61)(cid:59)(cid:50)(cid:43)(cid:62)(cid:61)(cid:50)(cid:56)(cid:55)(cid:60)(cid:13)(cid:1)(cid:45)(cid:46)(cid:47)(cid:50)(cid:55)(cid:46)(cid:45)(cid:1)(cid:44)(cid:56)(cid:55)(cid:61)(cid:59)(cid:50)(cid:43)(cid:62)(cid:61)(cid:50)(cid:56)(cid:55)(cid:1)(cid:57)(cid:53)(cid:42)(cid:55)(cid:60)
(cid:22)(cid:42)(cid:50)(cid:55)(cid:60)(cid:1)(cid:54)(cid:42)(cid:45)(cid:46)(cid:1)(cid:56)(cid:55)(cid:1)(cid:46)(cid:65)(cid:46)(cid:59)(cid:44)(cid:50)(cid:60)(cid:46)(cid:1)(cid:56)(cid:47)(cid:1)(cid:60)(cid:49)(cid:42)(cid:59)(cid:46)(cid:1)(cid:56)(cid:57)(cid:61)(cid:50)(cid:56)(cid:55)(cid:60)
(cid:15)(cid:13)(cid:15)(cid:13)
(cid:45)(cid:43)(cid:2)(cid:5)(cid:13)(cid:13)(cid:13)
(cid:19)(cid:9)(cid:19)(cid:21)(cid:19)(cid:1)
(cid:21)(cid:9)(cid:22)(cid:20)(cid:17)(cid:1)
(cid:14)(cid:18)(cid:9)(cid:19)(cid:19)(cid:13)(cid:1)
(cid:15)(cid:22)(cid:1)
(cid:80)(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:9)(cid:7)(cid:8)(cid:16)
(cid:37)(cid:35)(cid:72)(cid:67)(cid:7)(cid:7)(cid:7)
(cid:10)(cid:95)(cid:8)(cid:5)(cid:7)(cid:1)
(cid:7)(cid:95)(cid:10)(cid:7)(cid:11)(cid:1)
(cid:4)(cid:5)(cid:95)(cid:5)(cid:10)(cid:5)(cid:1)
(cid:7)(cid:5)(cid:1)
(cid:73)(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:9)(cid:7)(cid:8)(cid:15)
(cid:37)(cid:35)(cid:72)(cid:67)(cid:7)(cid:7)(cid:7)
(cid:12)(cid:95)(cid:3)(cid:9)(cid:12)(cid:1)
(cid:5)(cid:95)(cid:12)(cid:5)(cid:6)(cid:1)
(cid:4)(cid:4)(cid:95)(cid:12)(cid:12)(cid:5)(cid:1)
(cid:11)(cid:3)(cid:1)
(cid:4)(cid:3)(cid:10)(cid:1)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:21)(cid:58)(cid:55)(cid:61)(cid:56)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:59)(cid:1)(cid:51)(cid:45)(cid:65)(cid:1)(cid:53)(cid:41)(cid:54)(cid:41)(cid:47)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:56)(cid:45)(cid:58)(cid:59)(cid:55)(cid:54)(cid:54)(cid:45)(cid:52)(cid:1)(cid:41)(cid:59)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:53)(cid:45)(cid:53)(cid:42)(cid:45)(cid:58)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:19)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:1)(cid:17)(cid:55)(cid:53)(cid:53)(cid:49)(cid:60)(cid:60)(cid:45)(cid:45)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:1)(cid:19)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:1)(cid:17)(cid:55)(cid:53)(cid:53)(cid:49)(cid:60)(cid:60)(cid:45)(cid:45)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:58)(cid:49)(cid:59)(cid:45)(cid:59)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)
(cid:45)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:95)(cid:1)(cid:56)(cid:58)(cid:55)(cid:44)(cid:61)(cid:43)(cid:60)(cid:1)(cid:47)(cid:58)(cid:55)(cid:61)(cid:56)(cid:1)(cid:43)(cid:48)(cid:49)(cid:45)(cid:46)(cid:1)(cid:45)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:1)(cid:55)(cid:46)(cid:46)(cid:49)(cid:43)(cid:45)(cid:58)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:21)(cid:58)(cid:55)(cid:61)(cid:56)(cid:1)(cid:45)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:59)(cid:96)(cid:1)(cid:18)(cid:45)(cid:60)(cid:41)(cid:49)(cid:52)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:53)(cid:45)(cid:53)(cid:42)(cid:45)(cid:58)(cid:59)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:19)(cid:64)(cid:45)(cid:43)(cid:61)(cid:60)(cid:49)(cid:62)(cid:45)(cid:1)(cid:17)(cid:55)(cid:53)(cid:53)(cid:49)(cid:60)(cid:60)(cid:45)(cid:45)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)
(cid:59)(cid:48)(cid:55)(cid:63)(cid:54)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:18)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:69)(cid:1)(cid:32)(cid:45)(cid:56)(cid:55)(cid:58)(cid:60)(cid:1)(cid:55)(cid:54)(cid:1)(cid:56)(cid:41)(cid:47)(cid:45)(cid:59)(cid:1)(cid:4)(cid:4)(cid:9)(cid:97)(cid:4)(cid:4)(cid:12)(cid:96)(cid:1)(cid:1)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:41)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:58)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:56)(cid:45)(cid:54)(cid:59)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:59)(cid:1)(cid:49)(cid:54)(cid:43)(cid:61)(cid:58)(cid:58)(cid:45)(cid:44)(cid:1)(cid:42)(cid:65)(cid:1)(cid:32)(cid:49)(cid:55)(cid:1)(cid:34)(cid:49)(cid:54)(cid:60)(cid:55)(cid:1)(cid:56)(cid:52)(cid:43)(cid:1)(cid:49)(cid:54)(cid:1)(cid:58)(cid:45)(cid:59)(cid:56)(cid:45)(cid:43)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:49)(cid:60)(cid:59)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)(cid:35)(cid:33)(cid:89)(cid:4)(cid:7)(cid:95)(cid:12)(cid:11)(cid:6)(cid:95)(cid:3)(cid:3)(cid:3)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)
(cid:35)(cid:33)(cid:89)(cid:4)(cid:4)(cid:95)(cid:8)(cid:9)(cid:8)(cid:95)(cid:3)(cid:3)(cid:3)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:4)(cid:4)(cid:95)(cid:7)(cid:9)(cid:8)(cid:95)(cid:3)(cid:3)(cid:3)(cid:94)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:87)(cid:41)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:56)(cid:45)(cid:54)(cid:59)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:60)(cid:55)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:56)(cid:52)(cid:41)(cid:54)(cid:59)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)(cid:35)(cid:33)(cid:89)(cid:5)(cid:12)(cid:95)(cid:3)(cid:3)(cid:3)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:7)(cid:5)(cid:95)(cid:3)(cid:3)(cid:3)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)
(cid:35)(cid:33)(cid:89)(cid:11)(cid:3)(cid:95)(cid:3)(cid:3)(cid:3)(cid:94)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:1)(cid:41)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:58)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:56)(cid:45)(cid:54)(cid:59)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:55)(cid:60)(cid:48)(cid:45)(cid:58)(cid:1)(cid:58)(cid:45)(cid:60)(cid:49)(cid:58)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:42)(cid:45)(cid:54)(cid:45)(cid:46)(cid:49)(cid:60)(cid:59)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:61)(cid:58)(cid:58)(cid:45)(cid:44)(cid:1)(cid:42)(cid:65)(cid:1)(cid:32)(cid:49)(cid:55)(cid:1)(cid:34)(cid:49)(cid:54)(cid:60)(cid:55)(cid:1)(cid:26)(cid:49)(cid:53)(cid:49)(cid:60)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:1)(cid:58)(cid:45)(cid:59)(cid:56)(cid:45)(cid:43)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:49)(cid:60)(cid:59)(cid:1)
(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)(cid:35)(cid:33)(cid:89)(cid:10)(cid:3)(cid:10)(cid:95)(cid:3)(cid:3)(cid:3)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:10)(cid:7)(cid:12)(cid:95)(cid:3)(cid:3)(cid:3)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:9)(cid:3)(cid:10)(cid:95)(cid:3)(cid:3)(cid:3)(cid:94)(cid:96)(cid:1)(cid:34)(cid:48)(cid:45)(cid:1)(cid:41)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:56)(cid:45)(cid:54)(cid:59)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:60)(cid:55)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:56)(cid:52)(cid:41)(cid:54)(cid:59)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)(cid:35)(cid:33)(cid:89)(cid:54)(cid:49)(cid:52)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)
(cid:35)(cid:33)(cid:89)(cid:54)(cid:49)(cid:52)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:54)(cid:49)(cid:52)(cid:94)(cid:96)(cid:1)
(cid:18)(cid:61)(cid:58)(cid:49)(cid:54)(cid:47)(cid:1)(cid:5)(cid:3)(cid:5)(cid:3)(cid:95)(cid:1)(cid:54)(cid:55)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:54)(cid:49)(cid:52)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:54)(cid:49)(cid:52)(cid:94)(cid:95)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:41)(cid:43)(cid:43)(cid:58)(cid:61)(cid:45)(cid:44)(cid:1)(cid:58)(cid:45)(cid:60)(cid:49)(cid:58)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:42)(cid:45)(cid:54)(cid:45)(cid:46)(cid:49)(cid:60)(cid:59)(cid:1)(cid:61)(cid:54)(cid:44)(cid:45)(cid:58)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:42)(cid:45)(cid:54)(cid:45)(cid:46)(cid:49)(cid:60)(cid:1)(cid:41)(cid:58)(cid:58)(cid:41)(cid:54)(cid:47)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:95)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:60)(cid:63)(cid:55)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:60)(cid:63)(cid:55)(cid:14)(cid:1)
(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)(cid:60)(cid:48)(cid:58)(cid:45)(cid:45)(cid:94)(cid:1)(cid:41)(cid:43)(cid:43)(cid:58)(cid:61)(cid:45)(cid:44)(cid:1)(cid:58)(cid:45)(cid:60)(cid:49)(cid:58)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:42)(cid:45)(cid:54)(cid:45)(cid:46)(cid:49)(cid:60)(cid:59)(cid:1)(cid:61)(cid:54)(cid:44)(cid:45)(cid:58)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:43)(cid:55)(cid:54)(cid:60)(cid:58)(cid:49)(cid:42)(cid:61)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:41)(cid:58)(cid:58)(cid:41)(cid:54)(cid:47)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:96)(cid:1)
(cid:19)(cid:53)(cid:55)(cid:52)(cid:61)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:1)(cid:41)(cid:42)(cid:55)(cid:62)(cid:45)(cid:1)(cid:48)(cid:41)(cid:62)(cid:45)(cid:1)(cid:42)(cid:45)(cid:45)(cid:54)(cid:1)(cid:60)(cid:58)(cid:41)(cid:54)(cid:59)(cid:52)(cid:41)(cid:60)(cid:45)(cid:44)(cid:1)(cid:46)(cid:58)(cid:55)(cid:53)(cid:1)(cid:52)(cid:55)(cid:43)(cid:41)(cid:52)(cid:1)(cid:43)(cid:61)(cid:58)(cid:58)(cid:45)(cid:54)(cid:43)(cid:65)(cid:1)(cid:41)(cid:60)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:41)(cid:62)(cid:45)(cid:58)(cid:41)(cid:47)(cid:45)(cid:1)(cid:45)(cid:64)(cid:43)(cid:48)(cid:41)(cid:54)(cid:47)(cid:45)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:1)(cid:46)(cid:55)(cid:58)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:65)(cid:45)(cid:41)(cid:58)(cid:1)(cid:63)(cid:49)(cid:60)(cid:48)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:45)(cid:64)(cid:43)(cid:45)(cid:56)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:55)(cid:46)(cid:1)(cid:42)(cid:55)(cid:54)(cid:61)(cid:59)(cid:1)
(cid:56)(cid:41)(cid:65)(cid:53)(cid:45)(cid:54)(cid:60)(cid:59)(cid:95)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:48)(cid:41)(cid:62)(cid:45)(cid:1)(cid:42)(cid:45)(cid:45)(cid:54)(cid:1)(cid:60)(cid:58)(cid:41)(cid:54)(cid:59)(cid:52)(cid:41)(cid:60)(cid:45)(cid:44)(cid:1)(cid:41)(cid:60)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:65)(cid:45)(cid:41)(cid:58)(cid:97)(cid:45)(cid:54)(cid:44)(cid:1)(cid:58)(cid:41)(cid:60)(cid:45)(cid:96)(cid:1)
(cid:18)(cid:45)(cid:60)(cid:41)(cid:49)(cid:52)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:46)(cid:55)(cid:58)(cid:53)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:43)(cid:45)(cid:58)(cid:54)(cid:49)(cid:54)(cid:47)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:93)(cid:1)(cid:58)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:95)(cid:1)(cid:59)(cid:48)(cid:41)(cid:58)(cid:45)(cid:48)(cid:55)(cid:52)(cid:44)(cid:49)(cid:54)(cid:47)(cid:59)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:55)(cid:56)(cid:60)(cid:49)(cid:55)(cid:54)(cid:59)(cid:1)(cid:49)(cid:59)(cid:1)(cid:59)(cid:48)(cid:55)(cid:63)(cid:54)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:32)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:32)(cid:45)(cid:56)(cid:55)(cid:58)(cid:60)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:59)(cid:1)(cid:4)(cid:1)(cid:60)(cid:55)(cid:1)(cid:6)(cid:95)(cid:1)(cid:55)(cid:54)(cid:1)
(cid:56)(cid:41)(cid:47)(cid:45)(cid:59)(cid:1)(cid:4)(cid:10)(cid:9)(cid:97)(cid:4)(cid:11)(cid:7)(cid:96)(cid:1)
(cid:15)(cid:47)(cid:47)(cid:58)(cid:45)(cid:47)(cid:41)(cid:60)(cid:45)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:45)(cid:54)(cid:59)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:95)(cid:1)(cid:58)(cid:45)(cid:56)(cid:58)(cid:45)(cid:59)(cid:45)(cid:54)(cid:60)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:45)(cid:64)(cid:56)(cid:45)(cid:54)(cid:59)(cid:45)(cid:1)(cid:58)(cid:45)(cid:43)(cid:55)(cid:47)(cid:54)(cid:49)(cid:59)(cid:45)(cid:44)(cid:1)(cid:61)(cid:54)(cid:44)(cid:45)(cid:58)(cid:1)(cid:23)(cid:20)(cid:32)(cid:33)(cid:95)(cid:1)(cid:41)(cid:59)(cid:1)(cid:44)(cid:45)(cid:46)(cid:49)(cid:54)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:1)(cid:54)(cid:55)(cid:60)(cid:45)(cid:1)(cid:4)(cid:95)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:21)(cid:58)(cid:55)(cid:61)(cid:56)(cid:93)(cid:59)(cid:1)(cid:51)(cid:45)(cid:65)(cid:1)(cid:53)(cid:41)(cid:54)(cid:41)(cid:47)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:55)(cid:58)(cid:59)(cid:95)(cid:1)(cid:63)(cid:41)(cid:59)(cid:1)
(cid:41)(cid:59)(cid:1)(cid:46)(cid:55)(cid:52)(cid:52)(cid:55)(cid:63)(cid:59)(cid:13)
(cid:34)(cid:49)(cid:56)(cid:59)(cid:61)(cid:98)(cid:61)(cid:46)(cid:59)(cid:54)(cid:1)(cid:46)(cid:54)(cid:57)(cid:53)(cid:56)(cid:66)(cid:46)(cid:46)(cid:1)(cid:43)(cid:46)(cid:55)(cid:46)(cid:47)(cid:50)(cid:61)(cid:60)(cid:1)(cid:42)(cid:55)(cid:45)(cid:1)(cid:44)(cid:56)(cid:60)(cid:61)(cid:60)
(cid:31)(cid:56)(cid:60)(cid:61)(cid:98)(cid:46)(cid:54)(cid:57)(cid:53)(cid:56)(cid:66)(cid:54)(cid:46)(cid:55)(cid:61)(cid:1)(cid:43)(cid:46)(cid:55)(cid:46)(cid:47)(cid:50)(cid:61)(cid:60)
(cid:20)(cid:54)(cid:57)(cid:53)(cid:56)(cid:66)(cid:54)(cid:46)(cid:55)(cid:61)(cid:1)(cid:61)(cid:46)(cid:59)(cid:54)(cid:50)(cid:55)(cid:42)(cid:61)(cid:50)(cid:56)(cid:55)(cid:1)(cid:43)(cid:46)(cid:55)(cid:46)(cid:47)(cid:50)(cid:61)(cid:60)
(cid:34)(cid:49)(cid:42)(cid:59)(cid:46)(cid:98)(cid:43)(cid:42)(cid:60)(cid:46)(cid:45)(cid:1)(cid:57)(cid:42)(cid:66)(cid:54)(cid:46)(cid:55)(cid:61)(cid:60)
(cid:44)(cid:64)(cid:69)(cid:50)(cid:61)
(cid:15)(cid:13)(cid:15)(cid:13)
(cid:1)(cid:45)(cid:43)(cid:2)(cid:5)(cid:13)(cid:13)(cid:13)
(cid:15)(cid:14)(cid:9)(cid:19)(cid:21)(cid:18)(cid:1)
(cid:16)(cid:19)(cid:22)(cid:1)
(cid:15)(cid:9)(cid:20)(cid:21)(cid:22)(cid:1)
(cid:16)(cid:17)(cid:9)(cid:22)(cid:18)(cid:17)(cid:1)
(cid:18)(cid:22)(cid:9)(cid:20)(cid:22)(cid:20)(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:9)(cid:7)(cid:8)(cid:16)
(cid:37)(cid:35)(cid:72)(cid:67)(cid:7)(cid:7)(cid:7)
(cid:5)(cid:5)(cid:95)(cid:3)(cid:10)(cid:8)(cid:1)
(cid:7)(cid:10)(cid:10)(cid:1)
(cid:6)(cid:4)(cid:3)(cid:1)
(cid:4)(cid:10)(cid:95)(cid:9)(cid:6)(cid:5)(cid:1)
(cid:7)(cid:3)(cid:95)(cid:7)(cid:12)(cid:7)(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:9)(cid:7)(cid:8)(cid:15)
(cid:37)(cid:35)(cid:72)(cid:67)(cid:7)(cid:7)(cid:7)
(cid:5)(cid:6)(cid:95)(cid:12)(cid:10)(cid:11)(cid:1)
(cid:9)(cid:5)(cid:12)(cid:1)
(cid:9)(cid:12)(cid:1)
(cid:4)(cid:7)(cid:95)(cid:12)(cid:4)(cid:9)(cid:1)
(cid:6)(cid:12)(cid:95)(cid:8)(cid:12)(cid:5)(cid:1)
(cid:34)(cid:48)(cid:45)(cid:1)(cid:46)(cid:49)(cid:47)(cid:61)(cid:58)(cid:45)(cid:59)(cid:1)(cid:59)(cid:48)(cid:55)(cid:63)(cid:54)(cid:1)(cid:41)(cid:42)(cid:55)(cid:62)(cid:45)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:1)(cid:45)(cid:53)(cid:56)(cid:52)(cid:55)(cid:65)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:43)(cid:55)(cid:59)(cid:60)(cid:59)(cid:1)(cid:63)(cid:48)(cid:49)(cid:43)(cid:48)(cid:1)(cid:43)(cid:55)(cid:53)(cid:56)(cid:58)(cid:49)(cid:59)(cid:45)(cid:1)(cid:59)(cid:55)(cid:43)(cid:49)(cid:41)(cid:52)(cid:1)(cid:59)(cid:45)(cid:43)(cid:61)(cid:58)(cid:49)(cid:60)(cid:65)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:41)(cid:43)(cid:43)(cid:49)(cid:44)(cid:45)(cid:54)(cid:60)(cid:1)(cid:56)(cid:58)(cid:45)(cid:53)(cid:49)(cid:61)(cid:53)(cid:59)(cid:1)(cid:49)(cid:54)(cid:1)(cid:17)(cid:41)(cid:54)(cid:41)(cid:44)(cid:41)(cid:95)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:35)(cid:25)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:35)(cid:33)(cid:1)(cid:41)(cid:54)(cid:44)(cid:1)(cid:56)(cid:41)(cid:65)(cid:58)(cid:55)(cid:52)(cid:52)(cid:1)(cid:60)(cid:41)(cid:64)(cid:45)(cid:59)(cid:1)(cid:49)(cid:54)(cid:1)
(cid:15)(cid:61)(cid:59)(cid:60)(cid:58)(cid:41)(cid:52)(cid:49)(cid:41)(cid:1)(cid:56)(cid:41)(cid:49)(cid:44)(cid:1)(cid:42)(cid:65)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:45)(cid:53)(cid:56)(cid:52)(cid:55)(cid:65)(cid:45)(cid:58)(cid:1)(cid:41)(cid:59)(cid:1)(cid:41)(cid:1)(cid:44)(cid:49)(cid:58)(cid:45)(cid:43)(cid:60)(cid:1)(cid:41)(cid:44)(cid:44)(cid:49)(cid:60)(cid:49)(cid:55)(cid:54)(cid:41)(cid:52)(cid:1)(cid:43)(cid:55)(cid:59)(cid:60)(cid:1)(cid:55)(cid:46)(cid:1)(cid:48)(cid:49)(cid:58)(cid:45)(cid:96)(cid:1)(cid:23)(cid:54)(cid:1)(cid:60)(cid:55)(cid:60)(cid:41)(cid:52)(cid:95)(cid:1)(cid:60)(cid:48)(cid:45)(cid:65)(cid:1)(cid:41)(cid:53)(cid:55)(cid:61)(cid:54)(cid:60)(cid:1)(cid:60)(cid:55)(cid:1)(cid:35)(cid:33)(cid:89)(cid:5)(cid:95)(cid:4)(cid:6)(cid:3)(cid:95)(cid:3)(cid:3)(cid:3)(cid:1)(cid:92)(cid:5)(cid:3)(cid:4)(cid:12)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:5)(cid:95)(cid:3)(cid:9)(cid:9)(cid:95)(cid:3)(cid:3)(cid:3)(cid:14)(cid:1)(cid:5)(cid:3)(cid:4)(cid:11)(cid:13)(cid:1)(cid:35)(cid:33)(cid:89)(cid:5)(cid:95)(cid:6)(cid:9)(cid:3)(cid:95)(cid:3)(cid:3)(cid:3)(cid:94)(cid:1)(cid:41)(cid:54)(cid:44)(cid:95)(cid:1)
(cid:41)(cid:52)(cid:60)(cid:48)(cid:55)(cid:61)(cid:47)(cid:48)(cid:1)(cid:44)(cid:49)(cid:59)(cid:43)(cid:52)(cid:55)(cid:59)(cid:45)(cid:44)(cid:1)(cid:48)(cid:45)(cid:58)(cid:45)(cid:95)(cid:1)(cid:41)(cid:58)(cid:45)(cid:1)(cid:54)(cid:55)(cid:60)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:1)(cid:4)(cid:1)(cid:55)(cid:46)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:32)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:32)(cid:45)(cid:56)(cid:55)(cid:58)(cid:60)(cid:96)(cid:1)
(cid:27)(cid:55)(cid:58)(cid:45)(cid:1)(cid:44)(cid:45)(cid:60)(cid:41)(cid:49)(cid:52)(cid:45)(cid:44)(cid:1)(cid:49)(cid:54)(cid:46)(cid:55)(cid:58)(cid:53)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:43)(cid:55)(cid:54)(cid:43)(cid:45)(cid:58)(cid:54)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:58)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:55)(cid:46)(cid:1)(cid:51)(cid:45)(cid:65)(cid:1)(cid:53)(cid:41)(cid:54)(cid:41)(cid:47)(cid:45)(cid:53)(cid:45)(cid:54)(cid:60)(cid:1)(cid:49)(cid:59)(cid:1)(cid:59)(cid:48)(cid:55)(cid:63)(cid:54)(cid:1)(cid:49)(cid:54)(cid:1)(cid:60)(cid:48)(cid:45)(cid:1)(cid:32)(cid:45)(cid:53)(cid:61)(cid:54)(cid:45)(cid:58)(cid:41)(cid:60)(cid:49)(cid:55)(cid:54)(cid:1)(cid:32)(cid:45)(cid:56)(cid:55)(cid:58)(cid:60)(cid:95)(cid:1)(cid:49)(cid:54)(cid:43)(cid:52)(cid:61)(cid:44)(cid:49)(cid:54)(cid:47)(cid:1)(cid:60)(cid:41)(cid:42)(cid:52)(cid:45)(cid:59)(cid:1)(cid:4)(cid:1)(cid:60)(cid:55)(cid:1)(cid:6)(cid:1)(cid:55)(cid:54)(cid:1)
(cid:56)(cid:41)(cid:47)(cid:45)(cid:59)(cid:87)(cid:4)(cid:10)(cid:9)(cid:97)(cid:4)(cid:11)(cid:7)(cid:96)(cid:1)
Annual Report 2020 | riotinto.com
(cid:26)(cid:63)(cid:63)(cid:70)(cid:50)(cid:61)(cid:1)(cid:42)(cid:54)(cid:65)(cid:64)(cid:67)(cid:69)(cid:1)(cid:15)(cid:13)(cid:15)(cid:13)(cid:1)(cid:67)(cid:1)(cid:58)(cid:49)(cid:55)(cid:60)(cid:49)(cid:54)(cid:60)(cid:55)(cid:96)(cid:43)(cid:55)(cid:53)(cid:1)(cid:1)
(cid:5)(cid:9)(cid:12) 269
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
38 Auditors’ remuneration
Group auditors’ remuneration(a)
Audit of the Group
Audit of subsidiaries
Total audit
Audit-related assurance service
Other assurance services(b)
Total assurance services
Tax compliance
Other non-audit services not covered above
Total non-audit services
Total Group auditors’ remuneration
Audit fees payable to other accounting firms
Audit of the financial statements of the Group’s subsidiaries(c)
Fees in respect of pension scheme audits
Total audit fees payable to other accounting firms
2020
US$m
11.0
6.3
17.3
0.8
1.4
2.2
—
0.1
2.3
2019
US$m
9.6
6.8
16.4
0.8
1.9
2.7
0.1
—
2.8
2018
US$m
9.2
7.5
16.7
0.9
3.3
4.2
—
0.2
4.4
19.6
19.2
21.1
0.6
0.1
0.7
1.4
0.1
1.5
1.4
0.1
1.5
(a)
(b)
(c)
In 2020, all amounts were paid to member firms of KPMG. In 2019 and 2018, all amounts were paid to member firms of PwC, being the Group's auditors for these financial years. The remuneration
payable to KPMG, the Group auditors, is approved by the Audit Committee. The Committee sets the policy for the award of non-audit work to the auditors and approves the nature and extent of such
work, and the amount of the related fees, to ensure that independence is maintained. The fees disclosed above consolidate all payments made to member firms of KPMG by the companies and their
subsidiaries, along with fees in respect of joint operations paid for by the Group and includes an estimate of the costs to complete the 2020 audit. Non-audit services arise largely from assurance and/
or regulation related work.
Other assurance services relates to the review of non-statutory financial information including sustainability reporting.
In 2019 and 2018 these amounts include fees payable to KPMG in respect of subsidiaries who's statutory auditor was KPMG prior to their appointment as the Group's auditor.
39 Related-party transactions
Information about material related-party transactions of the Rio Tinto Group is set out below.
Subsidiary companies and joint operations
Details of investments in principal subsidiary companies are disclosed in note 32. Information relating to joint operations can be found in note 33.
Equity accounted units
Transactions and balances with equity accounted units are summarised below. Purchases, trade and other receivables, and trade and other payables
relate largely to amounts charged by equity accounted units for toll processing of alumina and purchasing of bauxite and aluminium. Sales relate largely
to sales of alumina to equity accounted units for smelting into aluminium.
Income statement items
Purchases from equity accounted units
Sales to equity accounted units
Cash flow statement items
Dividends from equity accounted units
Net funding of equity accounted units
Balance sheet items
Investments in equity accounted units(a)
Loans to equity accounted units
Trade and other receivables: amounts due from equity accounted units(b)
Trade and other payables: amounts due to equity accounted units
Note
2020
US$m
2019
US$m
2018
US$m
(960)
271
(1,155)
268
(1,209)
493
594
(43)
669
(33)
800
(9)
15
19
18
24
3,764
41
251
(241)
3,971
39
259
(271)
4,299
38
278
(223)
(a)
(b)
Investments in equity accounted units include quasi equity loans. Further information about investments in equity accounted units is set out in notes 34 and 35.
This includes prepayments of tolling charges.
Pension funds
Information relating to pension fund arrangements is set out in note 42.
Directors and key management
Details of directors’ and key management’s remuneration are set out in note 37 and in the Remuneration Report on pages 176-184.
270
270
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
40 Exchange rates in US$
The principal exchange rates used in the preparation of the 2020 financial statements were:
Sterling
Australian dollar
Canadian dollar
Euro
South African rand
Full-year average
Year-end
2020
1.28
0.69
0.75
1.14
0.061
2019
1.28
0.70
0.75
1.12
0.069
2018
1.34
0.75
0.77
1.18
0.076
2020
1.36
0.77
0.78
1.23
0.068
2019
1.31
0.70
0.77
1.12
0.071
2018
1.27
0.70
0.73
1.14
0.069
41 Share-based payments
Rio Tinto plc and Rio Tinto Limited have a number of share-based incentive plans, which are described in detail in the Remuneration Report. These plans
have been accounted for in accordance with the fair value recognition provisions of IFRS 2 “Share-based Payment”.
The charge that has been recognised in the income statement for Rio Tinto’s share-based incentive plans, and the related liability (for cash-settled
awards), is set out in the table below.
Equity-settled awards
Cash-settled awards
Total
The main Rio Tinto plc and Rio Tinto Limited plans are as follows:
Charge recognised for the year
Liability at the end of the year
2020
US$m
131
7
138
2019
US$m
118
5
123
2018
US$m
118
4
122
2020
US$m
—
7
7
2019
US$m
—
19
19
UK Share Plan (formerly the Share Ownership Plan)
The fair values of Matching and Free Shares made by Rio Tinto plc are taken to be the market value of the shares on the date of purchase. These awards
are settled in equity.
Equity Incentive Plan
In 2018, shareholders approved the introduction of the Rio Tinto 2018 Equity Incentive Plan (the “EIP”). From 2018, all long-term incentive awards have
been granted under this umbrella plan which allows for awards in the form of Performance Share Awards (PSA), Management Share Awards (MSA) and
Bonus Deferral Awards (BDA) to be granted.
Performance Share Awards (Performance Share Plans prior to 2018)
Participants are generally assigned shares in settlement of their PSA on vesting and therefore the awards are accounted for in accordance with the
requirements applying to equity-settled share-based payment transactions, including the dividends accumulated from date of award to vesting.
For the parts of awards with Total Shareholder Return (TSR) performance conditions, the fair value of the awards is calculated using a Monte Carlo
simulation model taking into account the TSR performance conditions. One third of the awards granted up to 2017 (inclusive) are subject to an earnings
margin performance target relative to ten global mining comparators. As this is a non-market related performance condition, under IFRS 2, the fair value
recognised is reviewed at each accounting date based on the directors’ expectations for the proportion vesting. Forfeitures prior to vesting are assumed at
5% per annum of outstanding awards (2019: 5% per annum).
For grants made from 2018, the earnings margin performance target applying to the PSA was removed and instead all of the awards are subject to the
TSR performance conditions set out in the Remuneration Report.
Management Share Awards (Management Share Plans prior to 2018)
The vesting of these awards is dependent on service conditions being met; no performance conditions apply. In general, the awards will be settled in
equity, including the dividends accumulated from date of award to vesting and therefore the awards are accounted for in accordance with the
requirements applying to equity-settled share-based payment transactions.
The fair value of each award on the day of grant is equal to the share price on the day of grant. Forfeitures prior to vesting are assumed at 7% per annum
of outstanding awards (2019: 7% per annum).
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
271
271
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
41 Share-based payments continued
Bonus Deferral Awards (Bonus Deferral Plans prior to 2018)
Bonus Deferral Awards (BDA) provide for the mandatory deferral of 50% of the bonuses for executive directors and Executive Committee members and
25% of the bonuses for other executives.
The vesting of these awards is dependent only on service conditions being met. In general, the awards will be settled in equity including the dividends
accumulated from date of award to vesting and therefore the awards are accounted for in accordance with the requirements applying to equity-settled
share-based payment transactions. The fair value of each award on the day of grant is equal to the share price on the day of grant. Forfeitures prior to
vesting are assumed at 3% per annum of outstanding awards (2019: 3% per annum).
Global Employee Share Plans
The Global Employee Share Plans were introduced in 2012. Under these Plans, the companies provide a matching share award for each investment share
purchased by a participant. The vesting of these matching awards is dependent on service conditions being met and the continued holding of investment
shares by the participant until vesting. These awards are settled in equity including the dividends accumulated from date of award to vesting. The fair
value of each matching share on the day of grant is equal to the share price on the date of purchase less a deduction of 15% for cancellations (caused by
employees electing to withdraw their investment shares before vesting of their matching shares). Forfeitures prior to vesting are assumed at 5% per
annum of outstanding awards (2019: 5% per annum).
The Management Share Awards, Performance Share Awards, Bonus Deferral Awards, Equity Incentive Plan, Global Employee Share Plans and UK Share
Plan together represent 100% (2019: 100%) of the total IFRS 2 charge for Rio Tinto plc and Rio Tinto Limited plans in 2020.
Performance Share Awards (granted under either the Performance Share Plans or the Equity Incentive Plans)
Rio Tinto plc awards
Rio Tinto Limited awards
Weighted
average fair
value at grant
date
2020
£
2020
number
3,803,394
716,111
(136,030)
(145,661)
(459,773)
3,778,041
22.20
13.55
21.13
16.64
20.55
21.01
Weighted
average fair
value at grant
date
2019
£
Weighted
average fair
value at grant
date
2020
A$
2020
number
21.86
24.68
23.95
23.79
21.36
22.20
1,636,517
198,863
(178,921)
(63,852)
(201,234)
1,391,373
45.11
33.56
46.37
33.38
41.21
44.40
2019
number
3,845,082
755,735
(122,961)
(384,130)
(290,332)
3,803,394
Weighted
average fair
value at grant
date
2019
A$
43.34
54.55
44.02
46.42
41.72
45.11
2019
number
1,797,279
297,189
(126,775)
(188,956)
(142,220)
1,636,517
Rio Tinto plc awards
Rio Tinto Limited awards
Weighted
average fair
value at grant
date
2020
£
2020
number
Weighted
average fair
value at grant
date
2019
£
2019
number
Weighted
average fair
value at grant
date
2020
A$
2020
number
Weighted
average fair
value at grant
date
2019
A$
2019
number
476,602
43.13
339,821
45.52
217,287
93.48
151,607
100.30
Unvested awards at 1 January
Awarded
Forfeited
Failed performance conditions
Vested
Unvested awards at 31 December
Vested awards settled in shares during the year
(including dividend shares applied on vesting)
Vested awards settled in cash during the year
(including dividend shares applied on vesting)
108,887
43.13
1,279
43.65
28,208
93.82
1,347
92.97
In addition to the equity-settled awards shown above, there were 48,191 Rio Tinto plc and 15,164 Rio Tinto Limited cash-settled awards outstanding at
31 December 2020 (2019: 49,019 Rio Tinto plc and 276,722 Rio Tinto Limited cash-settled awards outstanding). The total liability for these awards at
31 December 2020 was US$3 million (2019: US$13 million).
272
272
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Management Share Awards, Bonus Deferral Awards (granted under the Management Share Plans, Bonus Deferral Plans or Equity Incentive
Plans), Global Employee Share Plans and UK Share Plan (combined)
Rio Tinto plc awards(a)
Rio Tinto Limited awards
Weighted
average fair
value at grant
date
2020
£
2020
number
2,613,013
1,190,528
(99,038)
(33,955)
(1,019,687)
2,650,861
1,352,759
211,905
1,050,608
35,589
37.14
36.27
44.42
37.72
34.46
37.50
38.73
36.14
36.06
41.54
Weighted
average fair
value at grant
date
2020
£
42.26
49.71
43.82
45.73
2020
number
707,133
111,233
401,169
2,392
Weighted
average fair
value at grant
date
2019
£
Weighted
average fair
value at grant
date
2020
A$
2020
number
31.43
40.41
39.46
32.87
25.40
37.14
2,273,669
921,070
(60,935)
(50,354)
(866,716)
2,216,734
38.68
41.95
33.98
37.86
1,291,203
53,324
872,207
—
75.46
83.20
85.01
71.45
65.19
82.52
85.80
85.53
77.47
—
Weighted
average fair
value at grant
date
2019
£
Weighted
average fair
value at grant
date
2020
A$
2020
number
43.68
42.53
43.04
42.21
640,948
63,404
299,381
—
97.74
101.96
98.60
—
2019
number
3,042,020
1,043,817
(224,402)
(24,043)
(1,224,379)
2,613,013
1,398,039
192,878
982,932
39,164
2019
number
681,242
163,076
543,426
34,196
Weighted
average fair
value at grant
date
2019
A$
61.71
86.56
72.18
60.91
49.39
75.46
78.67
87.81
68.82
—
2019
number
2,613,930
846,008
(174,025)
(35,481)
(976,763)
2,273,669
1,363,601
87,930
822,138
—
Weighted
average fair
value at grant
date
2019
A$
93.05
97.30
91.50
—
2019
number
582,948
85,142
421,614
—
Unvested awards at 1 January(b)
Awarded
Forfeited
Cancelled
Vested
Unvested awards at 31 December(b)
Comprising:
– Management Share Awards
– Bonus Deferral Awards
– Global Employee Share Plan
– UK Share Plan
Vested awards settled in shares during the year
(including dividend shares applied on vesting):
– Management Share Awards
– Bonus Deferral Awards
– Global Employee Share Plan
– UK Share Plan
Vested awards settled in cash during the year
(including dividend shares applied on vesting):
– Bonus Deferral Awards
19,617
48.34
—
—
—
—
—
—
(a)
(b)
Awards of Rio Tinto American Depository Receipts (ADRs) under the Global Employee Share Plan are included within the totals for Rio Tinto plc awards for the purpose of these tables.
These numbers are presented and calculated in accordance with IFRS 2 and represent awards for which an IFRS 2 charge continues to be accrued for.
In addition to the equity-settled awards shown above, there were 89,253 Rio Tinto plc and 14,878 Rio Tinto Limited cash-settled awards outstanding at
31 December 2020 (2019: 52,881 Rio Tinto plc and 81,050 Rio Tinto Limited cash-settled awards outstanding). The total liability for these awards at
31 December 2020 was US$4 million (2019: US$6 million).
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
273
273
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
42 Post-retirement benefits
Description of plans
The Group operates a number of pension and post-retirement healthcare plans around the world. Some of these plans are defined contribution and some
are defined benefit, with assets held in separate trusts, foundations and similar entities.
Defined benefit pension and post-retirement healthcare plans expose the Group to a number of risks:
Uncertainty in benefit payments The value of the Group’s liabilities for post-retirement benefits will ultimately depend on the amount of benefits paid out.
This in turn will depend on the level of future pay increases, the level of inflation (for those benefits that are subject to some form of
inflation protection) and how long individuals live.
Volatility in asset values
The Group is exposed to future movements in the values of assets held in pension plans to meet future benefit payments.
Uncertainty in cash funding
Movements in the values of the obligations or assets may result in the Group being required to provide higher levels of cash funding,
although changes in the level of cash required can often be spread over a number of years. In some countries control over the rate of
cash funding or over the investment policy for pension assets might rest to some extent with a trustee body or other body that is not
under the Group’s direct control. In addition the Group is also exposed to adverse changes in pension regulation.
For these reasons the Group has a policy of moving away from defined
benefit pension provisions and towards defined contribution arrangements
instead. The defined benefit pension plans for salaried employees are
closed to new entrants in almost all countries. For unionised employees,
some plans remain open.
The Group does not usually participate in multi-employer plans in which
the risks are shared with other companies using those plans. The Group’s
participation in such plans is immaterial and consequently no detailed
disclosures are provided in this note.
Pension plans
The majority of the Group’s defined benefit pension obligations are in
Canada, the UK, the US and Switzerland.
In Canada the benefits for salaried staff are generally linked to final
average pay and the plans are generally closed to new entrants. Benefits
for bargaining employees are reviewed in negotiation with unions and are
typically linked either to final average pay or to a flat monetary amount per
year of service. New employees join arrangements which are defined
contribution from the Group’s perspective, with any required additional
funding being provided by employees. The plans are subject to the
regulatory requirements that apply to Canadian pension plans in the
relevant provinces and territories (predominantly Quebec). Pension
Committees are responsible for ensuring that the plans operate in a
manner that is compliant with the relevant regulations. The Pension
Committees generally have a number of members appointed by the
sponsor and a number appointed by the plan participants. In some cases
there is also an independent Committee member.
The defined benefit sections of the UK arrangements are linked to final
pay. New employees are admitted to defined contribution sections. The
plans are subject to the regulatory requirements that apply to UK pension
plans. Trustees are responsible for ensuring that the plans operate in a
manner that is compliant with UK regulations. The trustee board governing
the main UK plans has a number of directors appointed by the sponsor, a
number appointed by the plan participants and an independent
trustee director.
A number of defined benefit pension plans are sponsored by the US
entities. Benefits for salaried staff are generally linked to final average pay.
Benefits for bargaining employees are reviewed in negotiation with unions
and are typically a flat monetary amount per year of service. New
employees are admitted to defined contribution plans. A Benefits
Governance Committee is responsible for ensuring that the plans are
compliant with US regulations. Members of that Committee are appointed
by the sponsor.
In Europe, there are defined benefit plans in Switzerland, Germany and
France. The largest single plan is in Switzerland, which provides benefits
linked to final average pay. The Swiss plan is overseen by a foundation
board which is responsible for ensuring that the plan complies with Swiss
regulations. Foundation board members are appointed by the plan
sponsor, by employees and by retirees.
In Australia, the main arrangements are principally defined contribution in
nature but there are sections providing defined benefits linked to final pay,
typically paid in lump sum form. These arrangements are managed by an
independent financial institution. Rio Tinto may nominate candidates to be
considered for appointment to the governing board, as may other
employers. One third of the board positions are nominated by employers,
with the remaining positions being filled by independent directors and
directors nominated by participants.
The Group also operates a number of unfunded defined benefit plans,
which are included in the figures below.
Post-retirement healthcare plans
Certain subsidiaries of the Group, mainly in the US and Canada, provide
health and life insurance benefits to retired employees and in some cases
to their beneficiaries and covered dependants. Eligibility for cover is
dependent upon certain age and service criteria. These arrangements are
generally unfunded, and are included in the figures below.
Plan assets
The assets of the pension plans are invested predominantly in a diversified
range of equities, bonds and property. Consequently, the funding level of
the pension plans is affected by movements in the level of equity markets
and also by movements in interest rates. The Group monitors its exposure
to changes in interest rates and equity markets and also measures its
balance sheet pension risk using a value at risk approach. These measures
are considered when deciding whether significant changes in investment
strategy are required. Investment strategy reviews are conducted on a
periodic basis for the main pension plans to determine the optimal
investment mix bearing in mind the Group’s tolerance for risk, the risk
tolerance of the local sponsor companies and the views of the Pension
Committees and trustee boards who are legally responsible for the
investments of the plans. The assets of the pension plans may also be
invested in Qualifying Insurance Policies which provide a stream of
payments to match the benefits being paid out by the plans, thereby
removing investment, inflation and longevity risks. In Canada, the UK and
Switzerland, the Group works with the governing bodies to ensure that the
investment policy adopted is consistent with the Group’s tolerance for risk.
In the US the Group has direct control over the investment policy, subject
to local investment regulations.
274
274
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
The proportions of the total fair value of assets in the pension plans for each asset class at the balance sheet date were:
Equities
– Quoted
– Private
Bonds
– Government fixed income
– Government inflation-linked
– Corporate and other publicly quoted
– Private
Property
– Quoted property funds
– Unquoted property funds
Qualifying insurance policies
Cash & other
Total
2020
21.1%
55.8%
7.5%
11.3%
4.3%
100.0%
17.9%
3.2%
17.7%
9.6%
22.6%
5.9%
3.1%
4.4%
2019
20.4%
63.4%
8.8%
3.1%
4.3%
100.0%
17.0%
3.4%
18.4%
16.2%
24.1%
4.7%
3.4%
5.4%
The assets of the plans are managed on a day-to-day basis by external specialist fund managers. These managers may invest in the Group’s securities
subject to limits imposed by the relevant fiduciary committees and local legislation. The approximate total holding of Group securities within the plans is
US$4 million (2019: US$3 million).
The holdings of quoted equities are invested either in pooled funds or segregated accounts held in the name of the relevant pension funds. These equity
portfolios are well diversified in terms of the geographic distribution and market sectors.
The holdings of government bonds are generally invested in the debt of the country in which a pension plan is situated. Corporate and other quoted
bonds are usually of investment grade. Private debt is mainly held in the North American and UK pension funds and is invested in North American and
European companies.
The property funds are invested in a diversified range of properties.
The holdings of cash & other are predominantly cash and short-term money market instruments.
Investments in private equity, private debt and property are less liquid than the other investment classes listed above and therefore the Group’s
investment in those asset classes is restricted to a level that does not endanger the liquidity of the pension plans.
Qualifying insurance policies are held with insurance companies that are regulated by the relevant local authorities. The value of those policies is
calculated by the local actuaries using assumptions consistent with those adopted for valuing the insured obligations. The significant increase in the
allocation to Qualifying insurance policies during 2020 results from an insurance transaction completed by one of the UK pension plans. The purchase
price was financed predominantly from that plan’s inflation-linked government bonds.
The Group makes limited use of futures, repurchase agreements and other instruments to manage the interest rate risk in some of its plans. Fund
managers may also use derivatives to hedge currency movements within their portfolios and, in the case of bond managers, to take positions that could
be taken using direct holdings of bonds but more efficiently.
Maturity of defined benefit obligations
An approximate analysis of the maturity of the obligations is given in the table below:
Proportion relating to current employees
Proportion relating to former employees not yet retired
Proportion relating to retirees
Total
Average duration of obligations (years)
Pension
benefits
Other
benefits
21 %
12 %
67 %
100 %
14.4
19 %
0 %
81 %
100 %
13.5
Geographical distribution of defined benefit obligations
An approximate analysis of the geographic distribution of the obligations is given in the table below:
Canada
UK
US
Switzerland
Other
Total
Pension
benefits
Other
benefits
54 %
30 %
7 %
5 %
4 %
100 %
46 %
2 %
50 %
0 %
2 %
100 %
2020
Total
21 %
11 %
68 %
100 %
14.3
2020
Total
53 %
28 %
10 %
5 %
4 %
100 %
2019
Total
20 %
12 %
68 %
100 %
14.4
2019
Total
53 %
28 %
10 %
5 %
4 %
100 %
2018
Total
19 %
11 %
70 %
100 %
13.4
2018
Total
48 %
28 %
14 %
5 %
5 %
100 %
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
275
275
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
42 Post-retirement benefits continued
Total expense recognised in the income statement
Current employer service cost for defined benefit plans
Past service cost
Curtailment gains
Settlement (losses)/gains
Net interest on net defined benefit liability
Non-investment expenses paid from the plans
Total defined benefit expense
Current employer service cost for defined contribution and industry-wide plans
Total expense recognised in the income statement
Pension
benefits
US$m
Other
benefits
US$m
(131)
(2)
—
(1)
(22)
(16)
(172)
(262)
(434)
(6)
—
—
—
(27)
—
(33)
(2)
(35)
2020
Total
US$m
(137)
(2)
—
(1)
(49)
(16)
(205)
(264)
(469)
2019
Total
US$m
(125)
—
—
51
(58)
(14)
(146)
(238)
(384)
2018
Total
US$m
(165)
(36)
2
5
(79)
(15)
(288)
(244)
(532)
The above expense amounts are included as an employee cost within net operating costs. No amounts have been excluded from underlying earnings in
2020, 2019 or 2018.
The settlement gains in 2019 and 2018 were the result of certain US obligations being transferred to external insurance companies and of certain US
obligations being settled through a lump sum window exercise being offered to members with a deferred pension. The past service cost in 2018 related
primarily to benefit amendments in the US and also included US$9 million to reflect the estimated cost of equalising benefits in the Group's UK schemes,
in line with the requirements of the court judgment on 26 October 2018 in the case involving Lloyds Banking Group and relating to Guaranteed
Minimum Pensions. A past service cost of US$1 million was recognised in 2020 in relation to the subsequent court judgment addressing the need to
equalise historical transfer values.
Total amount recognised in other comprehensive income before tax
Actuarial (losses)/gains
Return on assets, net of interest on assets
Gain on application of asset ceiling
Total (loss)/gain recognised in other comprehensive income
Amounts recognised in the balance sheet
The following amounts were measured in accordance with IAS 19 at 31 December:
Total fair value of plan assets
Present value of obligations – funded
Present value of obligations – unfunded
Present value of obligations – total
Net deficit to be shown in the balance sheet
Comprising:
– Deficits
– Surpluses
Net deficits on pension plans
Unfunded post-retirement healthcare obligation
2020
US$m
(1,242)
768
—
(474)
2019
US$m
(1,295)
1,033
—
(262)
2018
US$m
1,382
(527)
52
907
Pension
benefits
US$m
14,905
(15,731)
(479)
(16,210)
(1,305)
(2,087)
782
(1,305)
—
Other
benefits
US$m
—
—
(968)
(968)
(968)
(968)
—
—
(968)
2020
Total
US$m
14,905
(15,731)
(1,447)
(17,178)
(2,273)
(3,055)
782
(1,305)
(968)
2019
Total
US$m
13,923
(14,311)
(1,342)
(15,653)
(1,730)
(2,714)
984
(831)
(899)
The surplus amounts shown above are included in the balance sheet as "Receivables and other assets". See note 18.
Deficits are shown in the balance sheet within "Provisions (including post-retirement benefits)". See note 25.
276
276
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Funding policy and contributions to plans
The Group reviews the funding position of its major pension plans on a regular basis and considers whether to provide funding above the minimum level
required in each country. In Canada and the US the minimum level is prescribed by legislation. In the UK and Switzerland the minimum level is negotiated
with the local trustee or foundation in accordance with the funding guidance issued by the local regulators. In deciding whether to provide funding above
the minimum level the Group takes into account other possible uses of cash within the Group, the tax situation of the local sponsoring entity and any
strategic advantage that the Group might obtain by accelerating contributions. The Group does not generally pre-fund post-retirement
healthcare arrangements.
Contributions to defined benefit plans
Contributions to defined contribution plans
Total
Pension
benefits
US$m
169
259
428
Other
benefits
US$m
32
2
34
2020
Total
US$m
201
261
462
2019
Total
US$m
257
235
492
2018
Total
US$m
248
244
492
The level of surplus in the Rio Tinto Pension Fund in the UK is such that it may be used to pay for the employer contributions to the defined contribution
section of that Fund, in accordance with the funding arrangements agreed with the Trustee of that Fund. Consequently, the cash paid to defined
contribution plans is lower than the defined contribution service cost by US$3 million. Contributions to defined benefit pension plans are kept under
regular review and actual contributions will be determined in line with the Group’s wider financing strategy, taking into account relevant minimum funding
requirements. As contributions to many plans are reviewed on at least an annual basis, the contributions for 2021 and subsequent years cannot be
determined precisely in advance. Most of the Group’s largest pension funds are fully funded on their local funding basis and do not require long-term
funding commitments at present. Contributions to defined benefit pension plans for 2021 are estimated to be around US$150 million but may be higher or
lower than this depending on the evolution of financial markets and voluntary funding decisions taken by the Group. Contributions for subsequent years
are expected to be at similar levels. Healthcare plans are generally unfunded and contributions for future years will be equal to benefit payments net of
participant contributions. The Group’s contributions in 2021 are expected to be similar to the amounts paid in 2020.
Movements in the net defined benefit liability
A summary of the movement in the net defined benefit liability is shown in the first table below. The subsequent tables provide a more detailed analysis
of the movements in the present value of the obligations and the fair value of assets.
Change in the net defined benefit liability
Net defined benefit liability at the start of the year
Amounts recognised in income statement
Amounts recognised in other comprehensive income
Employer contributions
Arrangements added/divested
Assets transferred to defined contribution section
Currency exchange rate (loss)
Net defined benefit liability at the end of the year
Change in present value of obligation
Present value of obligation at the start of the year
Current employer service costs
Past service cost
Settlements
Interest on obligation
Contributions by plan participants
Benefits paid
Experience gains
Changes in financial assumptions (loss)
Changes in demographic assumptions gain
Arrangements (added)
Currency exchange rate (loss)
Present value of obligation at the end of the year
Pension
benefits
US$m
Other
benefits
US$m
2020
Total
US$m
(831)
(172)
(416)
169
—
(3)
(52)
(1,305)
(899)
(33)
(58)
32
—
—
(10)
(968)
Pension
benefits
US$m
Other
benefits
US$m
(14,754)
(131)
(2)
6
(357)
(22)
746
46
(1,357)
127
—
(512)
(16,210)
(899)
(6)
—
—
(27)
—
32
15
(85)
12
—
(10)
(968)
(1,730)
(205)
(474)
201
—
(3)
(62)
(2,273)
2020
Total
US$m
(15,653)
(137)
(2)
6
(384)
(22)
778
61
(1,442)
139
—
(522)
(17,178)
2019
Total
US$m
(1,551)
(146)
(262)
257
(5)
(3)
(20)
(1,730)
2019
Total
US$m
(14,754)
(125)
—
638
(476)
(23)
862
111
(1,447)
41
(5)
(475)
(15,653)
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
277
277
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
42 Post-retirement benefits continued
Change in plan assets
Fair value of plan assets at the start of the year
Settlements
Interest on assets
Contributions by plan participants
Contributions by employer
Benefits paid
Non-investment expenses
Return on plan assets, net of interest on assets
Assets transferred to defined contribution section
Currency exchange rate gain
Fair value of plan assets at the end of the year
Pension
benefits
US$m
13,923
(7)
335
22
169
(746)
(16)
768
(3)
460
14,905
Other
benefits
US$m
—
—
—
—
32
(32)
—
—
—
—
—
2020
Total
US$m
13,923
(7)
335
22
201
(778)
(16)
768
(3)
460
14,905
2019
Total
US$m
13,203
(587)
418
23
257
(862)
(14)
1,033
(3)
455
13,923
Most of the settlement amounts shown above relate to the US, where assets and obligations for some pensions in payment were transferred to insurance
companies. Obligations were also settled through a lump sum window exercise being offered to members with a deferred pension in the US.
The asset ceiling had no effect during the year. In determining the extent to which the asset ceiling has an effect, the Group considers the funding
legislation in each country and the rules specific to each pension plan. The calculation takes into account any minimum funding requirements that may
be applicable to the plan, whether any reduction in future Group contributions is available, and whether a refund of surplus may be available. In
considering whether any refund of surplus is available the Group considers the powers of trustee boards and similar bodies to augment benefits or wind
up a plan. Where such powers are unilateral, the Group does not consider a refund to be available at the end of the life of a plan. Where the plan rules and
legislation both permit the employer to take a refund of surplus, the asset ceiling may have no effect, although it may be the case that a refund will only
be available many years in the future.
Main assumptions (rates per annum)
The main assumptions for the valuations of the plans under IAS 19 are set out below. Where there are multiple plans in a country the rates below are
weighted-average figures.
At 31 December 2020
Discount rate
Inflation(a)
Rate of increase in pensions
Rate of increase in salaries
At 31 December 2019
Discount rate
Inflation(a)
Rate of increase in pensions
Rate of increase in salaries
Canada
UK
US
Switzerland
2.5%
1.6%
0.1%
2.8%
3.1%
1.6%
0.1%
2.8%
1.2%
2.9%
2.5%
3.6%
2.0%
2.9%
2.5%
3.5%
2.2%
2.1%
—%
3.6%
3.1%
2.0%
—%
3.5%
0.1%
0.9%
0.5%
1.9%
0.2%
1.1%
0.2%
2.1%
(a)
The inflation assumption shown for the UK is for the Retail Price Index. The assumption for the Consumer Price Index at 31 December 2020 was 2.1% (2019: 2.0%).
The main financial assumptions used for the healthcare plans, which are predominantly in the US and Canada, were: discount rate: 2.5% (2019: 3.3%);
medical trend rate: 6.3% reducing to 4.6% by the year 2031 broadly on a straight line basis (2019: 6.1%, reducing to 4.6% by the year 2029); claims costs
based on individual company experience.
For both the pension and healthcare arrangements the post-retirement mortality assumptions allow for future improvements in longevity. The mortality
tables used imply that a man aged 60 at the balance sheet date has a weighted average expected future lifetime of 27 years (2019: 27 years) and that a
man aged 60 in 2040 would have a weighted average expected future lifetime of 28 years (2019: 28 years).The mortality tables are generally based upon
the latest standard tables published in each country, adjusted appropriately to reflect the actual mortality experience of the plan participants where
credible data is available..
278
278
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Sensitivity
The values reported for the defined benefit obligations are sensitive to the actuarial assumptions used for projecting future benefit payments and
discounting those payments. In order to estimate the sensitivity of the obligations to changes in assumptions, we calculate what the obligations would be
if we were to make changes to each of the key assumptions in isolation. The difference between this figure and the figure calculated using our stated
assumptions is an indication of the sensitivity to changes in each assumption. The results of this sensitivity analysis are summarised in the table below.
Note that this approach is valid for small changes in the assumptions but will be less accurate for larger changes in the assumptions. The sensitivity to
inflation includes the impact on pension increases, which are generally linked to inflation where they are granted.
2020
2019
Approximate
(increase)/
decrease in obligations
Approximate
(increase)/
decrease in obligations
Assumption
Discount rate
Inflation
Salary increases
Change in assumption
Increase of 0.5 percentage points
Decrease of 0.5 percentage points
Increase of 0.5 percentage points
Decrease of 0.5 percentage points
Increase of 0.5 percentage points
Decrease of 0.5 percentage points
Pensions
US$m
988
(1,186)
(484)
450
(81)
72
Demographic – allowance for future improvements in
longevity
Participants assumed to have the mortality rates of
individuals who are one year older
520
19
443
Other
US$m
Pensions
US$m
Other
US$m
62
(66)
(19)
17
(1)
1
894
(1,057)
(447)
422
(55)
54
56
(60)
(17)
15
(1)
1
18
Participants assumed to have the mortality rates of
individuals who are one year younger
(562)
(19)
(465)
(18)
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
279
279
Financial Statements
Financial Statements
Notes to the 2020 Financial Statements
43 Rio Tinto Limited parent company disclosures
As at 31 December
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Other reserves
Retained earnings
Total equity
Profit of the parent company
Total comprehensive income of the parent company
2020
A$m
12,024
3,167
15,191
2019
A$m
8,338
7,332
15,670
(2,665)
(541)
(3,206)
11,985
(2,541)
(411)
(2,952)
12,718
3,504
345
8,136
11,985
3,504
370
8,844
12,718
11,890
11,026
11,890
11,026
Prepared under Australian Accounting Standards (AAS) and in accordance with Australian Corporations Act (see page 310). In relation to Rio Tinto Limited
there are no significant measurement differences between AAS and IFRS as defined in note 1.
Rio Tinto Limited guarantees
Rio Tinto Limited provides a number of guarantees in respect of Group companies.
Rio Tinto plc and Rio Tinto Limited have jointly guaranteed the Group’s external listed debt under the US Shelf Programme, European Debt Issuance
Programme and Commercial Paper Programme which totalled A$7.2 billion at 31 December 2020 (31 December 2019: A$8.5 billion); in addition these
entities also jointly guarantee the Group’s undrawn credit facility which was A$9.8 billion at 31 December 2020 (31 December 2019: A$10.7 billion).
Rio Tinto Limited has guaranteed other external debt held by Rio Tinto Group entities which totalled A$0.1 billion at 31 December 2020 (31 December
2019: A$0.1 billion).
In addition, Rio Tinto Limited has provided a guarantee of all third-party obligations, including contingent obligations, of Rio Tinto Finance Limited, a
wholly owned subsidiary.
Pursuant to the DLC Merger, both Rio Tinto plc and Rio Tinto Limited issued deed poll guarantees by which each company guaranteed contractual
obligations incurred by the other or guaranteed by the other.
280
280
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
44 Related undertakings
In accordance with section 409 of the UK Companies Act 2006, disclosed below is a full list of related undertakings of the Group. Related undertakings
include “subsidiaries”, “associated undertakings”, and “significant holdings in undertakings other than subsidiary companies”. The registered office
address, country of incorporation, classes of shares and the effective percentage of equity owned by the Group calculated by reference to voting rights, is
disclosed as at 31 December 2020.
The definition of a subsidiary undertaking in accordance with the UK Companies Act 2006 is different from the definition under IFRS. As a result, the
related undertakings included within this list may not be the same as the related undertakings consolidated in the Group IFRS financial statements.
Unless otherwise disclosed, all undertakings with an effective equity holding of greater than 50% are considered subsidiary undertakings for the purpose
of this note.
Refer to notes 32-35 for further information on accounting policies, basis of consolidation, principal subsidiaries, joint operations, joint ventures
and associates.
An explanation of the dual listed companies structure of Rio Tinto plc and Rio Tinto Limited can be found on pages 375-376. For completeness, the
effective ownership by the Group relates to effective holdings by both entities either together or individually.
Wholly owned subsidiary undertakings
Name of undertaking and country
of incorporation
1043802 Ontario Ltd.; Canada
10676276 Canada Inc.; Canada
10676284 Canada Inc.; Canada
1109723 B.C. Ltd.; Canada
46106 Yukon Inc.; Canada
46117 Yukon Inc.; Canada
535630 Yukon Inc.; Canada
7999674 Canada Inc.; Canada
Alcan Alumina Ltda.; Brazil
Alcan Asia Limited; Hong Kong
Share class
CAD
Ordinary shares
CAD
Common shares
CAD
Common shares
CAD
Common shares
CAD
Common shares
CAD
Common shares
CAD
Preferred shares
CAD
Common shares
CAD
Preferred shares
CAD
Common shares
BRL1.00
Quota shares
HKD
Ordinary shares
Alcan Betriebs- und Verwaltungsgesellschaft
GmbH; Germany
€51.13
Ordinary shares
Alcan Chemicals Limited; United Kingdom
Alcan Composites Brasil Ltda; Brazil
Alcan Corporation; United States
£1.00
Ordinary shares
BRL0.01
Ordinary shares
US$0.01
Ordinary shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
5300-66 Wellington Street West, Toronto ON M5K 1E6, Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal
QC H3B 0E3, Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal
QC H3B 0E3, Canada
1800-510 West Georgia Street, Vancouver BC V6B 0M3,
Canada
200-204 Lambert Street, Whitehorse YT Y1A 3T2, Canada
200-204 Lambert Street, Whitehorse YT Y1A 3T2, Canada
200-204 Lambert Street, Whitehorse YT Y1A 3T2, Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal
QC H3B 0E3, Canada
Avenida Engenheiro Emiliano Macieira, 1–km 18,
Pedrinhas, São Luis, MA, 65095-603, Brazil
6/F, Luk Kwok Centre, 72 Gloucester Road, Wan Chai, Hong Kong
Alusingenplatz 1, D-78221, Singen, Germany
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Avenida das Nações Unidas, 10.989, 14th floor, Suite 141,
São Paulo, 04578-000, Brazil
CSC, 211 East 7th Street, Suite 620, Austin TX 78701-3218,
United States
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
281
281
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
Alcan Farms Limited; United Kingdom
Alcan Finances USA LLC; United States
Alcan Gove Development Pty Limited;
Australia
Share class
£1.00
Ordinary shares
US$1,000.00
Ordinary shares
AUD
Ordinary shares
Alcan Holdings Australia Pty Limited; Australia AUD
Alcan Holdings Europe B.V.; Netherlands
Alcan Holdings Nederland B.V.; Netherlands
Alcan Holdings Switzerland AG (SA/Ltd.);
Switzerland
Class A shares
AUD
Ordinary shares
€4,570,000,000.00
Common shares
€4,555.00
Ordinary shares
CHF0.01
Registered shares
Alcan International Network U.S.A. Inc.; United
States
US$
Ordinary shares
Alcan Lebensmittelverpackungen GmbH;
Germany
€51.13
Ordinary shares
Alcan Management Services (Shanghai) Co.,
Ltd.; China
US$1.00
Ordinary shares
Alcan Management Services Canada Limited;
Canada
CAD
Ordinary shares
Alcan Northern Territory Alumina Pty Limited;
Australia
AUD
Ordinary shares
Alcan Packaging Mühltal GmbH & Co. KG;
Germany
Alcan Primary Metal Australia Pty Ltd;
Australia
€51.13
Ordinary shares
AUD
Ordinary shares
Alcan Primary Products Company LLC; United
States
US$
Shares
Alcan Primary Products Corporation; United
States
Alcan Realty Limited; Canada
Alcan South Pacific Pty Ltd; Australia
Alcan Trading AG (SA/Ltd.); Switzerland
Aluminium Company of Canada Limited;
Canada
AML Properties Pty Ltd; Australia
Anglesey Aluminium Metal Limited; United
Kingdom
AP Service; France
Argyle Diamond Mines Pty Limited; Australia
Argyle Diamonds Limited; Australia(a)
US$0.01
Ordinary shares
CAD
Ordinary shares
AUD
Ordinary shares
CHF1000.00
Registered shares
CAD
Ordinary shares
AUD
Ordinary shares
£1.00
Ordinary shares
€15.00
Ordinary shares
AUD
Ordinary shares
AUD
Class A shares
AUD
Class B shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
CSC, 251 Little Falls Drive, Wilmington DE 19808, United
States
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
Badenerstrasse 549, CH-8048 , Zürich, Switzerland
CSC, 80 State Street, Albany NY 12207-2543, United States
Alusingenplatz 1, D-78221, Singen, Germany
Unit E, 40F Wheelock Square, No. 1717 West Nanjing Road, Jing'an District,
Shanghai, 200040, China
400-1190 Avenue des Canadiens-de-Montréal, Montréal
QC H3B 0E3, Canada
123 Albert Street, Brisbane QLD 4000, Australia
Alusingenplatz 1, D-78221, Singen, Germany
123 Albert Street, Brisbane QLD 4000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 211 East 7th Street, Suite 620, Austin TX 78701-3218, United States
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3, Canada
123 Albert Street, Brisbane QLD 4000, Australia
Herostrasse 9, P.O. Box 1954, CH-8048 Zurich, Switzerland
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3, Canada
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
6 St James's Square, London, SW1Y 4AD, United Kingdom
725 rue Aristide Bergès, 38340, Voreppe, France
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
282
282
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Name of undertaking and country
of incorporation
Ashton Mining Pty Ltd; Australia
Ashton Nominees Pty Limited; Australia
Australian Coal Holdings Pty. Limited;
Australia(a)
Australian Mining & Smelting Pty Ltd;
Australia(a)
Beasley River Management Pty Limited;
Australia
Beasley River Mining Pty Limited; Australia
Borax España, S.A.; Spain
Borax Europe Limited; United Kingdom
Borax Français; France
Borax Malaysia Sdn Bhd; Malaysia
Borax Rotterdam N.V.; Netherlands
British Alcan Aluminium Limited; United
Kingdom
Canning Resources Pty Limited; Australia(a)
Share class
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Class A shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
€150.00
Ordinary shares
£0.25
Ordinary shares
€2.75
Ordinary shares
MYR1.00
Ordinary shares
€453.78
Ordinary shares
£1.00
Ordinary shares
AUD
Ordinary shares
Capricorn Diamonds Investments Pty Limited;
Australia
AUD
Ordinary shares
Cathjoh Holdings Pty Limited; Australia
Champlain Reinsurance Company Ltd.;
Switzerland
AUD
Ordinary shares
CHF1.23
Registered shares
Channar Management Services Pty Limited;
Australia
AUD
Ordinary shares
Channar Mining Pty Ltd; Australia
AUD
Ordinary shares
CIA. Inmobiliaria e Inversiones Cosmos S.A.C.;
Peru
PEN1,000.00
Ordinary shares
Compania de Transmision Sierraoriente S.A.C.;
Peru
PEN1,000.00
Ordinary shares
CRA Investments Pty. Limited; Australia(a)
CRA Pty Ltd; Australia(a)
Daybreak Development LLC; United States
AUD
Ordinary shares
AUD
Ordinary shares
US$0.01
Common shares
Daybreak Property Holdings LLC; United
States(c)
—
Daybreak Secondary Water Distribution
Company; United States
Daybreak Water Holding LLC; United States
DB Medical I LLC; United States
US$0.01
Common shares
US$0.01
Common shares
US$
Shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
CN 340, Km 954, Apartado 197, 12520 NULES, Castellón, Spain
6 St James's Square, London, SW1Y 4AD, United Kingdom
89 Route de Bourbourg, 59210, Coudekerque-Branche, France
Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara,
Damansara Heights 50490 Kuala Lumpur, Malaysia
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
6 St James's Square, London, SW1Y 4AD, United Kingdom
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Badenerstrasse 549, CH-8048 , Zürich, Switzerland
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Calle Santa Maria No. 110 Urb. Miraflores - Miraflores-Lima, Peru
Calle Santa Maria No. 110 Urb. Miraflores - Miraflores-Lima, Peru
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 15 West South Temple, Suite 1701, Salt Lake City UT 84101,
United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 15 West South Temple, Suite 600, Salt Lake City UT 84101, United States
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
283
283
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
DBVC1 LLC; United States(c)
Diavik Diamond Mines (2012) Inc.; Canada
East Kalimantan Coal Pte. Ltd; Singapore(a)(d)
Eastland Management Inc.; United States
Electric Power Generation Limited; New
Zealand(a)
Flambeau Mining Company; United States
Fundsprops Pty. Limited; Australia(a)
Gladstone Infrastructure Pty Ltd; Australia
Gove Aluminium Ltd; Australia
GPS Energy Pty Limited; Australia
GPS Nominee Pty Limited; Australia
GPS Power Pty. Limited; Australia
Hamersley Exploration Pty Limited; Australia
Hamersley HMS Pty Ltd; Australia
Hamersley Holdings Limited; Australia(a)
Share class
—
CAD
Common shares
SGD1.00
Ordinary share
US$1.00
Common shares
US$1.00
Common shares
NZD1.00
Ordinary shares
US$0.01
Common shares
AUD
Ordinary shares
AUD Class G
Redeemable
Preference shares
AUD
Ordinary shares
AUD A Non-
redeemable
Preference shares
AUD A
redeemable
Preference shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
Hamersley Iron – Yandi Pty Limited; Australia(a) AUD
Hamersley Iron Pty. Limited; Australia
Hamersley Resources Limited; Australia
Class B shares
AUD
Class C shares
AUD Ordinary
shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD Z Class
Ordinary shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CSC, 15 West South Temple, Suite 600, Salt Lake City UT 84101, United States
300-5201 50th Avenue, P.O. Box 2498, Yellowknife NT X1A 2P8, Canada
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
1530 Tiwai Road, Tiwai Point, Invercargill 9877, New Zealand
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
123 Albert Street, Brisbane QLD 4000, Australia
100
123 Albert Street, Brisbane QLD 4000, Australia
100
100
100
100
100
100
100
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
284
284
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Name of undertaking and country
of incorporation
Hamersley WA Pty Ltd; Australia
Henlopen Manufacturing Co., Inc.; United
States
High Purity Iron Inc.; United States
HIsmelt Corporation Pty Limited; Australia(a)(d)
Hunter Valley Resources Pty Ltd; Australia
IEA Coal Research Limited; United Kingdom
IEA Environmental Projects Limited; United
Kingdom
Industrias Metalicas Castello S.A.; Spain
Integrity Land and Cattle LLC; United States
IOC Sales Limited; United Kingdom
Itallumina Srl; Italy(d)
Johcath Holdings Pty Limited; Australia
Juna Station Pty Ltd; Australia
Kalimantan Gold Pty Limited; Australia
Kelian Pty. Limited; Australia(a)
Kembla Coal & Coke Pty. Limited; Australia
Share class
AUD
Ordinary shares
US$100.00
Ordinary shares
US$1.00
Common shares
AUD
Class A shares
AUD
A Class shares
AUD
B Class shares
£1.00
Ordinary shares
£1.00
Ordinary shares
€6.01
Ordinary shares
US$
Shares
£1.00
Ordinary shares
€1.00
Quotas shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
Kennecott Barneys Canyon Mining Company;
United States
US$0.01
Common shares
Kennecott Exploration Company; United States US$0.01
Kennecott Exploration Mexico, S.A. de C.V.;
Mexico
Common shares
MXN1,000.00
Ordinary shares
Kennecott Holdings Corporation; United States US$0.01
Kennecott Land Company; United States
Common shares
US$0.01
Common shares
Kennecott Land Investment Company LLC;
United States(c)
—
Kennecott Molybdenum Company; United
States
Kennecott Nevada Copper Company; United
States
US$0.01
Common shares
US$0.01
Common shares
Kennecott Ridgeway Mining Company; United
States
US$1.00
Common shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
CSC, 80 State Street, Albany NY 12207-2543, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
100
123 Albert Street, Brisbane QLD 4000, Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Apsley House, Third Floor, 176 Upper Richmond Road, London, SW15 2SH,
United Kingdom
IEAGHG, Pure Offices Cheltenham Office Park, Hatherley Lane, Cheltenham,
GL51 6SH, United Kingdom
Calle Tuset 10, 08006, Barcelona, Catalonia, Spain
CSC, 8825 N. 23rd Avenue, Suite 100, Phoenix AZ 85021, United States
6 St James's Square, London, SW1Y 4AD, United Kingdom
Viale Castro Pretorio 122, 00185, Roma, Italy
123 Albert Street, Brisbane QLD 4000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
251 Little Falls Drive, Wilmington DE 19808, United States
Felix Berenguer 125 - 4 Col. Lomas Virreyes, Distrito Federal, 11000, Mexico
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
285
285
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
Kennecott Royalty Company; United States
Kennecott Services Company; United States
Kennecott Uranium Company; United States
Kennecott Utah Copper LLC; United States
Kennecott Water Distribution LLC; United
States
Kutaibar Holdings Pty Ltd; Australia(a)
Lawson Mardon Flexible Limited; United
Kingdom
Lawson Mardon Smith Brothers Ltd.; United
Kingdom
Metallwerke Refonda AG; Switzerland
Share class
US$100.00
Common shares
US$0.01
Common shares
US$0.01
Common shares
US$
Shares
US$
Ordinary shares
AUD
Ordinary shares
£1.00
Ordinary shares
£1.00
Ordinary shares
CHF 125.00
Bearer shares
Metals & Minerals Insurance Pte. Limited;
Singapore
SGD Redeemable
Preference shares
Minera Kennecott, S.A. de C.V.; Mexico(d)
Mitchell Plateau Bauxite Co. Pty. Limited;
Australia
Mount Bruce Mining Pty Limited; Australia
Mount Pleasant Pty Ltd; Australia
Mutamba Mineral Sands S.A.; Mozambique
NBH Pty Ltd; Australia
SGD
Ordinary shares
MXN1.00
Series B shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
MZN100.00
Ordinary shares
AUD
Ordinary shares
Nhulunbuy Corporation Limited; Australia(c)
—
Norgold Pty Limited; Australia
North Gold (W.A.) Pty Ltd; Australia
North Insurances Pty. Ltd.; Australia
North IOC (Bermuda) Holdings Limited;
Bermuda
North IOC (Bermuda) Limited; Bermuda
North IOC Holdings Pty Ltd; Australia
North Limited; Australia
AUD
Ordinary shares
AUD Redeemable
Preference shares
AUD
Ordinary shares
AUD Redeemable
Preference shares
AUD
Ordinary shares
US$1.00
Ordinary shares
US$143.64 Class A
Ordinary shares
US$100,000.00
Preference shares
US$1.00
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
286
286
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 15 West South Temple, Suite 600, Salt Lake City UT 84101,
United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
6 St James’s Square, London, SW1Y 4AD, United Kingdom
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Badenerstrasse 549, CH-8048 , Zürich, Switzerland
100
2 Shenton Way, #2601, SGX Centre 1, 068804, Singapore
100
100
100
100
100
100
100
100
100
100
100
Florencia 57, Piso 3, Col. Juarez, Delegación Cuauhtemoc, Mexico, D.F.,
06600, Mexico
123 Albert Street, Brisbane, QLD 4000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
123 Albert Street, Brisbane QLD 4000, Australia
Av. da Marginal Nº 4985, 1º andar – Prédio ZEN, Maputo, Mozambique
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
19 Westal Street, Nhulunbuy NT 0880, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda
100
Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda
100
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Additional disclosures
Name of undertaking and country
of incorporation
North Mining Limited; Australia
Share class
AUD
Ordinary shares
AUD Redeemable
Preference shares
Pacific Aluminium (New Zealand) Limited; New
Zealand
NZD1.00
Ordinary shares
Pacific Aluminium Pty. Limited; Australia(a)
Pacific Coast Mines, Inc.; United States
Pechiney Aviatube Limited; United Kingdom
Pechiney Bâtiment; France
Pechiney Bécancour, Inc.; United States
Pechiney Cast Plate, Inc.; United States
NZD2.00
Ordinary shares
AUD
Ordinary shares
US$1.00
Common shares
£1.00
Ordinary shares
€15.00
Ordinary shares
US$1.00
Ordinary shares
US$1.00
Ordinary shares
Pechiney Consolidated Australia Pty Limited;
Australia
US$1.00
Ordinary shares
Pechiney Holdings, Inc.; United States
US$1.00
preference shares
US$1.00
Ordinary shares
Pechiney Metals LLC; United States(c)
—
Pechiney Plastic Packaging, Inc.; United States US$
Pechiney Sales Corporation; United States
Peko Exploration Pty Ltd.; Australia
Peko-Wallsend Pty Ltd; Australia
Pilbara Iron Company (Services) Pty Ltd;
Australia
Pilbara Iron Pty Ltd; Australia
Project Generation Group Pty Ltd; Australia(a)
PT Rio Tinto Consultants; Indonesia(d)
QIT Madagascar Minerals Ltd; Bermuda
Queensland Coal Pty. Limited; Australia
Química e Metalúrgica Mequital Ltda.; Brazil
Ranges Management Company Pty Ltd;
Australia
Ranges Mining Pty Ltd; Australia
Resolution Copper Company; United States
Richards Bay Mining Holdings (Proprietary)
Limited; South Africa
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
US$1.00
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
BRL
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
US$0.01
Common shares
ZAR1.00 A
Ordinary shares
ZAR1.00 B
Ordinary shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
100
100
100
100
100
100
100
100
1530 Tiwai Road, Tiwai Point, Invercargill 9877, New Zealand
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6 St James’s Square, London, SW1Y 4AD, United Kingdom
60 Avenue Charles de Gaulle, 92200, Neuilly-Sur-Seine, France
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
123 Albert Street, Brisbane QLD 4000, Australia
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
37 Belmont Avenue, Belmont WA 6104, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
31st Floor, Menara BTPN, Jl. Dr. Ide Anak Agung Gde Agung Lot 5.5-5.6, Mega
Kuningan, Jakarta, 12950, Indonesia
Victoria Place, 5th Floor, 31 Victoria Street, , Hamilton HM 10, Bermuda
123 Albert Street, Brisbane QLD 4000, Australia
Av. das Nações Unidas, 12551 19o, andar, CJ 1911, 04578-000, São Paulo, SP,
Brazil
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
287
287
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
Share class
Richards Bay Titanium Holdings (Proprietary)
Limited; South Africa
ZAR1.00 A
Ordinary shares
Rio de Contas Desenvolvimentos Minerais
Ltda; Brazil
Rio Santa Rita Empreenimentos e-
Participações Ltda; Brazil
ZAR1.00 B
Ordinary shares
BRL
Quota shares
BRL
Quota shares
Rio Sava Exploration DOO; Serbia(c)
—
Rio Tinto (Commercial Paper) Limited;
Australia(a)
Rio Tinto (Hong Kong) Ltd; Hong Kong
Rio Tinto Advisory Services Pty Limited;
Australia
Rio Tinto Alcan Fund Inc.; Canada
Rio Tinto Alcan Inc.; Canada
Rio Tinto Alcan International Ltd.; Canada
Rio Tinto Alcan Technology Pty Ltd; Australia
Rio Tinto Aluminium (Bell Bay) Limited;
Australia
Rio Tinto Aluminium (Holdings) Limited;
Australia
Rio Tinto Aluminium Bell Bay Sales Pty
Limited; Australia
Rio Tinto Aluminium Limited; Australia
Rio Tinto Aluminium Pechiney
Rio Tinto Aluminium Services Pty Limited;
Australia
AUD
Ordinary shares
HKD
Ordinary shares
AUD
Ordinary shares
CAD
Ordinary shares
CAD
Common shares
CAD
Common shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
€10.00
Ordinary shares
AUD
Ordinary shares
Rio Tinto America Holdings Inc.; United States US$0.01 Class A
Common shares
Rio Tinto America Inc.; United States
Rio Tinto Asia Ltd; Hong Kong
Rio Tinto Asia Pty. Limited; Australia(a)
US$100.00 Series A
Preferred stock
US$100.00
Common shares
HKD
Ordinary shares
AUD
Class A shares
100
100
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
AUD Ordinary shares
100
Rio Tinto AuM Company; United States
US$0.01
Common shares
Rio Tinto Australian Holdings Limited; United
Kingdom
£1.00
Ordinary shares
Rio Tinto Bahia Holdings Limited; United
Kingdom
Rio Tinto Base Metals Pty. Limited; Australia(a)
AUD 0.10 Preference
shares
US$0.32
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
100
100
100
100
100
100
288
288
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
Rua Coronel Durval Matos, S/N. Centro, Municipio de Jaguaquara, Estado
da Bahia, CEP45345-000, Brazil
SIG, QUADRA 04, Lote 75, Sala 109 Parte E, Edifício Capital Financial
Center, Brasília DF, CEP 71.610-440, Brazil
Resavska 23, 11000 Beograd, 11000, Serbia
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
725 rue Aristide Bergès, 38340, Voreppe, France
123 Albert Street, Brisbane QLD 4000, Australia
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
100
100
100
100
100
100
100
100
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6/F, Luk Kwok Centre, 72 Gloucester Road, Wan Chai, Hong Kong
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6 St James’s Square, London, SW1Y 4AD, United Kingdom
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Additional disclosures
Name of undertaking and country
of incorporation
Rio Tinto Brazilian Holdings Limited; United
Kingdom
Share class
£1.00
Ordinary shares
US$1.00
Ordinary shares
Rio Tinto Brazilian Investments Limited; United
Kingdom
£1.00
Ordinary shares
Rio Tinto Canada Diamond Operation
Management Inc.; Canada
Rio Tinto Canada Inc.; Canada
Rio Tinto Canada Management Inc.; Canada
US$1.00
Ordinary shares
CAD
Common shares
CAD Class B shares
CAD Class C shares
CAD Class D shares
CAD Class J shares
CAD Class S shares
CAD
Common shares
CAD
Preferred shares
Rio Tinto Canada Uranium Corporation; Canada CAD
Rio Tinto Coal (Clermont) Pty Ltd; Australia
Rio Tinto Coal Australia Pty Limited; Australia
Rio Tinto Coal Investments Pty Limited;
Australia
Rio Tinto Coal NSW Holdings Limited;
Australia(a)
Rio Tinto Commercial Americas Inc.; United
States
Rio Tinto Commercial GmbH; Germany
Rio Tinto Commercial Pte. Ltd; Singapore
Common shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
US$0.01
Common shares
€1.00
Common shares
US$1.00
Ordinary shares
Rio Tinto Desenvolvimentos Minerais Ltda.;
Brazil
BRL
Quotas shares
Rio Tinto Diamonds and Minerals Canada
Holding Inc.; Canada
CAD Class A
(dividend rights)
shares
CAD Class C (voting
rights) shares
CAD Class P1
Preferred shares
Rio Tinto Diamonds Limited; United Kingdom US$1.00
Rio Tinto Diamonds Netherlands B.V.;
Netherlands
Ordinary shares
€500.00
Ordinary shares
Rio Tinto Diamonds NV; Belgium
€ Ordinary shares
Rio Tinto Eastern Investments B.V.;
Netherlands
€12,510,234,217.00
Ordinary shares
Rio Tinto Energy America Inc.; United States
Rio Tinto Energy Limited; United Kingdom
Rio Tinto Escondida Limited; Bermuda
US$0.01
Common shares
US$1.00
Ordinary shares
US$1.00
Common shares
Rio Tinto European Holdings Limited; United
Kingdom(b)
£1.00
Ordinary shares
Rio Tinto Exploration (Asia) Holdings Pte. Ltd.;
Singapore
US$1.00
Ordinary shares
CAD Class B shares
100
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
6 St James’s Square, London, SW1Y 4AD, United Kingdom
6 St James’s Square, London, SW1Y 4AD, United Kingdom
100
300-5201 50th Avenue, P.O. Box 2498, Yellowknife NT X1A 2P8, Canada
100
100
100
100
100
100
100
100
100
100
100
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
300 - 815 West Hastings Street, Vancouver BC V6C 1B4, Canada
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Alfred-Herrhausen-Allee 3-5, 65760, Eschborn, Germany
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
SIG Quadra 04, Lote 175, Torre A, Salas 106 a 109, Edifício Capital Financial
Center, Brasília, CEP 70610-440, Brazil
100
300-5201 50th Avenue, P. O. Box 2498, Yellowknife NT X1A 2P8, Canada
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
Hoveniersstraat 53, 2018 Antwerp, Belgium
6 St James's Square, London, SW1Y 4AD, United Kingdom
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6 St James's Square, London, SW1Y 4AD, United Kingdom
22 Canon's Court, Victoria Street, Hamilton, HM 12, Bermuda
6 St James's Square, London, SW1Y 4AD, United Kingdom
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
289
289
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
Rio Tinto Exploration (PNG) Limited; Papua
New Guinea(a)
Rio Tinto Exploration and Mining (India)
Private Limited; India(d)
Share class
PGK1.00
Ordinary shares
INR10.00
Ordinary shares
Rio Tinto Exploration Canada Inc.; Canada
CAD Class A shares
CAD Class B shares
CAD Class C shares
CAD Class D shares
Rio Tinto Exploration Dunav d.o.o. Beograd-
Vracar; Serbia(c)
—
Rio Tinto Exploration Finland OY; Finland
Rio Tinto Exploration India Private Limited;
India
€
Ordinary shares
INR10.00
Ordinary shares
Rio Tinto Exploration Kazakhstan LLP;
Kazakhstan(c)
—
Rio Tinto Exploration Pty Limited; Australia(a)
AUD Class B shares
Rio Tinto Exploration Zambia Limited; Zambia
Rio Tinto FalCon Diamonds Inc.; Canada
Rio Tinto Fer et Titane Inc.; Canada
Rio Tinto Finance (USA) Limited; Australia(a)
Rio Tinto Finance (USA) Inc; United States
Rio Tinto Finance (USA) plc; United Kingdom
Rio Tinto Finance Limited; Australia(a)
Rio Tinto Finance plc; United Kingdom
Rio Tinto France S.A.S.; France
Rio Tinto Global Employment Company Pte.
Ltd.; Singapore
Rio Tinto Guinée S.A.; Guinea
Rio Tinto Holdings LLC; Mongolia
Rio Tinto Hydrogen Energy LLC;
United States(c)
Rio Tinto Iceland Ltd.; Iceland
Rio Tinto India Private Limited; India
AUD Class C shares
AUD
Ordinary shares
ZMW1.00
Ordinary shares
CAD1,000.00
Common shares
CAD Class B
Preference shares
CAD
Common shares
CAD$0.01
Preference shares
AUD
Ordinary shares
US$1.00
Common shares
£1.00
Ordinary shares
AUD
Ordinary shares
£1.00
Ordinary shares
US$1.00
Ordinary shares
€10.00
Ordinary shares
US$1.00
Ordinary shares
GNF100,000.00
Ordinary shares
MNT20,000.00
Ordinary shares
—
ISK1.00
Registered shares
INR10.00
Ordinary shares
290
290
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
—
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
c/- BDO Accountants, Section 15, Lot 15, Bernal Street, National Capital
District, Port Moresby, Papua New Guinea
21st Floor, DLF Building No.5, Tower A, DLF Cyber City, Phase -III, Gurgaon,
Haryana, 122002, India
100
300 - 815 West Hastings Street, Vancouver BC V6C 1B4, Canada
100
100
100
100
Resavska 23, 11000 Beograd, 11000, Serbia
c/o Revico Grant Thornton Oy, PL 18, Helsinki, 00271, Finland
21st Floor, DLF Building No. 5, Tower A DLF Cyber City, Phase III, Gurgaon,
HR, 122002, India
Dostyk 310/G, Almaty, 050020, Kazakhstan
100
37 Belmont Avenue, Belmont WA 6104, Australia
100
100
Suit FF08, No.4 Bishops Road, Kabulonga, Lusaka, Zambia
300 - 815 West Hastings Street, Vancouver BC V6C 1B4, Canada
100
1625 Route Marie-Victorin, Sorel-Tracy QC J3R 1M6, Canada
100
100
100
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
6 St James’s Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
100
100
60 Avenue Charles de Gaulle, 92200, Neuilly-Sur-Seine, France
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
Manquépas-Commune de Kaloum, République de Guinée, Guinea
Floor 17, Shangri-La Center, Olympic Street-19, Khoroo 1, Sukhbaatar
District, Ulaanbaatar, 14241, Mongolia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
P.O. Box 244, IS-222, Hafnarfjördur, Iceland
21st Floor, DLF Building No.5, Tower A, DLF Cyber City, Phase–III, Gurgaon,
Haryana, 122022, India
Additional disclosures
Name of undertaking and country
of incorporation
Share class
Rio Tinto Indonesian Holdings Limited; United
Kingdom
£1.00
Ordinary shares
Rio Tinto International Holdings Limited;
United Kingdom(b)
Rio Tinto Investments One Pty Limited;
Australia
Rio Tinto Investments Two Pty Limited;
Australia
Rio Tinto Iron & Titanium (Suzhou) Co., Ltd;
China
US$1.00
Ordinary shares
£1.00
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
US$1.00
Ordinary shares
Rio Tinto Iron & Titanium GmbH; Germany(c) —
Rio Tinto Iron & Titanium Holdings GmbH;
Germany(c)
—
Rio Tinto Iron & Titanium Limited; United
Kingdom
Rio Tinto Iron and Titanium Canada Inc.;
Canada
£1.00
Ordinary shares
CAD
Common shares
Rio Tinto Iron Ore Atlantic Limited; United
Kingdom
US$1.00 Ordinary
shares
Rio Tinto Iron Ore Europe S.A.S.; France
Rio Tinto Iron Ore Trading China Limited;
United Kingdom
Rio Tinto Japan Ltd; Japan
€100.00
Ordinary shares
US$1.00
Ordinary shares
JPY500.00
Ordinary shares
Rio Tinto Jersey Holdings 2010 Limited; Jersey US$
Rio Tinto Korea Ltd; Republic of Korea
Rio Tinto London Limited; United Kingdom
Ordinary shares
KRW10,000.00
Ordinary shares
£1.00
Ordinary share
Rio Tinto Management Services South Africa
(Proprietary) Ltd: South Africa
ZAR2.00
Ordinary share
Rio Tinto Marketing Pte. Ltd.; Singapore
Rio Tinto Marketing Services Limited; United
Kingdom
Rio Tinto Medical Plan Trustees Limited;
United Kingdom
Rio Tinto Metals Limited; United Kingdom
Rio Tinto Minera Peru Limitada SAC; Peru
Rio Tinto Mineração do Brasil Ltda; Brazil
Rio Tinto Minerals Asia Pte Ltd; Singapore
Rio Tinto Minerals Development Limited;
United Kingdom
Rio Tinto Minerals Exploration (Beijing) Co.,
Ltd;
Rio Tinto Minerals Inc.; United States
SGD$1.00
Ordinary share
US$1.00
Ordinary share
£1.00
Ordinary share
£1.00
Ordinary share
£1.00
Ordinary share
US$1.00
Ordinary share
PEN100.00
Ordinary share
BRL1.00
Quotas shares
SGD$1.00
Ordinary shares
US$1.00
Ordinary shares
£0.25
Ordinary shares
US$1.00
Ordinary shares
US$1.00
Ordinary shares
US$0.01
Common shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
—
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6 St James’s Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
418 Nanshi Street, Suzhou Industrial Park, Suzhou, 215021, China
Alfred-Herrhausen-Allee 3-5, 65760, Eschborn, Germany
Alfred-Herrhausen-Allee 3-5, 65760, Eschborn, Germany
6 St James's Square, London, SW1Y 4AD, United Kingdom
1625 Route Marie - Victorin, Sorel - Tracy QC J3R 1M6, Canada
6 St James's Square, London, SW1Y 4AD, United Kingdom
60 Avenue Charles de Gaulle, 92200, Neuilly-Sur-Seine, France
6 St James's Square, London, SW1Y 4AD, United Kingdom
8th Floor, Kojimachi Diamond Building, 1 Kojimachi 4-chome, Chiyoda-ku,
Tokyo 102-0083, Japan
22 Grenville Street, St Helier, JE4 8PX, Jersey
2nd Floor, JS Tower, 6 Teheran-ro 79-gil, Gangnam-Gu, Seoul, 135-877,
Republic of Korea
6 St James's Square, London, SW1Y 4AD, United Kingdom
1 Harries Road, Illovo, Sandton, 2196, South Africa
12 Marina Boulevard, #20-01 Marina Bay Financial Center Tower 3,018982,
Singapore
6 St James's Square, London, SW1Y 4AD, United Kingdom
6 St James's Square, London, SW1Y 4AD, United Kingdom
6 St James's Square, London, SW1Y 4AD, United Kingdom
Av. La Paz 1049, Oficina 503, Miraflores, Lima 18 Peru
SIG Quadra 04, Lote 75, Torre A, Sala 109 Parte B, Edíficio Capital Financial
Center, Brasília, CEP 70610-440, Brazil
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Units 15-16, 18/F, China World Office Building 2, No. 1 Jianguomenwai Dajie,
Chaoyang District, Beijing, China
CSC, 15 West South Temple, Suite 6000, Salt Lake City UT 84101,
United States
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
291
291
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
Share class
Rio Tinto Mining and Exploration Inc.; United
States
US$1.00
Common shares
Rio Tinto Mining and Exploration Limited;
United Kingdom
Rio Tinto Mining and Exploration S.A.C.; Peru
£1.00
Ordinary shares
US$1.00
Ordinary shares
PEN0.50
Ordinary shares
Rio Tinto Mining Commercial (Shanghai) Co.,
Ltd.; China
CNY 1.00 Ordinary
shares
Rio Tinto Mongolia LLC; Mongolia
MNT1,240.00
Common shares
Rio Tinto Nominees Limited; United Kingdom £1.00
Rio Tinto OT Management Limited; United
Kingdom
Rio Tinto Overseas Holdings Limited; United
Kingdom
Rio Tinto PACE Australia Pty Limited;
Australia(a)
Rio Tinto PACE Canada Inc.; Canada
Rio Tinto Peru Limited; United Kingdom
Rio Tinto Potash Management Inc.; Canada
Rio Tinto Procurement (Singapore) Pte Ltd;
Singapore
Rio Tinto Pte Ltd; Singapore
Rio Tinto Saskatchewan Management Inc.;
Canada
Rio Tinto Saskatchewan Potash Holdings
General Partner Inc.; Canada
Ordinary shares
US$1.00
Ordinary shares
£1.00
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
CAD
Ordinary shares
US$1.00
Ordinary shares
CAD
Common shares
US$1.00
Ordinary shares
SGD$1.00
Ordinary shares
SGD$1.00
Preference shares
CAD
Common shares
CAD
Common shares
Rio Tinto Saskatchewan Potash Holdings
Limited Partnership; Canada(c)
—
Rio Tinto Secretariat Limited; United Kingdom £1.00
Rio Tinto Services Inc.; United States
Rio Tinto Services Limited; Australia(a)
Rio Tinto Shared Services Pty Limited;
Australia
Rio Tinto Shipping (Asia) Pte. Ltd.; Singapore
Rio Tinto Shipping Pty. Limited; Australia(a)
Ordinary shares
US$0.01
Common shares
AUD
Class Z shares
AUD
Ordinary shares
AUD
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
Rio Tinto Simfer UK Limited; United Kingdom US$1.00
Rio Tinto Singapore Holdings Pte Ltd;
Singapore
Ordinary shares
SGD$1.00
Ordinary shares
US$
Ordinary shares
292
292
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
251 Little Falls Drive, Wilmington DE 19808, United States
100
6 St James’s Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
Av, La Paz 1049, Oficina 503, Miraflores, Lima 18, Peru
Room 328, 3rd Floor, Unit 2, 231 Shibocun Road, China (Shanghai) Pilot Free
Trade Zone, Shanghai, 200125, China
Level 17, Shangri-La Centre, Olympic Street 19A, Sukhbaatar District,
Ulaanbaatar, 14241, Mongolia
6 St James's Square, London, SW1Y 4AD, United Kingdom
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
Level 18 152-158 St. Georges Terrace, Perth WA 6000, Australia
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3, Canada
6 St James's Square, London, SW1Y 4AD, United Kingdom
354-200 Granville Street, Vancouver BC V6C 1S4, Canada
100
100
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
100
100
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
354-200 Granville Street, Vancouver BC V6C 1S4, Canada
5300-66 Wellington Street West, Toronto ON M5K 1E6, Canada
5300,-66 Wellington Street West, Toronto ON M5K 1E6, Canada
6 St James's Square, London, SW1Y 4AD, United Kingdom
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
100
100
100
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
6 St James's Square, London, SW1Y 4AD, United Kingdom
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
Additional disclosures
Name of undertaking and country
of incorporation
Rio Tinto South East Asia Limited; United
Kingdom
Rio Tinto Staff Fund (Retired) Pty Limited;
Australia(a)
Share class
£1.00
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
Rio Tinto Sulawesi Holdings Limited; United
Kingdom
US$1.00
Ordinary shares
Rio Tinto Technological Resources Inc.; United
States
USD$0.01
Common shares
Rio Tinto Technological Resources UK Limited;
United Kingdom
US$1.00
Ordinary shares
Rio Tinto Trading (Shanghai) Co., Ltd.; China
Rio Tinto Uranium Limited; United Kingdom
Rio Tinto Western Holdings Limited; United
Kingdom
Rio Tinto Winu Pty Limited; Australia(a)
Riversdale Connections (Proprietary) Ltd;
South Africa
Robe River Limited; Australia
Rocklea Station Pty Ltd; Australia
RTA AAL Australia Limited; Australia
RTA Boyne Limited; Australia
RTA Gove Pty Limited; Australia
RTA Holdco 1 Limited; United Kingdom
RTA Holdco 4 Limited; United Kingdom
RTA Holdco 7 Limited; United Kingdom
RTA Holdco 8 Limited; United Kingdom
RTA Holdco Australia 1 Pty Ltd; Australia
RTA Holdco Australia 3 Pty Ltd; Australia
RTA Holdco Australia 5 Pty Ltd; Australia
RTA Holdco Australia 6 Pty Ltd; Australia
RTA Holdco France 1 S.A.S; France
RTA Holdco France 2 S.A.S; France
US$1.00
Ordinary shares
US$1.00
Ordinary shares
£1.00
Ordinary shares
US$1.00
Ordinary shares
AUD
Ordinary shares
ZAR1.00
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD Class A
shares
AUD Class B
shares
US$0.0001
Ordinary shares
US$1.00
Ordinary shares
US$0.73
Ordinary shares
US$1.00
Ordinary shares
US$0.001 Class A
Preference shares
US$1.00
Ordinary shares
US$0.001 Class A
Preference shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
€10.00 Ordinary
Shares
€10.00 Ordinary
Shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
6 St James's Square, London, SW1Y 4AD, United Kingdom
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
6 St James's Square, London, SW1Y 4AD, United Kingdom
41/F Wheelock Square, No. 1717 West Nanjing Road, Jing'an District,
Shanghai, 200040, China
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
100
Level 18, Central Park, 152-158 St Georges Terrace, Perth WA 6000, Australia
Ground Floor - Cypress Place North, Woodmead Business Park 140/142
Western Service Road, Woodmead, 2191, South Africa
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
100
123 Albert Street, Brisbane QLD 4000, Australia
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
100
100
100
100
100
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
60 Avenue Charles de Gaulle, 92200, Neuilly-Sur-Seine, France
60 Avenue Charles de Gaulle, 92200, Neuilly-Sur-Seine, France
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
293
293
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Wholly owned subsidiary undertakings continued
Name of undertaking and country
of incorporation
RTA Pacific Pty Limited; Australia
RTA Sales Pty Ltd; Australia
RTA Smelter Development Pty Limited;
Australia
RTA Weipa Pty Ltd; Australia
RTA Yarwun Pty Ltd; Australia
RTAlcan 1 LLC; United States
RTAlcan 2 LLC; United States
RTAlcan 3 LLC; United States
RTLDS Aus Pty. Ltd; Australia(a)
RTLDS UK Limited; United Kingdom
RTPDS Aus Pty Ltd; Australia
Scheuch Unterstuetzungskasse GmbH;
Germany
Skymont Corporation; United States
Share class
AUD
Ordinary shares
AUD
Class A shares
AUD
Class B shares
AUD
Ordinary shares
AUD
Ordinary shares
AUD
Ordinary shares
US$
Common shares
US$
Class A
Preferred shares
US$
Common shares
US$
Common shares
AUD
Ordinary shares
£1.00
Ordinary shares
AUD
Ordinary shares
€51.13
Ordinary shares
US$
Common shares
€
Ordinary shares
Société De Financement Des Risques
Industriels; Luxembourg
Sohio Western Mining Company; United States US$100.00
Southern Copper Pty. Limited; Australia
Swift Current Land & Cattle LLC;
United States(c)
Swiss Aluminium Australia Limited; Australia
TBAC Limited; United Kingdom
Technological Resources Pty. Limited;
Australia(a)
Common shares
AUD
A shares
AUD
B shares
AUD
Non-cumulative
Redeemable
Preference shares
AUD
Ordinary shares
—
AUD
Ordinary shares
AUD
Stock Unit A
shares
AUD
Stock Unit B
shares
AUD
Stock Unit C
shares
£1.00
Ordinary shares
AUD
A Ordinary shares
AUD
B Ordinary shares
294
294
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
100
123 Albert Street, Brisbane QLD 4000, Australia
100
123 Albert Street, Brisbane QLD 4000, Australia
100
100
100
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
100
100
100
100
100
100
100
100
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
6 St James's Square, London, SW1Y 4AD, United Kingdom
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Alusingenplatz 1, D-78221, Singen, Germany
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
534, rue de Neudorf, B.P. 593, L-2015, Luxembourg
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
CSC, 8825 N. 23rd Avenue, Suite 100, Phoenix AZ 85021
100
123 Albert Street, Brisbane QLD 4000, Australia
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
Additional disclosures
Name of undertaking and country
of incorporation
Share class
The Barrier Corporation (Vic.) Pty. Limited;
Australia(a)
AUD
Ordinary shares
The Kelian Community and Forest Protection
Trust; Singapore(c)
—
The Pyrites Company, Inc.; United States
US$1.00
Common shares
The Roberval and Saguenay Railway Company;
Canada
CAD$100.00
Ordinary shares
The Zinc Corporation Pty Ltd; Australia
Thos. W. Ward Limited; United Kingdom
CAD$100.00
Preference shares
6% non-cumulative
AUD
Ordinary shares
AUD
Z Class
Ordinary shares
£0.25
Ordinary shares
Three Crowns Insurance Company Limited;
United States
US$2.00
Common shares
Tinto Holdings Australia Pty. Limited; Australia AUD
Trans Territory Pipeline Pty Limited; Australia
U.S. Borax Inc.; United States
Victoria Technology Inc.; United States(a)
A shares
AUD
Ordinary shares
AUD
Ordinary shares
US$0.10
Common shares
US$1.00
Ordinary shares
Waste Solutions and Recycling LLC; United
States
US$ shares
West Kutai Foundation Limited; Singapore(c)
—
Wimmera Industrial Minerals Pty. Limited;
Australia(a)
Winchester South Development Company
Proprietary Limited; Australia
Wyoming Coal Resources Company;
United States
AUD
Ordinary shares
AUD
Ordinary shares
US$0.01
Common shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
100
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
10 Collyer Quay, #10-01 Ocean Financial Centre, 049315, Singapore
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
100
6 St James's Square, London, SW1Y 4AD, United Kingdom
CT Corporation, 1108 E. South Union Avenue, Midvale UT 84047, United
States
100
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
100
100
100
100
100
100
100
100
123 Albert Street, Brisbane QLD 4000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
10 Collyer Quay, #10-01 Ocean Financial Centre, 049315, Singapore
Level 7, 360 Collins Street, Melbourne VIC 3000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
295
295
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Other Group entities including subsidiaries where the effective ownership is less than 100%, associated undertakings and significant holdings
in undertakings other than subsidiary companies
Name of undertaking and country
of incorporation
201 Logistics Center, LLC; United States(c)
AGM Holding Company Pte Ltd; Singapore
Alufluor AB; Sweden
Aluminerie Alouette Inc.; Canada
Aluminerie De Bécancour, Inc.; Canada
Aluminium & Chemie Rotterdam B.V.;
Netherlands
Asia Gold Mongolia LLC; Mongolia
Asia Naran Bulag LLC; Mongolia
Share class
—
US$ Ordinary
shares
SEK1,000.00
Ordinary shares
CAD
Ordinary shares
CAD1.00
Ordinary shares
€4,555.00
Ordinary shares
MNT1,250.00
Common shares
MNT1,000.00
Common shares
Balkhash Saryshagan LLP; Kazakhstan(c)
—
Beasley River Marketing Pty Ltd; Australia
Bektau B.V.; Netherlands
Boyne Smelters Limited; Australia
AUD
A class shares
€200.00
Ordinary shares
AUD A1
Class shares
AUD A2
Class shares
AUD B1
Class shares
CanPacific Potash Inc.; Canada(c)
—
Carol Lake Company Ltd.; Canada
CAD$100.00
Ordinary shares
Chinalco Rio Tinto Exploration Co. Ltd; China(d) CNY1.00 Capital
Contribution
(Ordinary shares)
% of share
class held
by Group
companies
—
100
50
40
50.1
65.8
100
100
—
100
75
100
100
100
—
100
49
Chlor Alkali Unit Pte Ltd; Singapore
SGD$1.00 Ordinary
(SGD) shares
100
Dampier Salt Limited; Australia
US$1.00
Ordinary (USD)
shares
AUD Ordinary
($1.00257) shares
AUD Ordinary
($1.88 on
31/01/2013) shares
ELYSIS Limited Partnership/ELYSIS Société en
Commandite; Canada
US$1,000.00
Class B shares
Empresa de Mineração Finesa Ltda.; Brazil
Enarotali Gold Project Limited; Jersey
Energy Resources of Australia Ltd; Australia
BRL
Quotas shares
£0.001
Ordinary shares
AUD A Class
Ordinary shares
Fabrica De Plasticos Mycsa, S.A.; Bolivarian
Republic of Venezuela(d)
VEF1.00
Common shares
Global Hubco B.V.; Netherlands
Gulf Power Company; Canada
Halco (Mining) Inc.; United States
€1.00 Ordinary
shares
CAD$100.00
Ordinary shares
US$100.00 Ordinary
shares
45
68.4
68.4
68.4
100
100
25
49
33.3
100
296
296
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Effective
Group %
ownership
50
Registered office address
Corporation Trust Center, 1209 Orange Street, Wilmington DE
19801, United States
50.8
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
50
40
25.2
65.8
50.7
50.7
75
53
75
Industrigatan 70, Box 902, S-25109, Helsingborg, Sweden
400, Chemin de la Pointe-Noire, C.P. 1650, Sept-Îles QC G4R 5M9, Canada
5555 Pierre Thibault Street, PO 30, Bécancour, Québec G0X 1B, Canada
Oude Maasweg 80, 3197 KJ, Botlek, Rotterdam, Netherlands
Level 17, Shangri-La Centre, Olympic Street 19A, Sukhbaatar District,
Ulaanbaatar, 14241 Mongolia
Level 17, Shangri-La Centre, Olympic Street 19A, Sukhbaatar District,
Ulaanbaatar, 14241 Mongolia
Dostyk 310/G, Almaty, 050020, Kazakhstan
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA
6000, Australia
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
59.4
123 Albert Street, Brisbane QLD 4000, Australia
32
58.7
49
68.4
374 Third Avenue South, Saskatoon SK S7K 1M5, Canada
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3, Canada
Unit 402, China Resources Building, No. 8 Jianguomenbei Avenue, Dong
Cheng District, Beijing, 100005 P.R., China
12 Marina Boulevard, #20-01 Marina Bay Financial Centre Tower 3, 018982,
Singapore
68.4
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
48.2
2323-1 Place Ville Marie, Montréal QC H3B 5M5, Canada
49
25
SIG, QUADRA 04, Lote 75, Sala 109 Parte C, Edifício Capital Financial Center,
Brasília DF, CEP 71.610-440, Brazil
IFC 5, St Helier, JE1 1ST, Jersey
86.3
86.3
c/o Mallesons Stephen Jacques, Level 5 NICTA Building, B 7 London Circuit,
Canberra City ACT 2601, Australia
49
33.3
58.7
45
Urbanización Industrial San Ignacio, parcela 2-A, vía
San Pedro, Los Teques, Estado Miranda, Bolivarian Republic of Venezuela
c/o TMF Netherlands B.V., Luna Arena, Herikerbergweg 238, 1101, CM
Amsterdam Zuidoost, Netherlands
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3, Canada
30 Isabella Street, 3rd Floor, Pittsburgh, Pennsylvania, 15212, United States
Additional disclosures
Name of undertaking and country
of incorporation
Heruga Exploration LLC; Mongolia
Share class
MNT12,500.00
Common Shares
Hope Downs Marketing Company Pty Ltd;
Australia
AUD
A Class shares
IAL Holdings Singapore Pte Ltd; Singapore
US$ Ordinary shares 100
Iron Ore Company of Canada; United States
US$1,000.00
Series A shares
US$1,000.00
Series E shares
US$1,000.00
Series F shares
Korgantas LLP; Kazakhstan(c)
—
Lao Sanxai Minerals Company Limited; Lao
People’s Democratic Republic
Magma Arizona Railroad Company; United
States
Mineração Tabuleiro Ltda; Brazil
US$1.00
Ordinary shares
US$100.00
Common shares
BRL
Quotas shares
Minera Escondida Ltda; Chile(c)
—
Minmetals Rio Tinto Exploration Company
Limited; China
CNY1.00 Ordinary
shares
New Zealand Aluminium Smelters Ltd; New
Zealand
Northern Land Company Ltd; Canada
NZD1.00 Class A
Ordinary shares
CAD$1.00
Ordinary shares
Nozalela Mineral Sands (Pty) Ltd; South Africa ZAR1.00
NZAS Retirement Fund Trustee Limited; New
Zealand
Oyu Tolgoi LLC; Mongolia(e)
Oyu Tolgoi Netherlands B.V.; Netherlands
Pechiney Philippines Inc.; Philippines
Ordinary shares
NZD
Ordinary shares
MNT10,000.00
Common shares
€100.00
Ordinary shares
PHP10.00
Ordinary shares
Pechiney Reynolds Quebec, Inc.; United States US$10.00
Port d’Ehoala S.A.; Madagascar
Procivis Savoie; France
PT Hutan Lindung Kelian Lestari; Indonesia
PT Kelian Equatorial Mining; Indonesia
QIT Madagascar Minerals SA; Madagascar
Quebec North Shore and Labrador Railway
Company; Canada
Queensland Alumina Limited; Australia
Common shares
US$100.00
Preferred shares
US$100.00
Ordinary shares
€19.00
Ordinary shares
IDR9,803.00
Ordinary shares
IDR1,080.00
Ordinary shares
US$10.00 Certificats
d’investissement
US$10.00
Common shares
CAD$27.59
Ordinary shares
AUD Class B shares
AUD Class C shares
AUD Class D shares
Resolution Copper Mining LLC; United States(c) —
Richards Bay Mining (Proprietary) Limited;
South Africa
Richards Bay Prefco (Pty) Ltd; South Africa
ZAR0.01 B
Ordinary shares
ZAR0.01 B
Preference shares
ZAR 0.01 BHP
Billiton
ZAR0.01
Preference shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
91.4
100
100
—
70
99.9
100
—
50.0
100
100
100
100
66
100
99.9
50
100
100
50.8
50
50.8
Level 17, Shangri-La Centre, Olympic Street 19A, Sukhbaatar District,
Ulaanbaatar, 14241 Mongolia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
58.7
1209 Orange Street, Wilmington, Delaware 19801, United States
75
70
Dostyk 310/G, Almaty, 050020, Kazakhstan
5th Floor, ANZ Bank Building, 33 Lane Xang Avenue, Hatsady Village,
Chanthaboury District, Vientiane Capital, Lao People’s Democratic Republic
54.9
CSC, 8825 N. 23rd Avenue, Suite 100, Phoenix AZ 85021
48
30
50.0
79.4
58.7
74
79.4
33.5
50.8
99.9
SIG, QUADRA 04, Lote 75, Sala 109 Parte D, Edifício Capital Financial Center,
Brasília DF, CEP 71.610-440, Brazil
Av. Cerro Plomo, Piso 18, Las Condes, Santiago, 7580154, Chile
Section C239, Level 3, Phase II, Standard Workshop, Innovative Industrial
Park, Sanya City, Hainan Province, China
1530 Tiwai Road, Tiwai Point Invercargill, 9877 New Zealand
2 Avalon Drive, Labrador City NL A2V 2V6, Canada
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
Mercer (N.Z.) Limited, Level 2, 20 Customhouse Quay, Wellington, 6011,
New Zealand
Level 12 Monnis Tower, Chinggis Avenue-15, 1st khoroo, Sukhbaatar
District, Ulaanbaatar, 14240, Mongolia
Prins Bernhardplein 200, 1097 JB, Amsterdam, Netherlands
Room 306, ITC Building, 337 Sen Gil Puyat Avenue, Makati,
Metro Manila, Philippines
50.2
CSC, 233 South 13th Street, Suite 1900, Lincoln NE 68508, United States
80
Immeuble ASSIST, Ivandry, Lot N°35, 5ème étage, 101 Antananarivo,
Madagascar
22.1
22.1
116 Quai Charles Roissard, 73000, Chambéry, France
99
90
100
85
100
100
100
100
—
100
100
100
100
99
90
80
58.7
80
55
Kelian Mine Site, West Kutai, East Kalimantan, Indonesia
Sampoerna Strategic Square, South Tower, Level 30, Jl. Jenderal Sudirman
Kav. 45-46, Jakarta, 12930, Indonesia
Immeuble ASSIST, Ivandry, Lot N°35, 5ème étage, 101 Antananarivo,
Madagascar
400-1190 Avenue des Canadiens-de-Montréal, Montréal QC H3B 0E3,
Canada
Plant Operations Building, Parsons Point, Gladstone QLD 4680, Australia
CSC, 251 Little Falls Drive, Wilmington DE 19808, United States
73.9
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
99.9
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
297
297
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
44 Related undertakings continued
Other Group entities including subsidiaries where the effective ownership is less than 100%, associated undertakings and significant holdings
in undertakings other than subsidiary companies continued
Name of undertaking and country
of incorporation
Share class
Richards Bay Titanium (Proprietary) Limited;
South Africa
ZAR0.01 B
Preference shares
Rightship Pty Ltd; Australia
Rio Tinto Orissa Mining Private Ltd; India
Rio Tinto Sohar Logistics LLC; Oman
Robe River Mining Co. Pty. Ltd.; Australia
Robe River Ore Sales Pty. Ltd.; Australia
Saryarka B.V.; Netherlands
SGLS LLC; Mongolia
Sharp Strategic Funding Pte. Ltd.; Singapore
Simfer Jersey Finance 1 Ltd; Jersey(d)
Simfer Jersey Finance 2 Ltd; Jersey(d)
Simfer Jersey Limited; Jersey
Simfer Jersey Nominee Limited; United
Kingdom
SIMFER S.A.; Guinea(e)
Singapore Metals Pte. Ltd.; Singapore
ZAR0.01 BHP
Billiton Preference
ZAR0.01 B
Ordinary shares
AUD
Ordinary shares
INR100.00
Ordinary shares
OMR1.00
Ordinary shares
AUD
A shares
AUD
B shares
AUD
Ordinary shares
€200.00
Ordinary shares
MNT10,000.00
Common shares
US$
Common shares
US$
Ordinary shares
US$
Ordinary shares
US$
Ordinary shares
£1.00
Ordinary shares
GNF100,000.00
Ordinary shares
US$
Ordinary shares
Société Minière Et De Participations Guinée
Alusuisse; Guinea(c)
—
Sohar Aluminium Co. L.L.C.; Oman
THR Aruba Holdings LLC A.V.V.; Aruba
OMR1.00
Ordinary shares
US$1.00
Common shares
THR Delaware Holdings, LLC; United States(c)
—
THR Kharmagtai Pte Ltd.; Singapore
THR MINES (BC) LTD.; Canada
THR Mines Services Co. Ltd.; Canada
THR OYU TOLGOI LTD.; British Virgin Islands
THR Ulaan Pte. Ltd.; Singapore
US$
Ordinary shares
CAD
Common shares
US$
Common shares
CAD
Common shares
US$1.00
Ordinary shares
US$
Ordinary shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
73.9
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
33.3
33.3
Level 20, 500 Collins Street, Melbourne VIC 3000, Australia
51
70
40
76.4
65
75
100
100
100
53
53
100
85
100
—
20
100
—
100
100
100
100
100
100
51
70
73.6
57.1
75
50.8
50.8
53
53
53
53
45
50.8
50.0
20.0
50.8
50.8
50.8
220, 2nd Floor, DLF, Cyber City, Chandaka Industrial Area, Patia,
Bhubneshwar, Odisha, 751024, India
P.O. Box 686, Ruwi, 112, Sultanate of Oman
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000,
Australia
Welplaatweg 104, 3197 KS, Botlek-Rotterdam, Netherlands
Level 17, Shangri-La Centre, Olympic Street 19A, Sukhbaatar District,
Ulaanbaatar, 14241 Mongolia
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
PO Box 536, 13-14 Esplanade, St Helier, JE4 5UR, Jersey
PO Box 536, 13-14 Esplanade, St Helier, JE4 5UR, Jersey
PO Box 536, 13-14 Esplanade, St Helier, JE4 5UR, Jersey
6 St James’s Square, London, SW1Y 4AD, United Kingdom
Résidence Dolphine1 Coléah Corniche Sud, Commune de Matam, Conakry,
BP 848, Guinea
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
Tougue, Guinea
Sohar Industrial Estate, P.O. Box 80, PC 327, Sohar, Sultanate of Oman
IMC International Management Trust Company N.V., L.G. Smith Blvd. 62,
Miramar Building, Oranjestad, Aruba
National Corporate Research, Ltd., 850 New Burton Road, Suite 201, Dover
DE 19904, United States
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
50.8
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
50.8
50.8
50.8
Lackowicz Shier & Hoffman Barristers & Solicitors, 300-204 Black Street,
Whitehorse YT Y1A 2M9, Canada
Craigmuir Chambers, Road Town, Tortola, VG1110 British Virgin Islands
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
298
298
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Additional disclosures
Name of undertaking and country
of incorporation
Tisand (Proprietary) Limited; South Africa
Share class
ZAR1.00 A
Ordinary shares
ZAR1.00 B
Ordinary shares
ZAR1,000.00
Cumulative
Preference shares
Tomago Aluminium Company Pty Limited;
Australia
AUD
Ordinary shares
TRQ Australia Pty. Ltd.; Australia
AUD Ordinary
shares
Turquoise Hill (Beijing) Services Company Ltd;
China(c)
—
Turquoise Hill Netherlands Cooperatief U.A.;
Netherlands
US$
COOP shares
Turquoise Hill Resources Ltd.; Canada
CAD Common
Shares
Turquoise Hill Resources Philippines Inc.;
Philippines(d)
PHP100.00
Common shares
Turquoise Hill Resources Singapore Pte Ltd.;
Singapore
SGD1.00
Common shares
Twin Falls Power Corporation Ltd; Canada
Wright Mgmt Services Pte. Ltd.; Singapore
Yalleen Pastoral Co. Pty Ltd: Australia
Zululand Titanium (Pty) Ltd; South Africa
CAD
Class B shares
US$ Common
shares
AUD
Ordinary shares
ZAR1.00
Ordinary shares
% of share
class held
by Group
companies
Effective
Group %
ownership
Registered office address
100
100
100
100
100
—
100
50.8
99.9
100
74.4
100
65.7
100
74
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
51.6
50.8
50.8
50.8
50.8
50.8
50.8
14.6
50.8
57.4
74
638 Tomago Road, Tomago, NSW 2322, Australia
c/o Intertrust Australia Pty. Ltd., Level 25, Suite 2, 100 Miller Street, North
Sydney NSW 2060, Australia
07-119 Inner Room 101, 7th Floor, No.219 Wangfujing Street, Dongcheng
District, Beijing, China
Prins Bernhardplein 200, 1097 JB, Amsterdam, Netherlands
300-204 Black Street, Whitehorse YT Y1A 2M9, Canada
Romulo Mabanta Buenaventura Sayoc & De Los Angeles, 21st Floor,
Philamlife Tower, 8767 Paseo Roxas, Makati City, 1226, Philippines
2 Venture Drive, #24-01 Vision Exchange, Singapore 608526
Hydro Place, P.O. Box 12500, St-John's NL A1B 3T5, Canada
77 Robinson Road, #13-00, Robinson 77, 068896, Singapore
Level 18 Central Park, 152-158 St.Georges Terrace, Perth WA 6000, Australia
The Farm RBM, Number 16317, KwaZulu-Natal, South Africa
In addition, the Group participates in the following unincorporated arrangements:
Name of undertaking and country of incorporation
Address or principal place of business
Interest % owned
by the Group
Bao-HI Ranges Joint Venture; Australia
Beasley River Joint Venture; Australia
Cape Bougainville Joint Venture; Australia
Channar Mining Joint Venture; Australia
Diavik Joint Venture; Canada
Gladstone Power Station Joint Venture; Australia
Green Mountain Mining Venture; United States
Hope Downs Joint Venture; Australia
Mitchell Plateau Joint Venture; Australia
Rhodes Ridge Joint Venture; Australia
Robe River Iron Associates Joint Venture; Australia
Tomago Aluminium Joint Venture; Australia
Winter Road Joint Venture; Canada
Yarraloola Pastoral Co.; Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
300-5201 50th Avenue, Yellowknife NT X1A 2P9, Canada
NRG Gladstone Operating Service, Gladstone Power Station, Gladstone QLD 4680,
Australia
CSC 251 Little Falls Drive, Wilmington DE 19808, United States
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
123 Albert Street, Brisbane QLD 4000, Australia
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
Level 18, Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
638 Tomago Road, NSW 2322, Tomago, Australia
300-5201 50th Avenue, Yellowknife NT X1A 2P9, Canada
Level 18 Central Park, 152-158 St. Georges Terrace, Perth WA 6000, Australia
54
53
67.5
60
60
42.1
100
50
65.6
50
57.1
51.6
33.3
57.1
Directly held by Rio Tinto Limited.
Directly held by Rio Tinto plc.
Group ownership is held through an interest in capital. The entity has no classes of shares.
In liquidation or application for dissolution filed.
(a)
(b)
(c)
(d)
(e) Classed as a subsidiary in accordance with section 1162 (4)(a) of the UK Companies Act 2006 on the grounds of dominant influence.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
299
299
Financial Statements Financial Statements
Notes to the 2020 Financial Statements
45 Events after the balance sheet date
There were no significant events after the balance sheet date requiring disclosure.
300
300
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements
Financial Statements
Rio Tinto plc
Rio Tinto plc
Company Balance Sheet
Company balance sheet
As at 31 December
Non-current assets
Investments
Trade and other receivables
Current assets
Trade and other receivables
Cash at bank and in hand
Total assets
Current liabilities
Trade and other payables
Dividends payable
Other financial liabilities
Non-current liabilities
Other financial liabilities
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Other reserves
Retained earnings
Total equity
Note
2020
US$m
2019
US$m
B
C
D
G
G
E
F
36,320
206
36,526
5,710
11
5,721
42,247
36,250
263
36,513
6,439
5
6,444
42,957
(13,205)
(24)
(67)
(13,296)
(13,018)
(18)
(278)
(13,314)
(156)
(13,452)
(223)
(13,537)
28,795
29,420
207
4,313
12,005
12,270
28,795
207
4,312
12,005
12,896
29,420
The Rio Tinto plc company balance sheet has been prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure Framework” (FRS
101). Note A explains the principal accounting policies.
Profit after tax and total comprehensive income for the year amounted to US$4,027 million (2019: US$4,959 million). As permitted by section 408 of the
UK Companies Act 2006, no statement of comprehensive income for the Rio Tinto plc parent company is shown.
The Rio Tinto plc company balance sheet, statement of comprehensive income and the related notes were approved by the directors on 22 February 2021
and the balance sheet is signed on their behalf by
Simon Thompson
Chairman
Rio Tinto plc
Registered number: 719885
Jakob Stausholm
Chief Executive
Peter Cunningham
Interim Chief Financial Officer
Rio Tinto plc (the “Company”) is incorporated in the United Kingdom, registered in England and Wales, and domiciled in the United Kingdom.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
301
301
Financial Statements
Financial statements continued
Financial Statements
Rio Tinto plc
Rio Tinto plc
Company Statement of Changes in Equity
Company statement of changes in equity
Year ended 31 December 2020
Opening balance
Profit for the financial year (comprehensive income)
Dividends
Proceeds from issue of shares
Share-based payments
Total
Year ended 31 December 2019
Opening balance
Profit for the financial year (comprehensive income)
Dividends
Proceeds from issue of shares
Share buy-back
Share-based payments
Total
Share
capital
US$m
207
—
—
—
—
207
Share
capital
US$m
211
—
—
—
(4)
—
207
Share
premium
account
US$m
4,312
—
—
1
—
4,313
Share
premium
account
US$m
4,311
—
—
1
—
—
4,312
Other
reserves
US$m
12,005
—
—
—
—
12,005
Other
reserves
US$m
12,001
—
—
—
4
—
12,005
Retained
earnings
US$m
12,896
4,027
(4,720)
—
67
12,270
Retained
earnings
US$m
16,995
4,959
(7,987)
—
(1,135)
64
12,896
Total
equity
US$m
29,420
4,027
(4,720)
1
67
28,795
Total
equity
US$m
33,518
4,959
(7,987)
1
(1,135)
64
29,420
302
302
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements
Financial Statements
Notes to the Rio Tinto plc Financial Statements
Notes to the Rio Tinto plc Financial Statements
A Principal accounting policies
a. Basis of preparation
The Rio Tinto plc company financial statements have been prepared
using the historical cost convention, as modified by the revaluation of
certain financial liabilities and in accordance with the UK Companies
Act 2006 and FRS 101. The financial statements have been prepared on
a going concern basis.
The accounting policies set out below have been applied consistently to
all periods presented in these financial statements. The following
exemptions available under FRS 101 have been applied:
– Paragraphs 45(b) and 46 to 52 of IFRS 2, “Share-based
payment” (details of the number and weighted average exercise
prices of share options and how the fair value of goods and services
received was determined).
– Paragraphs 91-99 of IFRS 13 “Fair value measurement” (disclosure
of valuation techniques and inputs used for fair value measurement
of assets and liabilities).
– IFRS 7 “Financial Instruments: Disclosures”.
– Paragraph 38 of IAS 1 “Presentation of financial statements”,
comparative information requirements in respect of Paragraph
79(a)(iv) of IAS 1.
– The following paragraphs of IAS 1 “Presentation of financial
statements”:
– 10 (d) (statement of cash flows);
– 16 (statement of compliance with all IFRS);
– 38A (requirement for minimum of two primary statements,
including cash flow statements);
– 38B-D (additional comparative information);
– 111 (cash flow statement information); and
– 134-136 (capital management disclosures).
– IAS 7 “Statement of cash flows”.
– Paragraph 30 and 31 of IAS 8 “Accounting policies, changes in
accounting estimates and errors” (requirement for the disclosure of
information when an entity has not applied a new IFRS that has been
issued and is not yet effective).
– Paragraph 17 of IAS 24 “Related party disclosures” (key
management compensation).
– The requirements of IAS 24, “Related party disclosures” to disclose
related party transactions entered into between two or more
members of a group.
b. Judgments in applying accounting policies and key sources of
estimation uncertainty
The preparation of the financial statements requires management to
make assumptions, judgments and estimates and to use judgment in
applying accounting policies and making critical accounting estimates.
These judgments, estimates and assumptions are based on
management’s best knowledge of the relevant facts and circumstances,
having regard to previous experience, but actual results may differ
materially from the amounts included in the financial statements.
The key area of judgment that has the most significant effect on
the amounts recognised in the financial statements is the review for
impairment of investment carrying values.
Investments in subsidiaries are reviewed for impairment where events
or changes in circumstances indicate that the carrying amount of the
investment may not be recoverable. The unit of account being the
equity of the subsidiary taken as a whole, which may comprise interests
in multiple cash-generating units.
If any such indication exists, Rio Tinto plc makes an assessment of the
recoverable amount. If the asset is determined to be impaired, an
impairment loss will be recorded and the asset written down based on
the amount by which the asset carrying amount exceeds the higher of
fair value less cost of disposal and value in use. An impairment loss is
recognised immediately in the income statement.
c. Currency translation
Items included in the financial statements are measured using the
currency of the primary economic environment in which the Company
operates (the functional currency). The financial statements are
presented in US dollars, which is the Company’s functional and
presentation currency. Transactions denominated in other currencies,
including the issue of shares, are translated into the functional
currency using the exchange rates prevailing at the date of
the transaction.
Foreign exchange gains and losses resulting from the settlement of
such transactions, and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies,
are recognised in the profit and loss account.
Exchange rates used are consistent with the rates used by the Group as
disclosed in the consolidated financial statements (note 40).
d. Investments
Investments in Group companies are valued at cost less accumulated
impairment losses. Investments are reviewed for impairment if events
or changes in circumstances indicate that the carrying amount may not
be recoverable.
e. Financial guarantees
Financial guarantees are recognised initially at fair value. Subsequently,
the liability is measured at the higher of the best estimate of the
expenditure required to settle the present obligation and the amount
initially recognised less cumulative amortisation.
f. Share-based payments
The Company operates a number of share-based payment plans for
Group employees, the details of which are included in the consolidated
financial statements (note 41). The fair value of the Company’s share
plans is recognised as an addition to the cost of the investment in the
subsidiary in which the relevant employees work over the expected
vesting period, with a corresponding entry to retained earnings.
Payments received from the Company’s subsidiaries in respect of these
share-based payments are recognised as a reduction in the cost of the
investment. The Company uses fair values provided by independent
actuaries calculated using either a lattice-based option valuation model
or a Monte Carlo simulation model. The fair value of the share plans is
determined at the date of grant, taking into account any market-based
vesting conditions attached to the award.
Non-market based vesting conditions (eg relative EBIT margin
performance targets) are taken into account in estimating the number
of awards likely to vest. The estimate of the number of awards likely to
vest is reviewed at each balance sheet date up to the vesting date, at
which point the estimate is adjusted to reflect the actual awards issued.
No adjustment is made after the vesting date even if the awards are
forfeited or not exercised.
g. Dividend income
Dividend income is recognised when the right to receive payment
is established.
h. Treasury shares
The consideration paid for shares repurchased by the Company and
held as treasury shares is recognised as a reduction in shareholders’
funds through retained earnings.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
303
303
Financial Statements Financial statements
Financial Statements
Notes to the Rio Tinto plc Financial Statements
Notes to the Rio Tinto plc Financial Statements
continued
B Investments
Investments in Group companies:
At 1 January
Additions
At 31 December
2020
US$m
36,250
70
36,320
2019
US$m
36,159
91
36,250
At 31 December 2020, the Company had the following principal subsidiaries:
Company
Rio Tinto International Holdings Limited
Rio Tinto European Holdings Limited
Principal activity
Holding company
Holding company
Country of
incorporation
Percentage
shareholding
UK
UK
100 %
100 %
In accordance with section 409 of the UK Companies Act 2006, a full list of related undertakings is disclosed in the consolidated financial statements (note
44).
C Trade and other receivables
Trade and other receivables includes US$5,656 million (31 December 2019: US$6,256 million), which is subject to interest based on LIBOR, is unsecured
and repayable on demand.
D Trade and other payables
Trade and other payables include US$13,042 million (31 December 2019: US$12,968 million) which is subject to interest rates based on LIBOR, is
unsecured and repayable on demand.
E Share capital
Issued and fully paid up share capital of 10p each(a)
At 1 January
Ordinary shares purchased and cancelled(b)
At 31 December
2020
US$m
207
—
207
2019
US$m
211
(4)
207
(a)
(b)
39,273 new shares (2019: 40,974 new shares) were issued during the year and 568,863 shares (2019: 23,659 shares) were reissued from Treasury during the year resulting from the vesting of awards
and the exercise of options under Rio Tinto plc employee share-based payment plans, with exercise prices and market values between £32.74 and £56.32 per share.
The authority for the Company to buy back its ordinary shares was renewed at the 2020 annual general meeting. 3,627,568 shares (2019: 28,356,034 shares) were bought back and cancelled in 2020
under the on-market buy-back programme.
F Other reserves
Other reserves include US$11,936 million (2019: US$11,936 million) which represents the difference between the nominal value and issue price of the
shares issued arising from Rio Tinto plc’s rights issue completed in July 2009.
G Rio Tinto plc guarantees
Rio Tinto plc provides a number of guarantees in respect of Group companies.
Rio Tinto plc and Rio Tinto Limited have jointly guaranteed the Group’s external listed debt under the US Shelf Programme, European Debt Issuance
Programme and Commercial Paper Programme which totalled US$5.5 billion at 31 December 2020 (31 December 2019: US$5.9 billion). In addition, these
entities also jointly guarantee the Group’s undrawn credit facility which was US$7.5 billion at 31 December 2020 (31 December 2019: US$7.5 billion).
Rio Tinto plc has provided guarantees in respect of certain derivative contracts that are in a liability position of US$141 million at 31 December 2020
(31 December 2019: US$290 million).
Rio Tinto plc has provided a guarantee, known as the completion support undertaking (CSU), in favour of the Oyu Tolgoi LLC project finance lenders. At
31 December 2020, US$4.3 billion of project finance debt was outstanding under this facility (31 December 2019: US$4.3 billion). Oyu Tolgoi LLC is owned
by Erdenes Oyu Tolgoi LLC (34%), which is controlled by the Government of Mongolia, and Turquoise Hill Resources Ltd (66%, of which Rio Tinto owns
51%). The project finance has been raised for development of the underground mine and the CSU will terminate on the completion of the underground
mine according to a set of completion tests set out in the project finance facility.
The Rio Tinto guarantee applies to the extent that Turquoise Hill Resources Ltd cannot satisfy Oyu Tolgoi LLC’s project finance debt servicing obligations
under its own guarantee to the lenders, called the sponsor debt service undertaking (DSU). Both the CSU and DSU contain a carve-out for certain political
risk events.
During 2020, fees of US$108 million (2019: US$157 million) were received from Oyu Tolgoi LLC and Turquoise Hill Resources Ltd as consideration for the
provision of the CSU.
304
304
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements continued
Financial Statements
G Rio Tinto plc guarantees continued
Rio Tinto plc has provided a number of guarantees in relation to various pension funds. Subject to certain conditions, Rio Tinto plc would pay any
contributions due from Group companies participating in these funds in the event that the companies fail to meet their contribution requirements. The
guarantees were not called upon in 2020. The aggregate of company contributions to these plans in 2020 was US$10 million (2019: US$37 million).
Other guarantees issued by Rio Tinto plc in relation to Rio Tinto Group entities as at 31 December 2020 amount to US$388 million (31 December 2019:
US$353 million). Included within this balance is US$35 million (31 December 2019: US$32 million) in relation to non-wholly owned subsidiaries.
Pursuant to the DLC Merger, both Rio Tinto plc and Rio Tinto Limited issued deed poll guarantees by which each company guaranteed contractual
obligations incurred by the other or guaranteed by the other.
The liability recognised for financial guarantees is US$223 million (31 December 2019: US$294 million) presented in "Other financial liabilities" in the
balance sheet.
H Contingent liabilities
Details of contingent liabilities are included in note 30 to the Group financial statements.
I Events after the balance sheet date
There were no significant events after the balance sheet date requiring disclosure.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
305
305
Financial Statements Financial statements continued
Financial Statements
Rio Tinto Financial Information by Business Unit
Rio Tinto Financial Information by Business Unit
Gross product sales(a)
for the year ended
31 December
Underlying EBITDA(b)
for the year ended
31 December
Net earnings(c)
for the year ended
31 December
2020
US$m
2019
US$m
2018
US$m
2020
US$m
2019
US$m
2018
US$m
2020
US$m
2019
US$m
2018
US$m
27,027
252
657
(428)
27,508
23,681
271
123
—
24,075
18,359
246
126
—
18,731
18,896
43
(32)
(70)
18,837
15,936
75
87
—
16,098
11,267
56
55
—
11,378
11,551
12
(112)
(53)
11,398
9,619
27
(8)
—
9,638
6,460
18
53
—
6,531
Rio Tinto
interest
%
(d)
68.4
(e)
(e)
(f)
2,302
2,233
4,489
1,944
(2,510)
8,458
856
9,314
—
9,314
2,490
2,720
4,940
2,204
(3,079)
9,275
1,065
10,340
—
10,340
2,364
3,423
6,468
2,541
(4,084)
10,712
1,479
12,191
—
12,191
100.0
30.0
(h)
(i)
(j)
(k)
58.7
(l)
100.0
(m)
(n)
1,529
2,296
—
1,078
459
5,362
66
5,428
—
2,444
1,651
564
303
4,962
—
52
5,014
(o)
18
1,879
2,136
—
1,166
619
5,800
15
5,815
—
2,189
1,938
593
375
5,095
—
55
5,150
18
1,862
2,274
457
1,180
695
6,468
—
6,468
989
1,583
1,782
622
415
5,391
—
60
5,451
943
262
904
112
6
2,227
7
2,234
(82)
2,152
588
1,462
—
390
83
2,523
(351)
2,172
—
1,130
476
126
24
1,756
1,045
567
755
(22)
30
2,375
16
2,391
(106)
2,285
843
1,034
—
357
151
2,385
(312)
2,073
—
1,024
611
180
55
1,870
852
808
1,418
148
(92)
3,134
17
3,151
(56)
3,095
785
1,301
281
375
301
3,043
(267)
2,776
893
586
510
197
18
2,204
434
92
169
(6)
(159)
530
(5)
525
(54)
471
149
650
—
160
9
968
(205)
763
—
383
216
65
6
670
498
247
40
(137)
21
669
10
679
(80)
599
397
325
—
25
(21)
726
(172)
554
—
332
254
96
25
707
(14)
(96)
(12)
(96)
(15)
(49)
1,646
1,762
2,140
(6)
(87)
577
(5)
(91)
611
466
390
595
—
(69)
1,382
11
1,393
(46)
1,347
293
506
217
69
118
1,203
(149)
1,054
591
166
174
111
(4)
1,038
(7)
(36)
995
9
—
(77)
(70)
(54)
(89)
(102)
(264)
(31)
(15)
(94)
(9)
—
(32)
(3)
—
47,018
45,367
42,835
24,713
22,132
19,319
13,123
11,310
9,825
72
(133)
(500)
(250)
59
(183)
(496)
(315)
(128)
(272)
(552)
(231)
81
(108)
(418)
(216)
(14)
60
(94)
(550)
(231)
(122)
23,902
21,197
18,136
5,127
12,448
(2,679)
(722)
10,373
(2,363)
(395)
(2,407)
(2,202)
(2,313)
(90)
(190)
(410)
(193)
(134)
8,808
4,830
(1,272)
(3,487)
(132)
(4,074)
(576)
(443)
(4,272)
(653)
(296)
(3,909)
(650)
(372)
(1,751)
(648)
(33)
44,611
43,165
40,522
15,391
11,119
18,167
9,769
8,010
13,638
Iron Ore
Pilbara
Dampier Salt
Evaluation projects/other
Intra-segment
Total Iron Ore
Aluminium
Bauxite
Alumina
Primary Metal
Pacific Aluminium
Intra-segment and other
Integrated operations
Other product group items
Product group operations
Evaluation projects/other
Total Aluminium
Copper & Diamonds
Rio Tinto Kennecott
Escondida
Grasberg joint venture
Oyu Tolgoi and Turquoise Hill
Diamonds
Product group operations
Evaluation projects/other
Total Copper & Diamonds
Energy & Minerals
Rio Tinto Coal Australia
Iron Ore Company of Canada
Rio Tinto Iron & Titanium
Rio Tinto Borates
Uranium
Product group operations
Simandou iron ore project
Evaluation projects/other
Total Energy & Minerals
Other operations
Inter-segment transactions
Product group total
Central pension costs, share-based payments and insurance
Restructuring, project and one-off costs
Central costs
Exploration and evaluation
Net interest
Underlying EBITDA/earnings
Items excluded from underlying EBITDA/earnings
Reconciliation to Group income statement
Share of equity accounted unit sales and
intra-subsidiary/equity accounted unit sales
Impairment charges
Depreciation and amortisation in subsidiaries
excluding capitalised depreciation
Depreciation and amortisation in equity accounted units
Taxation and finance items in equity accounted units
Finance items
Consolidated sales revenue/profit before taxation/net
earnings
306
306
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements
Financial Statements
Rio Tinto Financial Information by Business Unit continued
Rio Tinto Financial Information by Business Unit
Iron Ore
Pilbara
Dampier Salt
Evaluation projects/other
Intra-segment
Total Iron Ore
Aluminium
Bauxite
Alumina
Primary Metal
Pacific Aluminium
Intra-segment and other
Integrated operations
Other product group items
Product group operations
Evaluation projects/other
Total Aluminium
Copper & Diamonds
Rio Tinto Kennecott
Escondida
Grasberg joint venture
Oyu Tolgoi and Turquoise Hill
Diamonds
Product group operations
Evaluation projects/other
Total Copper & Diamonds
Energy & Minerals
Rio Tinto Coal Australia
Iron Ore Company of Canada
Rio Tinto Iron & Titanium
Rio Tinto Borates
Uranium
Product group operations
Simandou iron ore project
Evaluation projects/other
Total Energy & Minerals
Other operations
Inter-segment transactions
Product group total
Net assets of disposal groups held for
sale
Other items
Less: equity accounted units
Total
Add back: Proceeds from disposal of
property, plant and equipment
Total capital expenditure per cash
flow statement
Less: Net (debt)/cash
Equity attributable to owners of Rio
Tinto
Capital expenditure(p)
for the year
ended 31 December
Depreciation and amortisation
for the year
ended 31 December
Operating assets(q)
as at 31 December
Employees for the year
ended 31 December
2020
US$m
2019
US$m
2018
US$m
2020
US$m
2019
US$m
2018
US$m
2020
US$m
2019
US$m
2018
US$m
2020
2019
2018
2,919
22
—
—
2,941
1,720
21
—
—
1,741
1,288
14
—
—
1,302
1,819
19
—
—
1,838
1,704
19
—
—
1,723
1,682
20
—
—
1,702
16,253
163
338
(104)
16,650
13,865
152
2
—
14,019
14,486
165
2
—
14,653
11,522
351
10
—
11,883
10,634
347
—
—
10,981
10,422
239
—
—
10,661
Rio Tinto
interest
%
(d)
68.4
(e)
(e)
(f)
142
228
602
114
(1)
387
282
658
129
—
1,456
—
1,456
—
1,456
953
218
595
115
—
1,881
(508)
1,373
—
1,373
290
138
643
119
1
1,191
—
1,191
—
1,191
286
187
682
154
—
1,309
—
1,309
3
1,312
165
194
615
149
(1)
2,593
2,294
9,361
455
662
15,365
—
15,365
—
15,365
2,597
2,009
9,674
970
780
16,030
—
16,030
—
16,030
2,494
2,721
9,306
1,156
769
16,446
—
16,446
—
16,446
2,853
2,383
6,282
2,469
141
14,128
—
14,128
—
14,128
2,940
2,269
6,357
2,356
127
14,049
—
14,049
—
14,049
2,676
2,009
6,497
2,278
180
13,640
—
13,640
—
13,640
1,122
—
1,122
—
1,122
(g)
1,085
—
1,085
—
1,085
100.0
30.0
(h)
(i)
(j)
618
178
—
1,038
25
1,859
5
1,864
444
315
—
1,289
38
2,086
1
2,087
318
302
171
1,284
64
2,139
11
2,150
472
428
—
189
60
1,149
4
1,153
457
508
—
208
144
1,317
3
1,320
427
518
30
219
118
1,312
5
1,317
(k)
58.7
(l)
100.0
(m)
(n)
—
243
144
42
—
429
(2)
1
428
(o)
2
—
255
249
43
5
552
(1)
—
551
(4)
32
189
169
44
8
442
—
—
442
12
—
170
173
49
—
392
—
—
392
199
—
172
193
60
3
428
—
—
428
177
34
154
201
62
4
455
—
—
455
26
2,317
2,726
—
8,111
13,147
192
13,339
2,012
2,871
—
6,780
195
11,858
152
12,010
1,864
3,057
—
6,072
267
11,260
129
11,389
2,171
1,124
—
3,450
885
7,630
159
7,789
2,066
1,068
—
3,152
940
7,226
150
7,376
1,993
1,087
1,615
2,863
967
8,525
146
8,671
(7)
—
1,009
3,390
502
(71)
—
803
3,507
525
(363)
(837)
975
3,390
518
(406)
4,830
16
33
4,879
4,472
20
37
4,529
3,640
15
41
3,696
—
2,716
4,151
966
364
8,197
69
77
8,343
—
2,617
4,115
924
857
8,513
74
53
8,640
1,005
2,397
4,058
980
1,324
9,764
70
33
9,867
(479)
(83)
127
46,632
(442)
129
45,871
42,267
124
159
187
6,320
5,831
5,279
4,773
4,960
4,622
129
49,883
(r)
—
—
440
79
(255)
64
(456)
65
(500)
82
(576)
77
(653)
6,144
5,439
4,844
4,279
4,384
4,015
45
49
586
6,189
5,488
5,430
43
(650)
(2,165) (2,449) (2,880) 5,207
—
47,474
—
43,431
—
47,718
—
44,183
41,205
43,026
4,802
—
46,007
4,432
—
47,458
(664) (3,651)
255
47,054
40,532
43,686
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
307
307
Financial Statements
Financial statements continued
Financial Statements
Notes to Financial Information by Business Unit
Notes to Financial Information by Business Unit
Business units are classified according to the Group’s management
structure.
–
The Gross product sales, Underlying EBITDA and Net Earnings
have been restated to reallocate the margin generated by
internal shipping activities to Bauxite (2019: US$31 million,
US$76 million and US$57 million, respectively; 2018: US$40
million, US$62 million and US$54 million, respectively) and
Alumina businesses (2019: US$63 million, US$157 million and
US$117 million, respectively; 2018: US$83 million, US$128
million and US$111 million, respectively), instead of being
included in the Evaluation project/other line in order to provide
a comprehensive view of the performance of the Bauxite and
Alumina businesses.
Gross product sales, Underlying EBITDA, Net Earnings and Operating
assets of the overall Rio Tinto Aluminium business were not impacted
by these changes.
(g)
In 2018, Aluminium capital expenditure was reported net of US$508
million proceeds received from the sale of surplus land at Kitimat.
These proceeds were not included in Aluminium’s free cash flow and
the associated gain was excluded from business unit earnings
and Underlying EBITDA.
(h) Through a joint venture agreement with Freeport-McMoRan Inc.
(Freeport), we were entitled to 40% of material mined above an
agreed threshold as a consequence of expansions and developments
of the Grasberg facilities since 1998 (until 21 December 2018). On
21 December 2018, we sold our entire interest in the Grasberg mine
to PT Indonesia Asahan Aluminium (Persero) (Inalum).
(i)
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.
(j)
Includes our interests in Argyle (100%) and Diavik (60%).
(k)
Includes our 82% interest in the Hail Creek coal mine (until 1 August
2018), our 80% interest in the Kestrel underground coal mine (until
1 August 2018) and interests in the Winchester South (until 1 June
2018) and Valeria development projects (until 1 August 2018).
On 1 June 2018, we sold our entire 75% interest in the Winchester
South coal development project in Queensland, Australia, to
Whitehaven Coal Limited for US$200 million.
On 1 August 2018, we sold our entire 82% interest in the Hail Creek
coal mine and 71.2% interest in the Valeria coal development project
in Queensland, Australia, to Glencore for US$1.7 billion.
On 1 August 2018, we sold our entire 80% interest in the Kestrel
underground coal mine in Queensland, Australia, to a consortium
comprising private equity manager EMR Capital (EMR) and PT Adaro
Energy Tbk (Adaro), an Indonesian listed coal company, for US$2.25
billion.
Rio Tinto Coal Australia’s operating assets of US$(837) million at
31 December 2018 included provisions for onerous contracts in
relation to rail infrastructure capacity and capital gains tax payable on
the divestments announced in the year, partly offset by financial
assets and receivables relating to contingent royalties and disposal
proceeds. Following a change in management responsibility in 2019,
these amounts are reported within "Other operations" at 31
December 2020 and 31 December 2019, with no restatement of the
31 December 2018 comparative amount.
(l)
Includes our interests in Rio Tinto Fer et Titane (100%), QIT
Madagascar Minerals (QMM, 80%) and Richards Bay Minerals
(attributable interest of 74%).
The disclosures in this note include certain Alternative performance
measures (APMs). For more information on the APMs used by the Group,
including definitions and calculations, please refer to pages 329-333.
(a) Gross product sales includes the sales revenue of equity accounted
units on a proportionately consolidated 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 of subsidiaries and the Group’s share relating to
equity accounted units represents earnings attributable to owners of
Rio Tinto before: tax, net finance items, depreciation and amortisation
charged to the income statement in the period and excludes the
EBITDA impact of the same items that are excluded from underlying
earnings as defined in note 2.
(c) Represents profit after tax for the period attributable to the owners of
the Rio Tinto Group. Business unit earnings are stated before finance
items but after the amortisation of discount related to provisions.
Earnings attributed to business units do not include amounts that are
excluded in arriving at underlying earnings.
(d) 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.
(e) 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 the Pilbara and our
portside trading business are eliminated through the Iron Ore "intra-
segment" line and transactions between IOC and the portside trading
business are eliminated through "inter-segment transactions".
(f)
In order to reflect the evolution of the Aluminium business, the
following changes have been implemented:
–
–
The consolidation line for Bauxite & Alumina has been removed
to reflect the less integrated nature of the business and the
evolution of the Bauxite business towards a primarily export
oriented operation. As a result of this change, the intra-group
segment elimination for Gross product sales, Underlying
EBITDA, Net Earnings and Operating assets between bauxite and
alumina are now reported on line "Intra-segment and other".
The intra-segment eliminations for the year ended 31 December
2020 would have been US$722 million, US$31 million, US$21
million and US$7 million respectively. For the year ended 31
December 2019 the eliminations were US$825 million, US$10
million, US$7 million and US$27 million. For the year ended 31
December 2018 the eliminations were US$861 million, US$7
million, US$5 million and US$20 million.
The Underlying EBITDA and Net Earnings have been restated to
include the impact of the legacy alumina contracts (2019:
US$218 million and US$171 million, respectively; 2018: US$457
million and US$355 million, respectively) in the Alumina
business instead of being included in the Other product group
items line, in order to provide a comprehensive view of the
performance of the Alumina business.
308
308
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements
Financial Statements
Notes to Financial Information by Business Unit continued
(m)
Includes our interests in Energy Resources of Australia (ERA) and in
Rössing Uranium Limited (Rössing) (68.6%), up until the sale of
Rössing on 16 July 2019. In February 2020, our interest in ERA
increased from 68.4% to 86.3% as a result of new ERA shares issued
to Rio Tinto under the Entitlement Offer and Underwriting Agreement
to raise funds for the rehabilitation of the Ranger Project Area.
(n) Simfer Jersey Limited, 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.
(o) Other operations include our 100% interest in the Gove alumina
refinery, Rio Tinto Marine and, with effect from the first half of 2019,
the remaining operating assets of Rio Tinto Coal Australia. As at 31
December 2020, these include provisions for onerous contracts in
relation to rail infrastructure capacity, partly offset by deferred tax
assets and financial assets and receivables relating to contingent
royalties and disposal proceeds. Refer to note (k).
(p) 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.
(q) Operating assets of subsidiaries is comprised of net assets excluding
post-retirement assets and liabilities, net of tax, and before deducting
net debt. Operating assets are stated after the deduction of non-
controlling interests – these are calculated by reference to the net
assets of the relevant companies (ie inclusive of such companies’
debt and amounts due to or from Rio Tinto Group companies).
(r)
Assets and liabilities held for sale at 31 December 2018 included our
interest in Rössing Uranium Limited, the ISAL smelter, the Aluchemie
anode plant, and the Alufluor aluminium fluoride plant.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
309
309
Financial Statements Financial statements continued
Financial Statements
Australian Corporations Act – Summary of ASIC Relief
Australian Corporations Act – summary of ASIC relief
Those consolidated financial statements must also be audited in relation to
their compliance with relevant Australian and UK requirements.
Rio Tinto Limited must also prepare a Directors’ Report which satisfies the
content requirements of the Corporations Act (applied on the basis that for
these purposes the consolidated entity is the Group, and the consolidated
financial statements cover the Group). This includes a Remuneration
Report (see pages 140-185) prepared in accordance with the requirements
of the Corporations Act.
Rio Tinto Limited is also required to comply generally with the lodgement
and distribution requirements of the Corporations Act (including timing
requirements) in relation to those consolidated financial statements
(including any concise financial statements), the Auditors’ report and the
Directors’ Report. The Corporations Act also requires that a non-binding
resolution to adopt the Remuneration Report be voted on by shareholders
at Rio Tinto Limited’s annual general meeting.
Rio Tinto Limited is not required to prepare separate consolidated financial
statements solely for it and its controlled entities. Rio Tinto Limited is also
not required to prepare and lodge parent entity financial statements for
itself in respect of each relevant financial year.
Rio Tinto Limited must, however, in accordance with the Corporations Act
include in the consolidated financial statements for the Group, as a note,
various parent entity information regarding Rio Tinto Limited (including in
relation to assets, liabilities, shareholders’ equity, profit and loss, income,
guarantees, contingent liabilities, and contractual commitments) prepared
in accordance with AAS (see page 280).
Pursuant to section 340 of the Australian Corporations Act 2001
(Corporations Act), the Australian Securities and Investments Commission
issued an order dated 24 July 2020 that granted relief to Rio Tinto Limited
from certain requirements of the Corporations Act in relation to its
financial statements and associated reports. The order essentially
continues the relief that has applied to Rio Tinto Limited since the
formation of the Group’s dual listed companies (DLC) structure in 1995.
The order applies to Rio Tinto Limited’s financial reporting obligations for
the financial years and half-years ending between 30 June 2020 and 30
June 2023 inclusive.
In essence, instead of being required under the Corporations Act to prepare
consolidated financial statements covering only itself and its controlled
entities, the order allows Rio Tinto Limited to prepare consolidated
financial statements in which it, Rio Tinto plc and their respective
controlled entities are treated as a single economic entity. In addition,
those consolidated financial statements are to be prepared:
– in accordance with the principles and requirements of International
Financial Reporting Standards as adopted by the European Union (EU
IFRS) rather than the Australian Accounting Standards (AAS) (except for
one limited instance in the case of any concise report), and in
accordance with UK financial reporting obligations generally;
– on the basis that the transitional provisions of International Financial
Reporting Standard 1, First-time Adoption of International Financial
Reporting Standards, should be applied using the combined financial
statements previously prepared for Rio Tinto Limited, Rio Tinto plc and
their respective controlled entities under Generally Accepted
Accounting Principles in the United Kingdom, under which the DLC
Merger between Rio Tinto Limited and Rio Tinto plc was accounted for
using “merger”, rather than “acquisition”, accounting (reflecting that
neither Rio Tinto Limited nor Rio Tinto plc was acquired by, or is
controlled by, the other; and meaning that the existing carrying
amounts, rather than fair values, of assets and liabilities at the time of
the DLC Merger were used to measure those assets and liabilities at
formation);
– on the basis that Rio Tinto Limited and Rio Tinto plc are a single
company (with their respective shareholders being the shareholders in
that single company); and
– with a reconciliation, from EU IFRS to AAS, of the following amounts:
consolidated loss/profit for the financial year, total consolidated
comprehensive loss/income for the financial year and total consolidated
equity at the end of the financial year (see page 205).
310
310
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial statements
Financial Statements
Directors’ Declaration
Directors’ declaration
Directors' statement of responsibilities in relation to the Group financial statements,
Directors’ statement of responsibilities in relation to the Group financial statements,
Rio Tinto plc financial statements and Rio Tinto Limited financial statements
Rio Tinto plc financial statements and Rio Tinto Limited financial statements
The directors are responsible for preparing the Annual Report, the
Remuneration Report and the financial statements in accordance with
applicable law and regulations.
The directors are also responsible for safeguarding the assets of the
companies and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
UK and Australian company law requires the directors to prepare financial
statements for each financial year. Under UK law the directors have elected
to prepare the Group financial statements in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards
(IFRSs) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union (IFRSs as adopted by the EU), and the Rio Tinto plc
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law), including FRS 101 “Reduced disclosure framework”.
Under Australian law, the directors are also required to prepare certain
Rio Tinto Limited parent company financial statements in accordance with
Australian Accounting Standards (AAS). In preparing the Group financial
statements, the directors have also elected to comply with IFRSs, issued by
the International Accounting Standards Board (IASB).
Under UK and Australian company law the directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the companies as at the end of
the financial year, and of the profit or loss of the companies and Group for
the period (as applicable).
In preparing these financial statements, the directors are required to:
– select suitable accounting policies and apply them consistently;
– make judgments and estimates that are reasonable and prudent;
– state whether IFRSs as adopted by the EU, applicable UK Accounting
Standards and AAS have been followed, subject to any material
departures disclosed and explained in the Group and parent company
financial statements respectively; and
– prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the companies will
continue in business.
The directors are responsible for the maintenance and integrity of the
Group’s website. Legislation governing the preparation and dissemination
of financial statements may differ between jurisdictions in which the
Group reports.
Each of the current directors, whose names and function are listed on
pages 116-117 in the Governance section, confirm that, to the best of their
knowledge:
– the Rio Tinto Group financial statements and notes, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, IFRS as
adopted by the EU, the Australian Corporations Act 2001 as amended
by the Australian Securities and Investments Commission Order dated
24 July 2020, the UK Companies Act 2006 and Article 4 of the IAS
Regulation, give a true and fair view of the assets, liabilities, financial
position and profit of the Group;
– the Rio Tinto plc financial statements and notes, which have been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, give a true and fair view of the assets, liabilities,
financial position and profit of the company;
– the Rio Tinto Limited parent company disclosures, which have been
prepared in accordance with the AAS and Australian Corporations Act
2001 as amended by the Australian Securities and Investments
Commission Order dated 24 July 2020, give a true and fair view of the
assets, liabilities, financial position and profit of the company;
– the Strategic Report section of the Annual Report includes a fair review
of the development and performance of the business and the position
of the Group, together with a description of the principal risks and
uncertainties that it faces; and
– there are reasonable grounds to believe that each of the Rio Tinto
Group, Rio Tinto plc and Rio Tinto Limited will be able to pay its debts
as and when they become due and payable.
The directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the transactions of the companies and
the Group and disclose with reasonable accuracy at any time the financial
position of the companies and the Group and enable them to ensure that:
The directors have been given the declarations by the Chief Executive and
Chief Financial Officer required by section 295A of the Australian
Corporations Act 2001 as amended by the Australian Securities and
Investments Commission Order dated 24 July 2020.
– the Group financial statements comply with the UK Companies Act
2006, the Australian Corporations Act 2001 as amended by the
Australian Securities and Investments Commission Order dated 24 July
2020 and Article 4 of the IAS Regulation;
Disclosure of information to auditors
The directors in office at the date of this report have each confirmed that:
– so far as they are aware, there is no relevant audit information of which
– the Rio Tinto plc financial statements comply with the UK Companies
the Group’s auditors are unaware; and
Act 2006;
– the Rio Tinto Limited parent company disclosures comply with
the Corporations Act as amended by the Australian Securities and
Investments Commission Order dated 24 July 2020; and
– the Remuneration Report complies with the UK Companies Act 2006
and the Australian Corporations Act 2001 as amended by the Australian
Securities and Investments Commission Order dated 24 July 2020 .
– they have taken all the steps that they ought to have taken as a director
to make themselves aware of any relevant audit information and to
establish that the Group’s auditors are aware of that information.
This declaration is made in accordance with a resolution of the Board.
Simon Thompson
Chairman
Jakob Stausholm
Chief Executive
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
311
311
Financial Statements Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
1.
OUR OPINIONS ARE UNMODIFIED
In KPMG UK’s opinion:
the financial statements give a true and fair view of the state of the Group’s and of the UK Parent Company’s, Rio Tinto plc, affairs as at 31
December 2020, and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006, and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union (“IFRSs as adopted by the EU”);
the Group financial statements have been properly prepared in accordance with IFRSs as issued by the International Accounting Standards
Board (IASB). As explained in note 1 to the financial statements, the Group, in addition to complying with its legal obligation to apply
international accounting standards in conformity with the requirements of the Companies Act, the Group has also applied IFRSs as issued
by the IASB;
the Rio Tinto plc financial statements have been properly prepared in accordance with UK accounting standards, including FRS101 Reduced
Disclosure Framework; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards to the Group
financial statements, Article 4 of the IAS Regulation to the extent applicable.
In KPMG Australia’s opinion:
the consolidated financial statements are in accordance with the Australian Corporations Act 2001, as amended by the Australian
Securities and Investments Commission Order dated 24 July 2020 (the “ASIC Order”) including:
-
-
giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year then
ended; and
comply with IFRSs as adopted by the EU and the Australian Corporations Regulations 2001
For the purpose of these reports, the terms ‘we’ and ‘our’ denote KPMG UK (KPMG LLP) in relation to UK responsibilities and reporting
obligations to the members of Rio Tinto plc, and KPMG Australia (KPMG) in relation to Australian responsibilities and reporting obligations to
the members of Rio Tinto Limited. Rio Tinto (‘the Group’) consists of Rio Tinto plc, Rio Tinto Limited and the entities they controlled, including
the Group’s share of joint arrangements and associates, during the financial year ended 31 December 2020.
What our opinions cover
We have audited the Group financial statements for the year ended 31 December 2020 (FY20) included in the Annual Report and Accounts,
which comprise:
Rio Tinto Group
Group Balance Sheet
Group Income Statement
Group Statement of Comprehensive Income
Group Statement of Changes in Equity
Group Statement of Cash Flows
Notes (a) to the Group Financial Statements, including the summary of significant accounting policies, the outline of dual listed companies
structure and basis of financial statements; and the Rio Tinto financial information by business unit
KPMG UK has audited the Rio Tinto plc company financial statements for the year ended 31 December 2020, which comprise the parent
company balance sheet; the parent company statement of changes in equity; and related notes, which include a description of the significant
accounting policies and other explanatory information.
KPMG Australia has considered the Directors’ declaration to be part of the Group financial statements when forming its opinion under the
requirements of the Corporations Act 2001, as amended by the ASIC Order. Included within the Group financial statements KPMG Australia has
audited is the Reconciliation with Australian Accounting Standards. KPMG Australia has also audited the Remuneration Report included in the
Directors’ report for the year ended 31 December 2020.
Basis for opinions
We conducted our audits in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), Australian Auditing Standards (“ASAs”) and
applicable laws. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Statements section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinions.
(a) KPMG UK has audited notes 1 – 42 and notes 44 – 45. KPMG Australia has audited notes 1 – 45.
312
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
2.
OVERVIEW OF OUR AUDITS
Key audit matters
Evaluation of indicators of impairment or impairment reversal of intangible assets and property
plant and equipment in specific cash generating units
Evaluation of provisions for close-down, restoration and environmental obligations
Evaluation of provisions for uncertain tax positions
Recoverability of Rio Tinto Plc’s investments in its subsidiaries
Item
3.1
3.2
3.3
3.4
Audit Committee
interaction
During the year, the Audit Committee (AC) met six times. KPMG is invited to attend all Audit Committee meetings and
is invited to meet with the AC in private sessions without Executive Directors being present. For each Key Audit
Matter, we have set out communications with the Audit Committee in Section 3, including matters that required
particular judgment.
The matters included in the Audit Committee Chair’s report on page 133 are consistent with our observations of those
meetings. Our audit opinions and matters included in this report are consistent with those discussed and included in
our reports to the Rio Tinto Audit Committee.
Our Independence We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities; the Australian Corporations Act 2001
as amended by the ASIC Order; and the relevant ethical
requirements of the Australian Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards).
We have not provided any services which are prohibited by the
standards noted above to the Group during the year ended 31
December 2020 (FY20) or subsequently.
We were first appointed as auditor in May 2020 by the
shareholders following votes at the Rio Tinto plc and Rio Tinto
Limited annual general meetings, this being our first year of
engagement.
Total audit fee
$17.3m
Total non-audit fees
Non-audit fee as a % of
audit fee %
Next financial period
which requires a tender
Tenure of Group signing
and component
partners
$2.3m
13.3%
31
December
2030
1 year
Materiality
(Section 6 below)
The scope of our work is influenced by our view of materiality and
our assessed risk of material misstatement.
Materiality levels used in our audit
600
$550m
We have determined overall materiality for the Group at $550m.
A key judgment in determining materiality (and performance
materiality) was the appropriate benchmark to select, based on our
perception of the needs of shareholders. We considered which
benchmarks and Key Performance Indicators have the greatest
bearing on shareholder decisions.
We determined that Profit Before Tax for continuing operations, is
the key measure for performance of the Group. As such, we based
our materiality on Profit Before Tax for continuing operations
excluding certain identified items which could significantly distort
results in any one particular year, of which $550m represents 3.3%.
400
200
0
$358m
$340m
$250m
$32m $25m
p
u
o
r
G
M
C
P
M
P
G
M
C
H
M
C
L
T
D
R
Group Group Materiality
PCM
Parent Company Materiality
GPM
Group Performance Materiality
HCM
Highest Component Materiality
LCM
Lowest Component Materiality
RDT
Reporting Differences Threshold
Annual Report 2020 | riotinto.com
313
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Group scope
(section 7 below)
Top-down, we performed our risk assessment and planning to
determine the Group’s components that required involvement
from component auditors around the world. We scoped:
2 components, the Pilbara and Oyu Tolgoi as individually
financially significant components which were subject to full
scope audits by component auditors;
12 further components subject to full scope audits by
component auditors;
8 components subject to audit of account balances associated
to significant or elevated risks on either provision for close-
down, restoration and environmental obligations or asset
valuations; and
15 further components subject to audit of account balances to
ensure sufficient audit coverage.
We also considered the extent to which Rio Tinto operates shared
service centres for its transaction processing. In particular, across
sales and purchase processes, transactions that originate in one
country may be processed in Singapore and Delhi. As a result, we
established teams in Singapore and Delhi. The extent of testing of
controls in these locations is specific to the nature of transactions
processed. We performed audit procedures centrally across the
Group, set out in more detail in Section 7 below.
In addition, we performed Group level analysis on the remaining
components to determine whether further risks of material
misstatement exist in those components.
We consider the scope of our audits, as agreed with the Audit
Committee, to be an appropriate basis for our audit opinions.
Coverage of Group financial statements
Profit
before
Tax
Total
Assets
59%
57%
14%
27%
11%
32%
9%
23%
Revenue
68%
Full scope
audit
Audit of
account balance
Out of
scope
The impact of
climate change on
our audit
In planning our audit, we considered the potential impacts of climate change on the Group’s business and its financial
statements. Unlike other major resources companies, the Group does not mine or extract hydrocarbons such as coal,
natural gas or oil but it does emit greenhouse gases directly from energy used in its mining operations, the processing
of metals and minerals, and the transportation of its products. The Group’s products are used in energy and carbon
intensive industries including steel or aluminium production. The Group has set out its targets under the Paris
Agreement to reduce carbon intensity by 30% and absolute emissions by 15% by 2030, and to be net carbon neutral
by 2050 for Scope 1 and Scope 2 emissions. Further information is provided in the Strategic Report on pages 79 to 85
and the Group’s Climate Change report.
Climate change initiatives and commitments impact the preparation of the Group’s financial statements in a variety of
ways, all with inherent uncertainties. As explained in note 1 of the financial statements, the Group has considered
certain commodity and carbon pricing scenarios in assessing the impact of climate change in preparing its financial
statements. For the Group, other judgments and estimates are also expected to include the setting of useful economic
lives for carbon intensive property and equipment (such as aluminium smelting or coal fired power plants), the
valuation of assets or the determination of impairment charges taking into account future pricing assumptions and
estimates of mine life and closure and rehabilitation costs. Climate change also impacts the long-term viability of
aspects of the mining industry especially given greenhouse gas intensity in the use of certain of the industry’s
products (measured under Scope 3 emissions).
However, whilst the Group has set targets to be carbon neutral by 2050, the consequences, in terms of investment, its
cost base and impact on cash flows are still being assessed as the Group considers how it will work towards meeting
these targets. To the extent there are known implications these have been reflected in the financial statements in
accordance with IFRS requirements and have been considered in our audit as set out in our key audit matters. It is
therefore likely that the future carrying amounts of assets or liabilities will change for these other judgments and
estimates as the Group responds to its climate change targets.
Our Key Audit Matters explain how we have assessed the Group’s climate related assumptions and relevant
disclosures in arriving at our audit conclusions. This includes the use of our own climate change and sustainability
specialists. We have also read the Group’s disclosure of climate related information in the front half of the annual
report and compared this to our knowledge gained from our financial statement audit work.
The Group’s disclosures in the financial statements of the potential impacts of climate change and the assumptions
used in setting key estimates and judgments has increased significantly this year. We have discussed with the Group
ways in which climate change disclosures should continue to evolve as the Group continues to evaluate pathways to
being net carbon neutral.
314
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
3.
KEY AUDIT MATTERS
What we mean
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on:
the overall audit strategy;
the allocation of resources in the audit; and
directing the efforts of the engagement team.
We include below the key audit matters in decreasing order of audit significance, together with our principal audit procedures to address those
matters and, as required for EU public interest entities, our results from those procedures. These matters were addressed in the context of,
and our results are based on, procedures undertaken for the purpose of our audit of the financial statements as a whole and in forming our
opinions thereon. We do not provide a separate opinion on these matters.
3.1
equipment in specific cash generating units
Evaluation of indicators of impairment or impairment reversal of intangible assets and property plant and
Financial Statement Elements
Our results
Cash Generating Units
FY20: Acceptable
Oyu Tolgoi copper-gold mine
Yarwun alumina refinery
Kitimat aluminium smelter
Description of the Key Audit Matter
Our response to the risk
The recoverable amounts of the Group’s assets are
affected by forward-looking assumptions and
estimation uncertainties. Specific to this year, these
include the effects of macroeconomic disruption
caused by the COVID-19 pandemic which has
impacted pricing of some of the Group’s products,
and, longer term, the impacts of climate change
which affect forward looking assumptions such as
commodity pricing.
Assessment of impairment indicators
The Group’s determination of whether an indicator of
impairment or impairment reversal exists is
judgmental and includes consideration of external
factors such as changes in commodity prices as well
as internal factors such as changes to estimated
future operating or capital costs.
The Oyu Tolgoi copper-gold mine, Yarwun alumina
refinery and Kitimat aluminium smelter cash
generating units (CGUs), have previously been
impaired. We assessed these CGUs as most at risk of
additional impairment or impairment reversal and as
the subject of this key audit matter. For Oyu Tolgoi
this included an assessment of the finalisation of the
Definitive Estimate in December 2020. The Group did
not identify indicators of impairment or impairment
reversal in respect of these CGUs.
Our procedures to address the risk included:
Control operation
Testing the effectiveness of the Group’s internal controls over assessment of
impairment indicators.
Tests of detail
In respect of the CGUs noted, we challenged the Group’s assessment of
potential indicators of impairment or impairment reversal, through;
comparing operational and financial performance in the period to approved
budgets;
assessing changes in external market conditions that could impact
operating costs; and
comparing forecast commodity prices used in the Group’s assessment to
market consensus forecasts.
In addition to the above, our work in relation to the Oyu Tolgoi CGU included:
understanding the impact of the Definitive Estimate on mine plan
assumptions, including remaining capital expenditure costs and date of first
production, to assess if the Definitive Estimate represented an indicator of
impairment or impairment reversal; and
understanding the status of discussions, with the Government of Mongolia,
to assess the basis for management’s conclusion that this is not an
impairment indicator.
Annual Report 2020 | riotinto.com
315
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Description of the Key Audit Matter
Our response to the risk
The net impairment charge recorded in FY20 of
$1,115 million relates largely to now fully impaired
assets. As part of our risk assessment we satisfied
ourselves that events or conditions had caused these
assets to have negligible value and therefore limited
estimation uncertainty.
>> Refer to notes 1(i) and 6, and the Audit
Committee’s views set out on page 133.
Impact of climate change
We used our sustainability specialists to assist in understanding the Group’s
approach to incorporating the impacts of climate change into its pricing
process. We used this information to challenge how the Group’s analysis of
indicators of impairment took factors such as the impact of climate change on
commodity pricing into account.
Assessing disclosures
We assessed the appropriateness of the related disclosures in notes 1 and 6 of
the financial statements against the accounting requirements.
Communications with Rio Tinto’s Audit Committee
We discussed with and reported to the Audit Committee:
How the outcome of the Definitive Estimate for Oyu Tolgoi compared to the scenarios considered as part of the 2019 impairment test.
How the current status of discussions with the Government of Mongolia compare to the risks anticipated at the time of the 2019
impairment test.
How the Group considered the impacts of climate change within its assessment of potential indicators of impairment or impairment
reversal, and, as explained in note 1 to the financial statements, that the financial statements do not yet reflect the financial reporting
consequences of how the Group will meet its target to be carbon net neutral by 2050.
Based on the risk identified and our procedures performed, we found the Group’s conclusion that there are no indicators of impairment or
impairment reversal in respect of the Oyu Tolgoi copper-gold mine, Yarwun alumina refinery and Kitimat aluminium smelter cash generating
units (CGUs) and related disclosures to be acceptable.
3.2
Evaluation of provisions for close-down, restoration and environmental obligations
Financial Statement Elements
Our results
Closure Provision carrying value
FY20: Acceptable
$13,335m at 31 December 2020
Description of the Key Audit Matter
Our response to the risk
The Group incurs legal and constructive obligations
for close-down and restoration activities which
include the dismantling and demolition of
infrastructure, the removal of residual materials and
the remediation of disturbed areas for mines and
certain refineries and smelters. Generally, there is
relatively limited activity within the Group or broader
industry of completing large scale restoration and
rehabilitation projects, and elements of restoration
and rehabilitation of each site are relatively unique to
the site. As such, there are limited comparable
historical precedents against which to benchmark
estimates of future costs, which increases estimation
uncertainty.
A significant proportion of the Group’s assets have
long remaining lives, which also increases the
estimation uncertainty relating to the rehabilitation
activities required, including considering the impact
of future environmental requirements and climate
change, and the timing and amount of the associated
future cash flows. Because of this, the effect of the
time value of money is material.
Our procedures to address the risk included:
Control operation
Testing internal controls over the Group’s process to estimate provisions for
close-down, restoration and environmental obligations, including controls over
the Groups selection of the assumptions, data, methods and models to be used.
This included controls over the determination of key inputs such as future
rehabilitation costs, the timing of these costs, the life of the operation or site,
the discount rate and the preparation of the underlying closure plan scenarios.
Tests of detail
For Pilbara, Kennecott and Gove refinery closure provisions as at 31 December
2020, we performed the following procedures:
we performed a retrospective review of the key cost assumptions to
evaluate the accuracy of the Group’s forecasting;
we examined the most recent closure studies and other technical material
prepared by the Group relating to changes in the closure provision to
assess the nature and scope of work undertaken. We compared estimated
closure costs included in the studies with those used in the calculation of
the provision;
for operations that the Group determined did not require a change in key
assumptions during the year, we considered the consistency of the Group’s
conclusion with our understanding of the obligations associated with that
operation and its closure remediation plan;
316
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Description of the Key Audit Matter
Our response to the risk
we assessed the sensitivity of closure provision calculations to changes in
key assumptions, and considered the reasonableness of the assumptions
with the greatest impact on the assessment for each site by comparing
them to independent sources of data or considering the approach
undertaken by the Group to determine them where external comparable
data was not available; and
We assessed an immaterial audit misstatement identified in the context of
the overall balance and the financial statements as a whole.
Our closure and valuation expertise
For Pilbara and the Gove refinery we used our closure specialists to assist us in
assessing:
the scope, competency and objectivity of the Group’s experts, both internal
and external to the Group, who produce the cost estimates;
the reasonableness of key assumptions made by the Group for closure
activities included in the closure scenarios by comparing them against our
understanding of the legislative requirements, the Group’s closure
commitments, industry practice and our understanding of the business;
the Group’s assumptions regarding the timing and costs of such activities
based on their experience and familiarity with applicable regulations and
the forecast life of the operation; and
the consistency of closure activities reflected in the Group’s models used to
determine the provision with the relevant closure plan.
We used our valuations specialists to assist us in evaluating the discount rate
applied by the Group to calculate the net present value of these provisions by
evaluating it against external data including yields on long-term government
bonds and external market research, using our specialist knowledge. .
Assessing disclosures
We assessed the appropriateness of the related disclosures in notes 1 and 25 of
the financial statements against the accounting requirements.
Close-down, restoration and environmental
remediation activities are governed by a combination
of legislative requirements, the Group’s policies, and
commitments made to stakeholders. These vary
across location, product and operation.
The Group has disclosed that the determination of
when an estimate associated with close-down,
restoration and environmental obligations is
sufficiently reliable to update is an area of judgment
that may have a significant effect on the amounts
recognised in the financial statements.
The evaluation of provisions for close-down,
restoration and environmental obligations is a key
audit matter due to the amount of the provision and
the judgment and specialised skills involved in
auditing the key inputs used by the Group to
determine the provision including:
the nature and timing of future close-down and
restoration activities including post-closure
monitoring and associated costs;
the life of the operation and timing of
commencement of rehabilitation activities;
the interpretation of legislative requirements;
and
the discount rate.
In 2020 the Group reduced the discount rate used to
value future closure obligations which resulted in an
increase to the close-down, restoration and
environmental provisions of $954 million.
We focussed on the locations most material and
sensitive to changes in key inputs being:
Rio Tinto Iron Ore (Pilbara)
Rio Tinto Kennecott
Gove refinery
>> Refer to notes 1(l) and 25, and the Audit
Committee’s views set out on page 133.
Communications with Rio Tinto’s Audit Committee
We discussed with and reported to the Audit Committee:
Our support for additional disclosures provided by management in addition to those in FY19, given the size of the company’s closure
obligations and the degree of estimation uncertainty and judgment in applying the relevant accounting principles to such long-lived
commitments.
Areas of particular auditor judgment
Having found the discount rate (1.5%) to be toward the upper end of the range we considered to be acceptable, we exercised judgment to
determine the acceptability of the closure provision balance given the discount rate used, taking into account our assessment of the
associated cash flows and the clarity of the associated disclosure of the sensitivity and impact of the closure provision to changes in the
discount rate.
Based on the risk identified and our procedures performed, we consider that the level of provisions for close-down, restoration and
environmental obligations and related disclosures to be acceptable.
Annual Report 2020 | riotinto.com
317
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
3.3
Evaluation of provisions for uncertain tax positions
Financial Statement Elements
Our results
Provisions for uncertain tax positions
FY20: Acceptable
Description of the Key Audit Matter
Our response to the risk
The Group operates across multiple tax jurisdictions
and is subject to periodic challenge by local tax
authorities on a range of tax matters including
transfer pricing, royalties, other resource and
production-based taxes, and indirect taxes.
Where the amount of tax payable is uncertain, the
Group establishes provisions based on judgment and
estimates relating to tax law, settlement negotiations
or changes in legislation. The Group maintain
material provisions for uncertain tax positions.
We focused our work on a number of uncertain tax
positions, including disputes with the Australian
Taxation Office (ATO) and outstanding assessments
received from the Mongolian Tax Authority.
As part of our risk assessment, we determined that
these uncertain tax positions have a high degree of
estimation uncertainty with a wide range of potential
outcomes. The evaluation of these provisions for
uncertain tax positions is a key audit matter due to
the judgment, estimation uncertainty and specialised
skills involved in auditing these provisions for
uncertain tax positions.
>> Refer to notes 1(n) and 9, and the Audit
Committee’s views set out on page 133.
Our procedures to address the risk included:
Control operation
We tested the effectiveness of certain internal controls over the Group’s
assessment of uncertain tax positions, including controls relating to the
interpretation of the relevant tax regulations in assessing transfer pricing
positions.
Our taxation expertise
Our tax and transfer pricing specialists used their knowledge and experience of
the application of legislation by the relevant tax authorities to assist us in
challenging the Group’s assessment of uncertain tax positions. This included
assessing:
the implications of results of historical tax audits, and outcomes from
comparable situations for the positions taken by the Group;
correspondence with tax authorities;
transfer pricing documentation and methodology for compliance with tax
law;
third party tax advice received by the Group; and
changes in tax legislation.
Assessing disclosures
We assessed the appropriateness of the Group’s tax disclosures in notes 1 and 9
of the financial statements against the accounting requirements.
Communications with Rio Tinto’s Audit Committee
We discussed with and reported to the Audit Committee:
How we considered specific external advice obtained by the Group in respect of these disputes when forming our conclusions regarding
the appropriateness of provisioning.
How we considered the merits of the technical tax positions adopted by the Group, having regard to relevant tax legislation and case law,
in determining the Group’s tax provisions.
The Group’s history of resolving disputes with tax authorities.
Based on the risk identified and our procedures performed, we consider that the level of tax provisioning and related disclosures to be
acceptable.
318
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
3.4
Recoverability of Rio Tinto plc’s investments in its subsidiaries (KPMG UK Only)
Financial Statement Elements
Our results
Carrying value of Rio Tinto plc’s
investments in its subsidiaries
FY20
$36,320m
FY20: Acceptable
Description of the Key Audit Matter
Our response to the risk
In respect of KPMG UK’s audit of the parent
company, Rio Tinto plc, the sole key audit matter
relates to the recoverability of its investment in its
subsidiaries of the group.
We performed the tests below rather than seeking to rely on any of the
company’s controls because the nature of the balance is such that we would
expect to obtain audit evidence primarily through the detailed procedures
described.
Their recoverability is not at a high risk of significant
misstatement or subject to significant judgment.
However, due to the value of these investments in
the context of the parent company financial
statements, this is the area that had the greatest
effect overall on our parent company audit.
Our procedures to address the risk included:
Tests of detail
Comparing the carrying amount of its investments with the relevant
subsidiaries’ draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries have historically
been profit-making.
Communications with Rio Tinto’s Audit Committee
We reported to the Audit Committee that based on the risk identified and our procedures performed, we found the company’s conclusion that
there is no impairment of its investments in subsidiaries to be acceptable.
Annual Report 2020 | riotinto.com
319
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
4.
GOING CONCERN, VIABILITY AND PRINCIPAL RISKS AND UNCERTAINTIES
(KPMG UK ONLY)
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group
or to cease their operations, and they have concluded that the Company’s and the Group’s financial position means that this is realistic. They
have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Going Concern
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s financial resources or ability to continue operations over the going concern
period. The risks we consider as most relevant to the level of the Group’s financial resources over this period relate to levels of demand and
commodity pricing.
We critically assessed the assumptions in the Directors’ downside scenarios relevant to liquidity and covenant metrics, in particular in
relation to revenue growth by comparing to historical trends and assessing whether downside scenarios applied take into account
reasonably possible downsides. The extent of our work was influenced by the level of liquidity.
We assessed the completeness of the going concern disclosure.
Our conclusions
We consider that the Directors’ use of the going concern basis of accounting in the preparation of the Group’s and Company’s financial
statements is appropriate.
We have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going
concern period.
We have nothing material to add or draw attention to in relation to the Directors’ statement in Note 1 to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of
that basis for the going concern period, and we found the going concern disclosure in Note 1 to be acceptable.
The related statement under the UK Listing Rules set out on page 190 is materially consistent with the financial statements and our audit
knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgments that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will
continue in operation.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of
emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Our reporting
Based on the knowledge we acquired during our financial statement audit, we have nothing further to add or draw attention to in relation
to:
the Directors’ confirmation within the viability statement that they have carried out a robust assessment of the emerging and principal
risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
the Principal Risks and Uncertainties disclosures describing these risks and explaining how they are being managed and mitigated; and
the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have
done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
Under the UK Listing Rules we are also required to review the Viability Statement. Based on the above procedures, we have concluded that
the above disclosures are materially consistent with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statement audit. As we
cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgments that
were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s
and Company’s longer-term viability.
320
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
5.
KPMG UK’S REPORTING ON OUR ABILITY TO DETECT IRREGULARITIES, AND OUR RESPONSE
Fraud – Identifying and responding to risks of material misstatement due to fraud
Fraud risk
assessment
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure by management to commit, or provide an opportunity to commit, fraud. Our risk
assessment procedures included:
Enquiries of management, internal audit and the Audit Committee, including obtaining and reviewing supporting
documentation, concerning the Group’s policies and procedures relating to:
-
-
detecting and responding to the risks of fraud; and
internal controls established to mitigate risks related to fraud;
Enquiries of management, internal audit and the Audit Committee as to whether they had knowledge of any
actual, suspected or alleged fraud;
Reading Board and Audit Committee minutes;
Considering remuneration incentive schemes and performance targets for management and Directors, including
the flexed and unflexed underlying earnings and STIP free cash flow target ranges for executive remuneration;
and
Discussions among the engagement team regarding how and where fraud might occur in the financial statements
and any potential indicators of fraud. The engagement team includes audit partners and staff who have extensive
experience of working with companies in the mining sector, and this experience was relevant to the discussion
about where fraud risks may arise. The discussions also involved our own forensic specialists to assist us in
identifying fraud risks based on discussions of the circumstances of the Group, who advised the engagement
team of fraud schemes that had arisen in similar sectors and industries and participated in the initial fraud risk
assessment discussions.
Risk
communications
Fraud risks
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud
throughout the audit. This included communication from the group to component audit teams of relevant fraud risks
identified at the group level and requests to component audit teams to report to the group audit team any instances
of fraud that could give rise to a material misstatement of the Group financial statements.
As required by auditing standards we addressed the risk of management override of controls and the risk of
fraudulent revenue recognition. In particular we considered the risk that revenue is recorded in the wrong period and
the risk that Group and component management may be in a position to make inappropriate accounting entries, and
the risk of bias in accounting estimates and judgments
Procedures to
address fraud risks
Our audit procedures included evaluating the design and implementation, and operating effectiveness of internal
controls relevant to mitigate these risks.
We also performed substantive audit procedures including:
Comparing journal entries to supporting documentation for a selection based on risk including, for example,
those posted by senior finance management, those posted to unusual accounts or those containing unusual
journal descriptions;
Assessing significant accounting estimates for bias;
Obtaining third party confirmations for all material cash balances; and
Assessing when revenue was recognised, particularly focusing on revenue recognised in the days before and after
the year end date, and whether it was recognised in the correct year.
Work on the fraud risks was performed by a combination of component auditors and the group audit team.
Annual Report 2020 | riotinto.com
321
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Laws and regulations – Identifying and responding to risks of material misstatement due to non-compliance with laws and
regulations
Risk assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements. For this risk assessment, matters considered included the following:
our general commercial and mining sector experience;
through discussion with the Directors and other management (as required by auditing standards);
from inspection of the Group’s regulatory and legal correspondence; and
discussions with the Directors and other management about the policies and procedures regarding compliance
with laws and regulations.
As the Group operates in a regulated environment, our assessment of risks of material misstatement also involved
gaining an understanding of control environment including the Group’s higher-level procedures for complying with
regulatory requirements. Our work included understanding the facts and circumstances associated with the
destruction of rockshelters at Juukan Gorge and the Group’s assessment of its compliance with relevant laws and
regulations in relation to this matter.
Risk communication Our communication of identified laws and regulations risks was made throughout our team and we remained alert to
any indications of non-compliance throughout the audit. This included communication from the group to all
component audit teams of relevant laws and regulations identified at group level, and a request for component
auditors to report to the group team any instances of non-compliance with laws and regulations that could give rise
to a material misstatement of the Group financial statements.
Direct laws context
and link to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including:
financial reporting legislation (including related companies’ legislation)
distributable profits legislation
taxation legislation (direct and indirect)
pensions legislation
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related
financial statement items.
Most significant
indirect law/
regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could
have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of
fines or litigation or harm to the Group’s license to operate.
We identified the following areas as those most likely to have such an effect:
anti-bribery fraud and corruption
health and safety legislation
employment and social security legislation
environmental protection legislation
competition legislation
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to
enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any.
Therefore, if a breach of law or regulations is not disclosed to us or evident from relevant correspondence, our audit
will not detect that breach.
For the contingent liabilities disclosed in Note 30 we assessed disclosures against our understanding from legal
confirmations received from external counsel. For the uncertain tax positions referred to in Note 1 we performed
procedures as detailed in our key audit matter (page 318).
.
.
322
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the
financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We
are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
6.
OUR DETERMINATION OF MATERIALITY
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations
to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements,
both individually and in the aggregate, on the financial statements as a whole.
$550m
Materiality for the
financial
statements as a
whole
What we mean by materiality
This is the amount representing the total magnitude of misstatements that we expect to influence the economic
decisions of the primary users of these financial statements.
Basis for determining materiality and judgments applied
Our assessment of overall group materiality was $550m. This was derived from the level of profit before tax for
continuing operations, excluding items which are outside of the normal course of business.
Profit before tax excluding certain identified items, removes the effects of items which could significantly distort
results in any one particular year. Furthermore, analyst forecasts predominately feature profit before tax, excluding
identified items, as the basis for earnings. Analyst consensus data supports our judgment that profit before tax,
excluding identified items, is a key indicator of performance from a reasonable investor perspective.
$358m
Performance
materiality
The identified items excluded in FY20 were:
net pre-tax impairments ($1,243m charge),
Materiality of $550m was determined by applying a percentage to the calculated adjusted profit before tax ($16,634
million). When using a profit-related measure to determine overall materiality, KPMG’s approach is to ordinarily apply
a percentage between 3 – 5% to the pre-tax measure. In setting overall materiality, we applied a rate of 3.3%, which is
at the low end of the allowable percentage range recognising that this was our first audit of the Group since
appointment in May 2020.
Materiality for the parent company financial statements as a whole was set at $340 million, determined with
reference to a benchmark of the parent company’s total assets of which it represents 0.8%.
What we mean
Our procedures on individual account balances and disclosures were performed to performance materiality, to reduce
to an acceptable level the risk that individually immaterial misstatements in individual account balances might add up
to a material amount across the financial statements as a whole.
Basis for determining performance materiality and judgments applied
We have considered performance materiality at a level of 65% of materiality for Rio Tinto Group’s financial
statements as a whole, and for the Parent Company financial statements to be appropriate, having taken account of:
The level of audit differences (adjusted and unadjusted) identified during previous audits by PwC; and
Our view of the strength and robustness of the control environment, including the tone at the top and culture of
Rio Tinto’s organisation as well as control deficiencies identified in previous audits.
Parent Company (Rio Tinto Plc) performance materiality is set at $221 million.
$25m
Audit
misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are clearly trivial from a quantitative point of view. We may
become aware of misstatements below this threshold which could alter the nature, timing and extent of our audit
procedures, for example if we identify smaller misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to Rio Tinto’s Audit Committee.
Basis for determining the audit misstatement reporting threshold and judgments applied
We set our audit misstatement posting at 5% of our materiality, rounded down to $25m. We will also report to the
Audit Committee any items that warrant reporting on qualitative grounds.
Annual Report 2020 | riotinto.com
323
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Group materiality of $550m compares to the main Financial Statement captions amounts as follows:
Total Revenue
2020
Total Assets
2020
Profit Before Taxation
2020
Financial Statement Caption
$44,611m
$97,390m
$15,391m
Group Materiality as % of caption
1.2%
0.6%
3.6%
7.
THE SCOPE OF OUR AUDIT
Group Scope
What we mean
How the Group audit team determined the procedures to be performed across the Group by component audit teams.
Top-down, we performed our risk assessment and planning to determine the Group’s components that required
involvement from component auditors around the world. We have scoped:
Two components, the Pilbara and Oyu Tolgoi as individually financially significant components which were
subjected to full scope audits by component auditors;
Twelve further components subjected to full scope audits by component auditors;
Eight components subjected to audit of account balances associated with significant or elevated risks on either
provision for close-down, restoration and environmental obligations or asset valuations; and
Fifteen futher components subjected to audit of account balances to ensure sufficient audit coverage.
Scope
Full scope audit
Audit of account balance
Number of components
Range of materiality applied
14
23
$32m – $250m
$32m – $125m
We have also performed audit procedures centrally across the Group, beyond the component scope set out above, in
the following areas:
Testing of IT systems and configurations;
Consolidation of the financial information;
Journal entry analytics, to identify journal entries with higher risk such as those posted by Group management
into component books, and manual entries into accounts where these are not expected (e.g. revenue);
Uncertain tax positions; and
Pensions.
In addition, we have performed group level analysis on the remaining components to determine whether further risks
of material misstatement exist in those components.
Work on the key audit matters (detailed in section 3) was performed by a combination of component auditors and the
group audit team.
Group audit team
oversight
What we mean
The extent of the Group audit team’s involvement in component audits.
As part of determining the scope and preparing our audit plan and strategy, the Group audit team held a global
planning conference in London to discuss key audit risks and obtain input from component teams.
The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks
detailed above and the information to be reported back. The Group team approved the component materialities,
which ranged from $32m to $250m, having regard to the mix of size and risk profile of the components.
324
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
2020
2019 (Planning)
Sites visited
Pilbara
Oyu Tolgoi (Mongolia)
Oyu Tolgoi (Virtual)
Montreal (Northern Hemisphere Hub)
Perth (Southern Hemisphere Hub)
Perth (Southern Hemisphere Hub)
Delhi (Group Services)
Brisbane (Controls and IT)
Richards Bay Minerals (South Africa)
Singapore commercial centre
The Group audit team shadowed PwC during its 2019 audit and during this time visited 7 component sites as part of
planning the 2020 audit. As a result of the coronavirus pandemic, site visits in 2020 were limited to the Pilbara, Perth
and a virtual visit to Oyu Tolgoi. The Group team met with the local audit teams and with local Rio Tinto management
to understand the performance of these business and the risks faced.
Aside from the site visits, frequent video conference calls were held throughout the audit with the component
auditors. The Group audit team inspected the component team’s key work papers related to the significant risks and
assessed the appropriateness of conclusions and the consistency between reported findings and work performed. At
these meetings, the findings reported to the Group team were discussed in more detail, and any further work
required by the Group team was then performed by the component auditor
8.
KPMG AUSTRALIA’S AUDIT OF THE DIRECTORS’ REMUNERATION REPORT
Our responsibilities
KPMG Australia is required to express an opinion on the Remuneration Report, included in pages 159 to 185 of the
Annual Report, based on its audit conducted in accordance with Australian Auditing Standards.
Directors’
responsibilities
Opinion
The Directors of Rio Tinto Limited are responsible for the preparation and presentation of the Remuneration Report
in accordance with Section 300A of the Corporations Act 2001.
In our opinion, the Remuneration Report of Rio Tinto Limited for the year ended 31 December 2020 complies with
Section 300A of the Australian Corporations Act 2001.
9.
OTHER INFORMATION IN THE ANNUAL REPORT
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Other
Information is financial and non-financial information in Rio Tinto’s annual reporting which is provided in addition to the consolidated financial
statements and the Auditor’s Report. Our opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether, based on our
financial statements audit work, the information is materially misstated or inconsistent with the
financial statements or our audit knowledge and report such misstatements or inconsistencies.
Our results
Based solely on that work we have
not identified material
misstatements or inconsistencies in
the other information.
Annual Report 2020 | riotinto.com
325
Financial Statements
Financial Statements
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Strategic report and directors’ report (KPMG UK only)
Our responsibility
Our reporting
Based solely on our work on the other information described above we are required to report to you
as follows:
we have not identified material misstatements in the strategic report and the Directors’ report; We have not identified material
misstatements in the strategic
report and the Directors’ report.
in our opinion the information given in those reports for FY20 is consistent with the financial
statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
Our responsibility
KPMG UK is required to form an opinion as to whether the part of the Directors’ Remuneration
Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance disclosures (KPMG UK ONLY)
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency
between the financial statements and our audit knowledge, and:
the Directors’ statement that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable, and provides the information necessary
for shareholders to assess the Group’s position and performance, business model and strategy;
the section of the annual report describing the work of the Audit Committee, including the
significant issues that the Audit Committee considered in relation to the financial statements,
and how these issues were addressed; and
the section of the annual report that describes the review of the effectiveness of the Group’s
risk management and internal control systems.
In our opinion the information given
in those reports for the year is
consistent with the financial
statements.
In our opinion those reports have
been prepared in accordance with
the Companies Act 2006.
Our reporting
In our opinion the part of the
Directors’ Remuneration Report to
be audited has been properly
prepared in accordance with the
Companies Act 2006.
Our reporting
Based on those procedures, we have
concluded that each of these
disclosures is materially consistent
with the financial statements and
our audit knowledge.
We are also required to review the part of Corporate Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules
for our review, and to report if a corporate governance statement has not been prepared by the
company.
We have nothing to report in this
regard.
326
Annual Report 2020 | riotinto.com
Independent auditors’ reports
Independent auditors’ reports
of KPMG LLP to the members of Rio Tinto plc
and of KPMG to the members of Rio Tinto Limited
Other matters on which we are required to report by exception (KPMG UK ONLY)
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent Company financial statements and the part of the Directors’ Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these
regards.
10. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities for the financial statements
As explained more fully in their statement set out on page 99, the Directors are responsible for: the preparation of the financial statements,
including being satisfied that they give a true and fair view in accordance with the relevant financial reporting frameworks; implementing such
internal control as they determine is necessary to enable the preparation of financial statements that give a true and fair view and are free
from material misstatement, whether due to fraud or error; assessing the Group, Rio Tinto plc’s and Rio Tinto Limited’s ability to continue as a
going concern and whether the use of the going concern basis of accounting is appropriate, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless they either intend to liquidate the Group, Rio Tinto plc and Rio Tinto Limited or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities, or error, and to issue our opinions in an auditor’s report. Reasonable assurance is a high level of
assurance but does not guarantee that an audit conducted in accordance with ISAs (UK) and ASAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of the primary users taken on the basis of the financial statements.
A fuller description of KPMG UK’s responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. A further
description of KPMG Australia’s responsibilities for the audit of the Financial Statements is located at the Auditing and Assurance Standards
Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Australian auditor’s
report.
11.
THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
KPMG UK’s report is made solely to Rio Tinto Plc’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
the terms of our engagement by the Company. KPMG Australia’s report is made solely to Rio Tinto Limited’s members, as a body, in
accordance with the Australian Corporations Act 2001. Our audit work has been undertaken so that we might state to the members of each
company those matters we are required to state to them in an auditor’s report, and the further matters we are required to state to them in
accordance with the terms agreed with the company, and for no other purpose. Accordingly, each of KPMG UK and KPMG Australia makes the
following statement: to the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Stephen Oxley (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
London, United Kingdom
22 February 2021
Trevor Hart
Partner
KPMG
Perth, Australia
22 February 2021
Annual Report 2020 | riotinto.com
327
Financial Statements
Financial statements continued
Financial Statements
Lead Auditor's Independence Declaration under Section 307C
Lead Auditor’s Independence Declaration under Section 307C
of the Australian Corporations Act 2001
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 audit of Rio Tinto Limited for the year ended 31 December 2020 there have been:
(a) no contraventions of the auditor independence requirements as set out in the Australian Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Rio Tinto Limited and the entities it controlled during the period.
KPMG
Trevor Hart
Partner
Perth
22 February 2021
Liability limited by a scheme approved under Professional Standards Legislation
328
328
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Alternative Performance Measures
Alternative Performance Measures
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 measure.
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 includes the sales revenue of equity accounted units on a proportionately consolidated 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.
Gross product sales measures revenue on a basis that is comparable to our Underlying EBITDA metric.
Consolidated sales revenue
Share of equity accounted unit sales and inter-subsidiary/equity accounted unit sales
Gross product sales(a)
(a) Gross product sales was previously referred to as Gross sales revenue in the 2019 Annual Report.
2020
US$m
44,611
2,407
47,018
2019
US$m
43,165
2,202
45,367
2018
US$m
40,522
2,313
42,835
Underlying EBITDA
Underlying EBITDA represents earnings attributable to owners of Rio Tinto 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 on page 331).
Profit after tax
Less (profits)/losses attributable to non-controlling interests
Profit after tax attributable to owners of Rio Tinto (net earnings)
Depreciation and amortisation in subsidiaries excluding capitalised depreciation
Depreciation and amortisation in equity accounted units
Finance items in subsidiaries
Taxation in subsidiaries
Taxation and finance items in equity accounted units
Add back profits/(losses) attributable to non-controlling interests
Impairment charges
(Gains)/losses on embedded commodity derivatives not qualifying for hedge accounting (including exchange)
Net losses/(gains) on consolidation and disposal of interests in businesses
Change in closure estimates (non-operating and fully impaired sites)
Gain on sale of wharf and land in Kitimat, Canada
Change in other exclusions
Underlying EBITDA
2020
US$m
10,400
(631)
9,769
4,074
576
1,751
4,991
443
631
1,272
(6)
—
401
—
—
23,902
2019
US$m
6,972
1,038
8,010
4,272
653
648
4,147
296
(1,038)
3,487
260
291
—
—
171
21,197
2018
US$m
13,925
(287)
13,638
3,909
650
33
4,242
372
287
132
(279)
(4,622)
376
(602)
—
18,136
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
329
329
Financial Statements
Alternative Performance Measures
Alternative Performance Measures continued
Alternative Performance Measures
Underlying EBITDA margin
Underlying EBITDA margin is defined as Group underlying EBITDA divided by gross product sales.
Underlying EBITDA
Gross product sales
Underlying EBITDA margin
2020
US$m
23,902
47,018
51 %
2019
US$m
21,197
45,367
47 %
2018
US$m
18,136
42,835
42 %
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is defined as Pilbara underlying EBITDA divided by Pilbara revenues, excluding freight
revenue.
Pilbara
Underlying EBITDA
Pilbara gross product sales
Freight revenue
Gross product sales
Pilbara underlying FOB EBITDA margin
Underlying EBITDA margin from Aluminium integrated operations
Underlying EBITDA margin from integrated operations is defined as underlying EBITDA divided by gross product sales.
Aluminium
Underlying EBITDA - integrated operations
Gross product sales - integrated operations
Underlying EBITDA margin from integrated operations
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined as underlying EBITDA divided by gross product sales.
Copper & Diamonds
Underlying EBITDA - product group operations
Gross product sales - product group operations
Underlying EBITDA margin - product group operations
Energy & Minerals
Underlying EBITDA - product group operations
Gross product sales - product group operations
Underlying EBITDA margin - product group operations
2020
US$m
18,896
27,027
1,487
25,540
74 %
2019
US$m
15,936
23,681
1,671
22,010
72 %
2020
US$m
2,227
8,458
26 %
2020
US$m
2,523
5,362
47 %
2020
US$m
1,756
4,962
35 %
2019
US$m
2,375
9,275
26 %
2019
US$m
2,385
5,800
41 %
2019
US$m
1,870
5,095
37 %
2018
US$m
11,267
18,359
1,688
16,671
68 %
2018
US$m
3,134
10,712
29 %
2018
US$m
3,043
6,468
47 %
2018
US$m
2,204
5,391
41 %
330
330
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Alternative Performance Measures
Underlying earnings
Underlying earnings 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.
Exclusions from underlying earnings are those gains and losses, that individually, or in aggregate with similar items, are of a nature and size to require
exclusion in order to provide additional insight into underlying business performance.
The following items are excluded from net earnings in arriving at underlying earnings in each period irrespective of the magnitude:
– Net gains/(losses) on disposal and consolidation of interests in businesses.
– Impairment charges and reversals.
– Profit/(loss) after tax from discontinued operations.
– Certain exchange and derivative gains and losses (as defined in note 2).
The reconciliation of underlying earnings to net earnings can be found in note 2.
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying earnings divided by the weighted average number of shares outstanding during the year.
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.
Basic earnings per ordinary share
Items excluded from underlying earnings per share
Basic underlying earnings per ordinary share
2020
(cents)
604.0
165.6
769.6
2019
(cents)
491.4
144.9
636.3
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
331
331
Financial Statements Alternative Performance Measures
Alternative Performance Measures continued
Alternative Performance Measures
APMs derived from cash flow statement
Capital expenditure
Capital expenditure comprises 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, hence, presented gross, before taking into account any
cash received from disposals 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.
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.
Net cash generated from operating activities
Less: Purchase of property, plant and equipment and intangible assets
Less: Lease principal payments
Add: Sales of property, plant and equipment and intangible assets
Free cash flow
2020
US$m
15,875
(6,189)
(324)
45
9,407
2019
US$m
14,912
(5,488)
(315)
49
9,158
2018
US$m
11,821
(5,430)
—
586
6,977
APMs derived from the balance sheet
Net debt
Net debt is total borrowings plus lease liabilities less cash and cash equivalents and other liquid investments, adjusted for derivatives related to net debt.
Net debt measures how we are managing our balance sheet and capital structure. Refer to Consolidated net debt note for the reconciliation on page 243.
Net gearing ratio
Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at the end of each period. It demonstrates the degree to which the
Group's operations are funded by debt versus equity.
Net debt
Net debt
Total equity
Net debt plus total equity
Net gearing ratio
Operating assets
The Group's operating assets comprise our share of net assets before deducting net debt.
This measure shows the net value of assets and liabilities used to generate profits.
Equity attributable to owners of Rio Tinto
Add: Net debt
Operating assets
2020
US$m
664
664
51,903
52,567
1%
2019
US$m
3,651
3,651
45,242
48,893
7%
2020
US$m
47,054
664
47,718
2019
US$m
40,532
3,651
44,183
332
332
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Alternative Performance Measures
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as underlying earnings excluding net interest divided by average capital employed (operating
assets).
ROCE measures how efficiently we generate profits from investment in our portfolio of assets.
Profit after tax attributable to owners of Rio Tinto (net earnings)
Items added back to derive underlying earnings (refer to page 226)
Underlying earnings
Add/(deduct):
Finance income per the income statement
Finance costs per the income statement
Tax on finance cost
Non-controlling interest share of net finance costs
Net interest cost in equity accounted units (Rio Tinto share)
Adjusted net interest
Adjusted underlying earnings
Equity attributable to owners of Rio Tinto - beginning of the period
Net debt/(cash) - beginning of the period
Capital employed - beginning of the period
Equity attributable to owners of Rio Tinto - end of the period
Net debt - end of the period
Capital employed - end of the period
Average capital employed
Return on capital employed
2020
US$m
9,769
2,679
12,448
(141)
268
(38)
(107)
32
14
12,462
40,532
3,651
44,183
47,054
664
47,718
45,951
27 %
2019
US$m
8,010
2,363
10,373
(300)
554
(145)
(25)
38
122
10,495
43,686
(255)
43,431
40,532
3,651
44,183
43,807
24 %
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
333
333
Financial Statements Financial Summary 2011-2020
Financial Statements
Financial Summary 2011-2020
US$m
Gross product sales(a)
Share of equity accounted units' sales revenue
and items excluded from underlying earnings
Consolidated sales revenue
Underlying profit before interest and tax (PBIT)
Finance costs(b)
Exchange differences and derivatives(c)
Other exclusions from underlying earnings
Profit/(loss) before tax (PBT)
Tax on exclusions
Tax on underlying PBT
Loss after tax from discontinued operations
Attributable to non-controlling interests
Net earnings/(loss)(d)
Underlying EBITDA
Underlying earnings
Earnings/(loss) per share (basic) – continuing
operations
Underlying earnings per share (basic) –
continuing operations
Dividends per share: declared for year(e)
Rio Tinto shareholders (US cents)
Rio Tinto plc (pence)
Rio Tinto Limited (Aus. cents)
Net assets
Fixed assets(f)
Other assets less liabilities
Provisions (including deferred tax liabilities)
Net (debt)/cash
Non-controlling interests
Equity attributable to owners of Rio Tinto
Capital expenditure(g)
Acquisitions
Disposals
Net cash generated from operating activities(h)
Cash flows before financing activities(i)
Ratios
Operating margin(j)
Net (debt)/cash to total capital(k)
Underlying earnings: owners' equity(l)
Interest cover(m)
2011
65,298
2012
55,597
2013
54,575
2014
50,041
2015
36,784
2016
35,336
2017
41,867
2018
42,835
2019
45,367
2020
47,018
(4,769)
(4,655)
(3,404)
(2,377)
(1,955)
(1,555)
(1,837)
(2,313)
(2,202)
(2,407)
60,529
23,662
(759)
2
(9,633)
13,272
135
(6,607)
(10)
(955)
5,835
28,640
15,572
50,942
13,467
(616)
695
(15,977)
(2,431)
2,896
(3,485)
(7)
(1)
(3,028)
19,245
9,269
51,171
16,039
(794)
(3,362)
(8,378)
3,505
2,642
(5,068)
—
2,586
3,665
21,509
10,217
47,664
13,851
(967)
(2,021)
(1,311)
9,552
423
(3,476)
—
28
6,527
19,665
9,305
34,829
7,310
(1,076)
(3,458)
(3,502)
(726)
567
(1,560)
—
853
(866)
12,621
4,540
33,781
8,053
(1,360)
622
(972)
6,343
(155)
(1,412)
—
(159)
4,617
13,510
5,100
40,030
13,363
(1,090)
(1,078)
1,621
12,816
(596)
(3,369)
—
(89)
8,762
18,580
8,627
40,522
13,208
(680)
923
4,716
18,167
(801)
(3,441)
—
(287)
13,638
18,136
8,808
43,165
15,979
(638)
(273)
(3,949)
11,119
391
(4,538)
—
1,038
8,010
21,197
10,373
44,611
18,786
(504)
(1,247)
(1,644)
15,391
204
(5,195)
—
(631)
9,769
23,902
12,448
303.9c
(163.4)c
198.4c
353.1c
(47.5)c
256.9c
490.4c
793.2c
491.4c
604.0c
809.7c
501.3c
553.1c
503.4c
248.8c
283.8c
482.8c
512.3c
636.3c
769.6c
145.00c
90.47p
134.01c
167.00c
106.77p
160.18c
192.00c
120.10p
213.14c
215.00c
134.88p
256.07c
215.00c
143.13p
296.80c
170.00c
134.36p
222.75c
290.00c
212.56p
366.25c
307.00c
232.78p
421.73c
231.00c
177.47p
349.74c
309.00c
221.86p
397.48c
91,529
1,632
(25,935)
(8,342)
(6,685)
52,199
90,580
8,478
(22,126)
(19,192)
(11,187)
46,553
(12,573)
(4,156)
386
20,235
3,245
(17,615)
(1,335)
251
9,430
(8,813)
81,554
8,224
(18,221)
(18,055)
(7,616)
45,886
(13,001)
4
1,896
15,078
4,132
80,669
4,596
(18,176)
(12,495)
(8,309)
46,285
70,226
4,037
(16,352)
(13,783)
(6,779)
37,349
68,104
4,128
(16,915)
(9,587)
(6,440)
39,290
70,735
2,495
(18,270)
(3,845)
(6,404)
44,711
64,351
2,498
(17,281)
255
(6,137)
43,686
(8,162)
—
887
14,286
7,783
(4,685)
(3)
(38)
9,383
4,783
(3,012)
—
761
8,465
6,361
(4,482)
—
2,675
13,884
11,511
(5,430)
(5)
7,733
11,821
13,142
37%
-12%
28%
27
25%
-25%
19%
13
30%
-25%
22%
13
28%
-19%
20%
13
20%
-24%
11%
7
23%
-17%
13%
7
32%
-7%
21%
14
31%
1%
20%
22
64,902
2,314
70,347
3,124
(18,323) (20,904)
(664)
(4,849)
47,054
(3,651)
(4,710)
40,532
(5,488)
—
(80)
(6,189)
—
10
15,875
9,319
14,912
9,411
36%
7%
25%
28
39%
1%
28%
39
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Gross product sales includes 100% of subsidiaries’ sales revenue and the Group’s share of the sales revenue of equity accounted units (after adjusting for sales to subsidiaries).
Finance costs include net interest and amortisation of discount. From 1 January 2019, it also included the impact of adopting IFRS 16 “Leases”.
Under IFRS, as defined in note 1, certain gains and losses on currency exchange and on revaluation of derivatives are included in the Group’s net earnings/(loss). These items are excluded from
underlying earnings.
Underlying earnings is an additional measure of earnings, which is reported by Rio Tinto with its IFRS (as defined in note 1) results to provide greater understanding of the underlying business
performance of its operations. It is defined in note 2 to the financial statements. Underlying profit before interest and tax (PBIT) is similar to underlying earnings except that it is stated before interest
and tax.
Dividends per share are the amounts declared in respect of each financial year. These usually include an interim dividend paid in the year, and a final dividend paid after the end of the year. The
special dividend of 93 US cents per share paid out based on the 2020 results is not included above.
Fixed assets include: property, plant and equipment, intangible assets, goodwill, and investments in, and long-term loans to, equity accounted units. From 1 January 2019, it also included the impact
of adopting IFRS 16 “Leases”.
Capital expenditure is presented gross, before taking into account any disposals of property, plant and equipment or intangible assets.
Net cash generated from operating activities represents the cash generated by the Group’s consolidated operations, after payment of interest, taxes, and dividends to non-controlling interests in
subsidiaries.
Cash flow before financing activities is stated before deducting dividends payable to owners of Rio Tinto.
Operating margin is the percentage of underlying PBIT, after excluding tax on equity accounted units, to gross product sales.
Total capital comprises equity attributable to owners of Rio Tinto plus net debt and non-controlling interests.
Underlying earnings: owners’ equity represents underlying earnings expressed as a percentage of the mean of opening and closing equity attributable to owners of Rio Tinto.
Interest cover represents the number of times interest payable less receivable (excluding the amortisation of discount but including capitalised interest) is covered by underlying operating profit, less
amortisation of discount, plus dividends from equity accounted units. Underlying operating profit is similar to underlying earnings but is stated before tax, interest and share of profit after tax of
equity accounted units.
334
334
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
Financial Statements
Summary Financial Data in Australian
Dollars, Sterling and US Dollars
Summary Financial Data in Australian Dollars,
Sterling and US Dollars
2020
A$m
68,061
64,577
22,279
15,055
14,141
34,599
18,019
874.3c
1114.1c
566.21c
—
397.48c
119.63c
13,490
(864)
61,252
2019
A$m
64,810
61,664
15,884
9,960
11,443
30,281
14,819
702.0c
909.1c
2020
£m
36,624
34,749
11,989
8,101
7,609
18,618
9,696
470.5p
599.5p
2019
£m
35,443 Gross product sales
33,723 Consolidated sales revenue
8,687 Profit before tax from continuing operations
5,447 Profit for the year from continuing operations
6,258 Net earnings attributable to Rio Tinto shareholders
16,560 Underlying EBITDA
8,104 Underlying earnings(a)
383.9p Basic earnings per ordinary share(b)
497.1p Basic underlying earnings per ordinary share(a)(b)
Dividends per share to Rio Tinto shareholders(c)
469.97c
427.20c
349.74c
—
13,444
(5,216)
57,903
297.21p
—
221.86p
66.77p
7,259
(488)
34,592
259.28p
233.37p
177.47p
—
- paid – ordinary dividend
- paid – special dividend
- proposed – ordinary dividend
- proposed – special dividend
7,352 Cash flow before financing activities
(2,787) Net debt
30,940 Equity attributable to Rio Tinto shareholders
2020
US$m
47,018
44,611
15,391
10,400
9,769
23,902
12,448
604.0p
769.6p
386.0c
—
309.0c
93.0c
9,319
(664)
47,054
2019
US$m
45,367
43,165
11,119
6,972
8,010
21,197
10,373
491.4p
636.3p
331.0c
304.0c
231.0c
—
9,411
(3,651)
40,532
(a)
(b)
(c)
Underlying earnings exclude impairments and other charges of US$2,679 million (2019: US$2,363 million), which are analysed on page 226.
Basic earnings per ordinary share and basic underlying earnings per ordinary share do not recognise the dilution resulting from share options on issue.
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.
The financial data above has been extracted from the financial information set out on pages 200-300.
Annual Report 2020 | riotinto.com
Annual Report 2020 | riotinto.com
335
335
Financial Statements
Production,
Reserves and
Operations
An employee at our QMM operation in Madagascar,
where we delivered one of the best safety
performances across the Group. The wind turbine
generates power at the Diavik diamond mine in the
Northwest Territories, Canada.
336
Annual Report 2020 | riotinto.com
i
T
a
k
n
g
a
c
t
i
o
n
t
o
f
i
g
h
t
c
l
i
m
a
t
e
c
h
a
n
g
e
$1bn
for climate-related
projects
Annual Report 2020 | riotinto.com
337
Production, Reserves and Operations
Production, Reserves
and Operations
Metals and Minerals Production
Ore Reserves
Mineral Resources
Competent Persons
Mines and Production Facilities
339
341
345
350
352
338
Annual Report 2020 | riotinto.com
Production, Reserves and Operations
Metals and Minerals Production
ALUMINA (‘000 tonnes)
Jonquière (Vaudreuil) (Canada)(b)
Jonquière (Vaudreuil) specialty plant (Canada)
Queensland Alumina (Australia)
São Luis (Alumar) (Brazil)
Yarwun (Australia)
Rio Tinto total
ALUMINIUM (‘000 tonnes)
Alma (Canada)
Alouette (Sept-Îles) (Canada)
Arvida (Canada)
Arvida AP60 (Canada)
Bécancour (Canada)
Bell Bay (Australia)
Boyne Island (Australia)
Grande-Baie (Canada)
ISAL (Reykjavik) (Iceland)
Kitimat (Canada)
Laterrière (Canada)
Sohar (Oman)
Tiwai Point (New Zealand)
Tomago (Australia)
Rio Tinto total
BAUXITE (‘000 tonnes)
Gove (Australia)
Porto Trombetas (MRN) (Brazil)
Sangaredi (Guinea)
Weipa (Australia)
Rio Tinto total
BORATES (‘000 tonnes)(d)
Rio Tinto Borates – Boron (US)
COPPER (mined) (‘000 tonnes)
Bingham Canyon (US)
Escondida (Chile)
Oyu Tolgoi (Mongolia)(e)
Rio Tinto total
COPPER (refined) (‘000 tonnes)
Escondida (Chile)
Rio Tinto Kennecott (US)
Rio Tinto total
DIAMONDS (‘000 carats)
Argyle (Australia)
Diavik (Canada)
Rio Tinto total
GOLD (mined) (‘000 ounces)
Bingham Canyon (US)
Escondida (Chile)
Oyu Tolgoi (Mongolia)(e)
Rio Tinto total
GOLD (refined) (‘000 ounces)
Rio Tinto Kennecott (US)
IRON ORE (‘000 tonnes)
Hamersley mines (Australia)
Hamersley – Channar (Australia)(g)
Hope Downs (Australia)
Iron Ore Company of Canada (Canada)
Robe River – Robe Valley (Australia)
Robe River – West Angelas (Australia)
Rio Tinto total
MOLYBDENUM (‘000 tonnes)
Bingham Canyon (US)
See notes on page 340.
2020 Production
2019 Production
2018 Production
Rio Tinto
% share(a)
Total
Rio Tinto
share
100.0%
100.0%
80.0%
10.0%
100.0%
100.0%
40.0%
100.0%
100.0%
25.1%
100.0%
59.4%
100.0%
100.0%
100.0%
100.0%
20.0%
79.4%
51.6%
1,424
94
3,701
3,848
3,175
473
623
169
60
393
192
510
225
183
329
250
397
333
592
100.0%
12.0%
23.0%(c)
100.0%
12,299
11,629
16,506
35,009
1,424
94
2,961
385
3,175
8,039
473
249
169
60
98
192
303
225
183
329
250
79
265
305
3,180
12,299
1,395
7,428
35,009
56,131
Total
1,413
109
3,454
3,679
3,091
472
602
175
60
77
189
499
233
184
385
257
391
351
588
Rio Tinto
share
Rio Tinto
share
Total
1,413
109
2,763
368
3,091
7,744
472
241
175
60
19
189
296
233
184
385
257
78
279
303
1,444
1,444
124
3,697
3,509
3,103
124
2,958
351
3,103
7,980
465
584
173
52
136
189
497
233
212
436
257
380
341
592
465
234
173
52
34
189
295
233
212
436
257
76
270
305
3,171
3,231
12,201
11,060
13,701
35,411
12,201
12,540
12,540
1,327
6,165
35,411
55,105
13,134
13,039
1,576
5,868
30,437
30,437
50,421
100.0%
480
480
520
520
512
512
100.0%
30.0%
33.5%
140.0
1,125.9
149.6
30.0%
100.0%
233.9
84.8
140.0
337.8
50.2
527.9
70.2
84.8
155.0
100.0%
60.0%
100.0%
30.0%
33.5%
10,945
10,945
6,218
171.2
169.5
181.9
3,731
14,676
171.2
50.9
61.0
283.0
186.8
1,138.6
146.3
250.2
184.6
12,999
6,719
234.7
246.7
241.8
186.8
341.6
49.1
577.4
75.0
184.6
259.6
203.9
1,167.9
159.1
266.8
194.7
203.9
350.4
53.3
607.6
80.0
194.7
274.8
12,999
14,069
14,069
4,031
17,030
7,264
4,358
18,427
234.7
74.0
81.1
389.7
196.7
265.6
285.4
196.7
79.7
95.7
372.1
100.0%
117.5
117.5
218.7
218.7
198.0
198.0
(f)
210,682
210,682
209,392
209,392
220,612 220,612
100.0%
50.0%
58.7%
53.0%
53.0%
9,175
49,045
17,715
30,295
34,209
6,139
24,522
10,402
16,056
18,131
285,932
7,970
48,264
17,943
26,951
34,086
4,782
24,132
10,536
14,284
18,066
7,173
4,304
45,368
22,684
15,245
8,952
31,947
16,932
32,672
17,316
281,192
290,800
100%
20.4
20.4
11.2
11.2
5.8
5.8
Annual Report 2020 | riotinto.com
339
Production, Reserves and Operations
Production, Reserves and Operations
Metals and Minerals Production
continued
SALT (‘000 tonnes)
Dampier Salt (Australia)
SILVER (mined) (‘000 ounces)
Bingham Canyon (US)
Escondida (Chile)
Oyu Tolgoi (Mongolia)(e)
Rio Tinto total
SILVER (refined) (‘000 ounces)
Rio Tinto Kennecott (US)
TITANIUM DIOXIDE SLAG (‘000 tonnes)
Rio Tinto Iron & Titanium
(Canada/South Africa)(h)
URANIUM (‘000 lbs U3O8)
Energy Resources of Australia (Australia)(i)
Rössing (Namibia)(j)
Rio Tinto total
2020 Production
2019 Production
2018 Production
Rio Tinto
% share(a)
Total
Rio Tinto
share
Total
Rio Tinto
share
Rio Tinto
share
Total
68.4%
7,111
4,861
7,931
5,422
9,001
6,153
100.0%
30.0%
33.5%
2,205
6,196
876
2,205
1,859
293
4,357
2,815
7,687
867
2,815
2,306
290
5,412
2,520
9,433
914
2,520
2,830
306
5,656
100.0%
1,363
1,363
2,853
2,853
2,865
2,865
100.0%
1,120
1,120
1,206
1,206
1,116
1,116
86.3%
3,471
2,870
–
–
–
2,870
3,860
3,080
2,640
2,114
4,754
4,407
5,465
3,014
3,750
6,764
Production data notes:
Mine production figures for metals refer to the total quantity of metal produced in concentrates, leach liquor or doré bullion irrespective of whether these products are then refined onsite, except for the
data for bauxite and iron ore which can represent production of marketable quantities of ore plus concentrates and pellets. Production figures are sometimes more precise than the rounded numbers
shown, hence small differences may result from calculation of Rio Tinto share of production. Rio Tinto’s interest in the Kestrel, Hail Creek, Dunkerque and Grasberg operations were sold in 2018. No data for
these operations are included in the production table.
(a) Rio Tinto percentage share, shown above, is as at the end of 2020. The footnotes below include all ownership changes over the three years.
(b) Jonquière’s (Vaudreuil’s) production shows smelter grade alumina only and excludes hydrate produced and used for specialty alumina.
(c) Rio Tinto has a 22.95% shareholding in the Sangaredi mine but benefits from 45.0% of production.
(d) Borate quantities are expressed as B2O3.
(e) Rio Tinto owns a 33.52% indirect interest in Oyu Tolgoi through its 50.79% interest in Turquoise Hill Resources Ltd.
(f)
Includes 100% of production from Paraburdoo, Mt Tom Price, Marandoo, Yandicoogina, Brockman, Nammuldi, Silvergrass and the Eastern Range mines. Whilst Rio Tinto owns 54% of the Eastern Range
mine, under the terms of the joint venture agreement, Hamersley Iron manages the operation and is obliged to purchase all mine production from the joint venture and therefore all of the production
is included in Rio Tinto’s share of production.
(g) Rio Tinto’s ownership interest in Channar mine increased from 60% to 100%, following conclusion of its joint venture with Sinosteel Corporation upon reaching planned 290 million tonnes production
on 22 October 2020. Production is reported at 100% from this date onward. Historic data is unchanged.
(h) Quantities comprise 100% of Rio Tinto Fer et Titane and Rio Tinto’s 74% share of Richards Bay Minerals’ production. Ilmenite mined in Madagascar is being processed in Canada.
(i) ERA report drummed U3O8. In February 2020, our interest in Energy Resources of Australia (ERA) increased from 68.4% to 86.3% as a result of new ERA shares issued to Rio Tinto under the
Entitlement Offer and Underwriting Agreement to raise funds for the rehabilitation of the Ranger Project Area. Production is reported including this change from 1 March 2020.
(j) Rössing report drummed U3O8. On 16 July 2019, Rio Tinto completed the sale of its entire interest in the Rössing uranium mine in Namibia to China National Uranium Corporation Limited.
340
Annual Report 2020 | riotinto.com
Ore Reserves
Ore Reserves
Ore Reserves and Mineral Resources for Rio Tinto managed operations
are reported in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves, December
2012 (the JORC Code) as required by the Australian Securities Exchange
(ASX). Codes or guidelines similar to JORC with only minor regional
variations have been adopted in South Africa, Canada, the US, Chile, Peru,
the Philippines, the UK, Ireland and Europe. Together these Codes
represent current best practice for reporting Ore Reserves and Mineral
Resources.
The JORC Code envisages the use of reasonable investment
assumptions, including the use of projected long-term commodity prices,
in calculating Ore Reserve estimates. However, for US reporting, the US
Securities and Exchange Commission requires historical price data to be
used. For this reason, some Ore Reserves reported to the SEC in the
Form 20-F may differ from those reported below.
Ore Reserve and Mineral Resource information in the tables below is
based on information compiled by Competent Persons (as defined by
JORC), most of whom are full time employees of Rio Tinto or related
companies. Each has had a minimum of five years’ relevant estimation
experience and is a member of a recognised professional body whose
members are bound by a professional code of ethics. Each Competent
Person consents to the inclusion in this report of information they have
provided in the form and context in which it appears. Competent Persons
responsible for the estimates are listed on pages 350-351, by operation,
along with their professional affiliation, employer and accountability for
Ore Reserves and/or Mineral Resources. Where operations are not
managed by Rio Tinto, the Ore Reserves are published as received from
the managing company. The Ore Reserve figures in the following tables
are as of 31 December 2020. Summary data for year end 2019 are shown
for comparison. Metric units are used throughout. The figures used to
calculate Rio Tinto’s share of Ore Reserves are often more precise than
the rounded numbers shown in the tables, hence small differences might
result if the calculations are repeated using the tabulated figures.
Type of
mine(a)
O/P
O/P
O/P
O/P
O/P
O/P
U/G
O/P
O/P
O/P
O/P
O/P
U/G
U/G
Bauxite(b)
Reserves at operating mines
Gove (Australia)(c)
Porto Trombetas (MRN) (Brazil)(d)
Sangaredi (Guinea)(e)
Weipa (Australia)(f)
– Amrun(g)
–
East Weipa and Andoom(h)
Total
Borates(i)
Reserves at operating mines
Rio Tinto Borates – Boron (US)
Reserves at development projects
Jadar (Serbia)(j)
Copper
Reserves at operating mines
Bingham Canyon (US)(k)
Escondida (Chile)
–
–
–
sulphide
sulphide leach
oxide(l)
Oyu Tolgoi (Mongolia)
– Oyut open pit
– Oyut stockpiles(m)
Total
Reserves at development projects
Oyu Tolgoi (Mongolia)
– Hugo Dummett North(n)
– Hugo Dummett North Extension(o)
Total
Proved ore reserves
at end 2020
Probable ore reserves
at end 2020
Tonnage
Grade
Tonnage
Grade Tonnage
Tonnage
Grade
Total ore reserves 2020 compared with
2019
2020
2019
2020
2019
Grade
millions
of tonnes % Al2O3
millions
of tonnes % Al2O3
millions
of tonnes
millions
of tonnes % Al2O3
% Al2O3
77
19
359
211
100
50.4
48.1
47.1
54.1
51.4
3.3
2.5
37
49.7
48.5
48.1
80
21
396
131
33
428
833
53.9
1,044
1,253
100
146
50.4
48.2
47.2
54.0
51.4
49.3
48.3
47.1
53.1
50.8
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
11
4
2
15
2
16
–
Average
mill
recovery
%
Interest
%
100.0
12.0
23.0
100.0
100.0
100.0
100.0
millions
of tonnes
millions
of tonnes
% Cu
millions
of tonnes
millions
of tonnes
% Cu
% Cu
% Cu
365
0.47
187
0.39
552
612
0.44
0.43
87
100.0
3,359
1,324
72
283
57
0.69
0.42
0.62
0.52
0.32
1,792
324
111
0.57
0.41
0.52
5,151
1,648
183
5,366
1,642
224
460
0.39
743
57
783
48
0.65
0.42
0.56
0.44
0.32
0.65
0.42
0.59
0.44
0.33
409
39
1.51
1.56
409
39
447
32
1.51
1.56
1.64
1.64
83
41
60
78
73
93
93
30.0
30.0
30.0
33.5
33.5
33.5
29.5
Rio Tinto share
Recoverable
mineral
millions
of tonnes
80
3
91
1,044
100
1,318
Marketable
product
millions
of tonnes
15
2
Recoverable
metal
millions
of tonnes
2.126
8.320
0.856
0.182
0.860
0.045
12.390
1.920
0.166
2.086
Annual Report 2020 | riotinto.com
341
Production, Reserves and Operations
Production, Reserves and Operations
Ore Reserves
continued
Type of
mine(a)
U/G
Diamonds(b)
Reserves at operating mines
Argyle (Australia)(p)
Diavik (Canada)(q)
Total
Gold
Reserves at operating mines
Bingham Canyon (US)(k)
Oyu Tolgoi (Mongolia)
– Oyut open pit
– Oyut stockpiles(m)
Total
O/P
O/P
Reserves at development projects
Oyu Tolgoi (Mongolia)
– Hugo Dummett North(r)(n)
U/G
– Hugo Dummett North Extension(o) U/G
Total
Iron Ore(s)(b)
Reserves at operating mines
Hamersley Iron (Australia)(t)
Proved ore reserves
at end 2020
Probable ore reserves
at end 2020
2020
2019
Tonnage
Grade
Tonnage
Grade Tonnage
Tonnage
2020
Grade
2019
Grade
Total ore reserves 2020 compared with
2019
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
millions
of tonnes
carats
per tonne
carats
per tonne
Average
mill
recovery
%
Interest
%
Rio Tinto share
Recoverable diamonds
millions
of carats
O/P + U/G
5.6
2.2
3.4
2.1
–
9
5.1
11
–
2.1
1.9
2.4
–
60.0
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
365
0.16
187
0.16
552
612
0.16
0.16
67
100.0
283
57
0.40
0.13
460
0.24
743
57
783
48
0.30
0.13
0.29
0.12
409
39
0.29
0.54
409
39
447
32
0.29
0.54
0.34
0.57
millions
of tonnes
millions
of tonnes
% Fe
millions
of tonnes
millions
of tonnes
% Fe
% Fe
% Fe
– Channar (Brockman ore)(u)
O/P
7
61.5
5
60.8
12
16
61.2
61.4
– Greater Brockman 2 Nammuldi
(Brockman and Marra Mamba ore) O/P
– Gudai-Darri (Brockman ore)(v)
– Brockman 4 (Brockman and Marra
Mamba ore)(w)
– Marandoo (Marra Mamba ore)(x)
– Greater Tom Price (Brockman and
Marra Mamba ore)
– Paraburdoo (Brockman ore)(y)
–
Yandicoogina (Pisolite ore)(z)
Eastern Range JV (Australia)(t)
O/P
O/P
O/P
O/P
O/P
O/P
–
Eastern Range (Brockman ore)(aa)
O/P
Hope Downs JV (Australia)(t)
– Hope Downs 1 (Marra Mamba ore)(bb) O/P
– Hope Downs 4 (Brockman ore)(bb)
O/P
Robe River JV (Australia)(t)
– Robe Valley (Pisolite ore)
O/P
– West Angelas (Marra Mamba ore)(cc) O/P
Iron Ore Company of Canada (Canada)(dd) O/P
Total
Reserves at development projects
Hamersley Iron (Australia)(t)
172
286
211
141
183
2
460
18
76
41
172
105
296
62.3
62.2
62.3
63.9
62.5
61.9
58.3
98
275
69
21
119
4
60.1
61.3
60.6
57.9
61.5
62.9
269
561
280
162
302
6
460
298
516
345
196
313
7
509
61.5
61.8
61.9
63.1
62.1
62.6
58.3
61.1
61.7
61.9
62.5
62.1
62.2
58.3
61.4
4
60.3
22
28
61.2
61.6
62.7
63.7
56.4
62.0
65.0
64
57
154
69
214
60.2
63.2
56.2
61.5
65.0
140
98
326
173
510
165
116
344
201
528
61.6
63.4
56.3
61.8
65.0
61.4
63.4
56.4
61.9
65.0
–
Turee Central (Brockman ore)
O/P
– Western Range (Brockman ore)(ee) O/P
72
106
62.0
62.2
6
53
61.4
62.0
78
159
78
201
61.9
62.2
61.9
62.5
Total
342
Annual Report 2020 | riotinto.com
–
11.6
11.6
Recoverable
metal
millions
of ounces
1.940
1.620
0.035
3.595
1.012
0.161
1.174
Marketable
product
millions
of tonnes
7
269
561
280
162
302
6
460
12
70
49
173
92
299
2,743
78
159
237
67
45
79
81
33.5
33.5
33.5
29.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
54.0
50.0
50.0
53.0
53.0
58.7
100.0
100.0
Ore Reserves
Type of
mine(a)
Proved ore reserves
at end 2020
Probable ore reserves
at end 2020
2020
2019
Tonnage
Grade
Tonnage
Grade Tonnage
Tonnage
2020
Grade
2019
Grade
Total ore reserves 2020 compared with
2019
Lithium
millions
of tonnes
millions
of tonnes
% Li2O
millions
of tonnes
millions
of tonnes
% Li2O
% Li2O
% Li2O
Average
mill
recovery
%
Interest
%
Rio Tinto share
Marketable product
millions
of tonnes
Reserves at development projects
Jadar (Serbia)(j)
U/G
17
1.8
17
–
1.8
–
84
100.0
0.25
Molybdenum
Reserves at operating mines
millions
of tonnes
% Mo of tonnes
% Mo
millions
of tonnes
millions
of tonnes
% Mo
% Mo
Recoverable
metal
millions
of tonnes
Bingham Canyon (US)(ff)(k)
O/P
365
0.035
187
0.023
552
612
0.031
0.034
55
100.0
0.094
Silver
Reserves at operating mines
Bingham Canyon (US)(k)
Oyu Tolgoi (Mongolia)
– Oyut open pit
– Oyut stockpiles(m)
Total
O/P
O/P
Reserves at development projects
Oyu Tolgoi (Mongolia)
– Hugo Dummett North(n)
U/G
– Hugo Dummett North Extension(o) U/G
Total
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
Recoverable
metal
millions
of ounces
365
2.10
187
2.13
552
612
2.11
2.04
73
100.0
27.337
283
57
1.32
0.93
460
1.13
743
57
783
48
1.20
0.93
1.21
0.93
409
39
3.12
3.69
409
39
447
32
3.12
3.69
3.35
3.84
53
47
80
82
33.5
33.5
33.5
29.5
Titanium Dioxide Feedstock(gg)
Reserves at operating mines
QMM (Madagascar)
RBM (South Africa)
RTFT (Canada)
Total
millions
of tonnes
% Ti
Minerals
millions
of tonnes
% Ti
Minerals
millions
of tonnes
millions
of tonnes
% Ti
Minerals
% Ti
Minerals
D/O
D/O+O/P
O/P
346
931
3.5
2.3
12
495
152
3.4
2.6
358
382
1,426
1,500
3.5
2.4
80.1
152
149
80.1
3.5
2.4
80.3
80.0
74.0
100.0
5.103
0.267
32.708
11.029
1.123
12.152
Marketable product
millions
of tonnes
4.9
11.3
48.2
64.4
Annual Report 2020 | riotinto.com
343
Production, Reserves and Operations Production, Reserves and Operations
Ore Reserves
continued
Type of
mine(a)
Uranium
Reserves at operating mines
Energy Resources of Australia
(Australia)
– Ranger #3 stockpiles(hh)
Zircon(ii)
Reserves at operating mines
QMM (Madagascar)
RBM (South Africa)
Total
Proved ore reserves
at end 2020
Probable ore reserves
at end 2020
2020
2019
Tonnage
Grade
Tonnage
Grade Tonnage
Tonnage
2020
Grade
2019
Grade
Total ore reserves 2020 compared with
2019
millions
of tonnes
% U308
millions
of tonnes
millions
of tonnes
millions
of tonnes % U308
% U308
% U308
Average
mill
recovery
%
Interest
%
Rio Tinto share
Recoverable metal
millions
of tonnes
–
2.4
–
0.071
–
–
millions
millions
of tonnes % Zircon
of tonnes % Zircon
millions
of tonnes
millions
of tonnes % Zircon % Zircon
D/O
D/O+O/P
346
931
0.2
0.3
12
495
0.1
0.4
358
382
1,426
1,500
0.2
0.3
0.2
0.3
80.0
74.0
Marketable product
millions
of tonnes
0.4
2.8
3.1
(a) Type of mine: O/P = open pit, U/G = underground, D/O = dredging operation.
(b) Reserves of bauxite, diamonds and iron ore are shown as recoverable Reserves of marketable product after accounting for all mining and processing losses. Mill recoveries are therefore not shown.
(c) Gove Reserves are stated as dry tonnes and total alumina grade. Gove Reserve tonnes decreased following updated economic assumptions and mining depletion. A JORC Table 1 in support of this
change will be released to the market contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(d) Porto Trombetas (MRN) Reserves are stated as dry tonnes and available alumina grade. Reserve tonnes decreased following mining depletion.
(e) Sangaredi Reserve tonnes are reported on a 3% moisture basis and alumina grades are reported as total alumina.
(f) Weipa Reserves are stated as dry tonnes and total alumina grade.
(g) Amrun Reserve tonnes decreased following updated economic assumptions and mining depletion. A JORC Table 1 in support of this change will be released to the market contemporaneously with the
release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(h) East Weipa and Andoom Reserve tonnes decreased following updated economic assumptions and mining depletion. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(i) Reserves of borates are expressed in terms of marketable product (B2O3) after all mining and processing losses.
(j) A maiden in situ Reserve for Jadar of 16.6 million dry tonnes at 13.4% B2O3 and 1.81% Li2O was released to the market by Rio Tinto on 10 December 2020 following the completion of a Pre-Feasibility
Study. A JORC Table 1 in support of this change was released to the market and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(k) Bingham Canyon Reserve tonnes decreased following mining depletion.
(l) Escondida Oxide Reserve tonnes decreased following a geological model update.
(m) Oyut stockpiles Reserve tonnes increased following mining production.
(n) The Hugo Dummett North underground mine is currently under construction.
(o) Hugo Dummett North Extension Reserve tonnes increased following changes to the underground mine design. These changes were reported to the market on 3 July 2020, with a subsequent update on
16 December 2020. A JORC Table 1 in support of the material change was released to the market in July and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(p) Argyle Reserves were depleted with the cessation of mining in November 2020.
(q) Diavik Reserves are based on a nominal 1 millimetre lower cut-off size and a final re-crushing size of 5 millimetres. Diavik Reserve tonnes decreased following mining depletion.
(r) Hugo Dummett North Reserve grade decreased following changes to the underground mine design. These changes were reported to the market on 3 July 2020, with a subsequent update on
16 December 2020. A JORC Table 1 in support of the material change was released to the market in July and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(s) Australian iron ore Reserve tonnes are reported on a dry weight basis. As Rio Tinto only markets blended iron ore products from multiple mine sources, a detailed breakdown of constituent elements by
individual deposit is not reported.
(t) The updated assessment of Ore Reserves reflects measures Rio Tinto has put in place following the events in the Juukan Gorge on 24 May 2020. These measures are intended to protect a number of
sites, and to mitigate impacts to sites where there are existing heritage approvals authorising mining impacts, or a decision has been made not to seek regulatory approval to conduct mining activities,
given the heritage considerations identified by Traditional Owners. As a result, Rio Tinto has removed 54 million dry tonnes from Reserves across Brockman 4, Western Range, Gudai-Darri, Greater
Brockman 2 Nammuldi and West Angelas, including the 17 million dry tonnes at Western Range, which is the subject of a separate JORC Table 1 report. Rio Tinto’s approach to cultural heritage
management generally will continue to evolve in response to changes in agreements with Traditional Owners, further engagement with Traditional Owners and changing heritage legislation. Any
material changes to Ore Reserves as a result of the further refinement of Rio Tinto’s approach will be disclosed at the appropriate time.
(u) Channar (Brockman ore) Reserves were previously reported under Channar JV (Australia). Channar (Brockman ore) Reserve tonnes decreased following mining depletion and updated pit designs.
(v) Gudai-Darri (Brockman ore) was previously reported as Koodaideri (Brockman ore) and classified as a development project.
(w) Brockman 4 (Brockman and Marra Mamba ore) Reserve tonnes decreased following mining depletion and updated geological models, pit designs and cut-off grades.
(x) Marandoo (Marra Mamba ore) Reserve tonnes decreased following mining depletion and an updated geological model.
(y) Paraburdoo (Brockman ore) Reserve tonnes decreased following mining depletion and updated pit designs.
(z) Yandicoogina (Pisolite ore) Reserve tonnes decreased following mining depletion.
(aa) Eastern Range (Brockman ore) Reserve tonnes decreased following mining depletion.
(bb) Hope Downs 1 (Marra Mamba ore) and Hope Downs 4 (Brockman ore) Reserve tonnes decreased following mining depletion.
(cc) West Angelas (Marra Mamba ore) Reserve tonnes decreased following mining depletion and updated pit designs.
(dd) Reserves at Iron Ore Company of Canada are reported as marketable product (57% pellets and 43% concentrate for sale) at a natural moisture content of 2%. The marketable product is derived from
mined material comprising 703 million dry tonnes at 38.7% iron (Proved) and 507 million dry tonnes at 37.9% iron (Probable) using process recovery factors derived from current IOC concentrating
and pellet operations.
(ee) Western Range (Brockman ore) Reserve tonnes decreased following updates to the geological model and updated pit designs. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves. Joint venture discussions with China Baowu
Group covering the Western Range mining hub are continuing.
(ff) Bingham Canyon Reserves molybdenum grades interpolated from exploration drilling assays have been factored based on a long reconciliation history to blast hole and mill samples.
(gg) The marketable product (TiO2 slag) is shown after all mining and processing losses. The Reserves are expressed as in situ tonnes.
(hh) Ranger #3 stockpiles Reserves were depleted with the cessation of mining due to the expiry of the Ranger Project Area mining lease in January 2021.
(ii) The marketable product (zircon at RBM and zirsil at QMM) is shown after all mining and processing losses. The Reserves are expressed as in situ tonnes.
344
Annual Report 2020 | riotinto.com
Mineral Resources
Mineral Resources
As required by the Australian Securities Exchange, the following tables
contain details of other mineralisation that has a reasonable prospect of
being economically extracted in the future but which is not yet classified
as Proved or Probable Ore Reserves. This material is defined as Mineral
Resources under the JORC Code. Estimates of such material are based
largely on geological information with only preliminary consideration of
mining, economic and other factors. While in the judgment of the
Competent Person there are realistic expectations that all or part of the
Mineral Resources will eventually become Proved or Probable Ore
Reserves, there is no guarantee that this will occur as the result depends
on further technical and economic studies and prevailing economic
conditions in the future. As in the case of Ore Reserves, managed
operations’ estimates are completed using or testing against Rio Tinto
long-term pricing and market forecasts/scenarios. Mineral Resources are
stated as additional to the Ore Reserves reported earlier. Where
operations are not managed by Rio Tinto, the Mineral Resources are
published as received from the managing company. Where new project
Mineral Resources or Ore Reserves are footnoted as being reported for
the first time, additional information about them can be viewed on the
Rio Tinto website.
Likely
mining
method(a)
O/P
O/P
O/P
O/P
O/P
O/P
U/G
O/P
U/G
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
U/G
U/G
U/G
U/G
U/G
O/P
U/G
U/G
O/P
Bauxite
Gove (Australia)(c)(b)
Porto Trombetas (MRN) (Brazil)(d)
Sangaredi (Guinea)(e)
Weipa (Australia)(b)
–
East Weipa and Andoom(f)
– North of Weipa
– Amrun(g)
Borates(h)
Jadar (Serbia)(i)
Copper
Bingham Canyon (US)
– Open Pit(j)
– North Rim Skarn
Escondida (Chile)
– Chimborazo – sulphide
–
–
–
Escondida – sulphide
Escondida – mixed(k)
Escondida – oxide(l)
– Pampa Escondida – sulphide
– Pinta Verde – sulphide
– Pinta Verde – oxide
La Granja (Peru)
Oyu Tolgoi (Mongolia)
– Heruga ETG
– Heruga OT
– Hugo Dummett North(n)(m)
– Hugo Dummett North Extension(n)
– Hugo Dummett South
– Oyut Open Pit(o)
– Oyut Underground
Resolution Copper (US)
Winu (Australia)(p)
Diamonds
Measured resources
at end 2020
Indicated resources
at end 2020
Inferred resources
at end 2020
2020
2019
Total resources 2020 compared with 2019
Tonnage
Grade
Tonnage
Grade
Tonnage
Grade Tonnage
2020
Grade
2019
Rio Tinto
Interest
%
millions
of tonnes
% Al2O3
millions
of tonnes
% Al2O3
millions
of tonnes
% Al2O3
millions
of tonnes
millions
of tonnes % Al2O3
% Al2O3
23
281
293
35
57
9
41
5,983
48.6
48.9
46.6
48.6
49.7
43.8
51.1
49.0
348
50.3
2
134
752
1,330
273
49.6
49.9
45.8
52.0
50.5
34
456
28
456
7,028
6,785
35
1,330
678
11
1,330
580
48.7
49.7
46.4
51.1
52.0
50.3
48.2
49.7
46.5
52.1
52.0
50.1
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
millions
of tonnes
10
11
20
21
millions
of tonnes
% Cu
millions
of tonnes
% Cu
millions
of tonnes
millions
of tonnes
millions
of tonnes
% Cu
% Cu
% Cu
128
1
417
34
24
294
0.46
3.50
0.61
0.68
0.83
0.53
109
0.60
57
1.86
17
10
0.40
0.47
142
9
139
1,591
15
7
1,150
23
64
130
397
86
94
56
530
0.33
3.60
0.50
0.48
0.46
0.70
0.55
0.50
0.53
0.85
1.34
1.59
0.33
0.38
1.92
15
10
84
0.25
3.70
285
20
42
20
0.60
223
223
10,237
0.53 12,245
11,934
25
5
6,000
37
15
4,190
1,448
105
764
167
724
350
166
1,257
503
0.44
0.59
0.43
0.45
0.54
0.50
0.41
0.42
0.80
1.02
0.84
0.29
0.39
1.36
0.35
74
36
56
35
7,444
7,444
60
188
60
188
4,320
4,320
1,448
105
1,218
253
724
460
233
1,448
105
1,155
254
724
413
257
1,787
1,787
503
–
0.38
3.65
0.54
0.53
0.55
0.77
0.45
0.47
0.57
0.51
0.41
0.42
1.02
1.21
0.84
0.30
0.39
1.53
0.35
0.39
3.65
0.54
0.52
0.47
0.67
0.45
0.47
0.57
0.51
0.41
0.42
0.94
1.21
0.84
0.31
0.39
1.53
–
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
carats
per tonne
millions
of tonnes
millions
of tonnes
carats
per tonne
carats
per tonne
100.0
12.0
23.0
100.0
100.0
100.0
millions
of tonnes
100.0
100.0
100.0
30.0
30.0
30.0
30.0
30.0
30.0
30.0
100.0
29.5
33.5
33.5
29.5
33.5
33.5
33.5
55.0
100.0
Diavik (Canada)
O/P + U/G
0.2
2.3
1.2
2.5
1.5
1.5
2.5
2.7
60.0
Annual Report 2020 | riotinto.com
345
Production, Reserves and Operations
Measured resources
at end 2020
Indicated resources
at end 2020
Inferred resources
at end 2020
2020
2019
Total resources 2020 compared with 2019
Tonnage
Grade
Tonnage
Grade
Tonnage
Grade Tonnage
2020
Grade
2019
Rio Tinto
Interest
%
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
128
1
0.24
2.10
142
9
0.16
1.70
15
10
0.21
1.50
285
20
42
20
0.20
1.62
0.17
1.62
100.0
100.0
294
0.07
1,150
0.10
6,000
0.04
7,444
7,444
0.05
0.05
30.0
57
0.49
17
10
0.37
0.87
397
86
94
56
0.34
0.54
0.29
0.57
1,448
105
764
167
724
350
166
503
0.40
0.30
0.28
0.36
0.07
0.18
0.39
0.27
1,448
105
1,218
253
724
460
233
503
1,448
105
1,155
254
724
413
257
–
0.40
0.30
0.31
0.42
0.07
0.21
0.45
0.27
0.40
0.30
0.29
0.42
0.07
0.21
0.48
–
millions
of tonnes
millions
of tonnes
% Fe
millions
of tonnes
% Fe
millions
of tonnes
millions
of tonnes
% Fe
% Fe
% Fe
276
218
205
62.1
57.3
62.2
498
56.9
13
9
89
42
136
61.9
57.0
62.5
57.0
62.9
158
62.0
189
151
324
55.0
40.9
66.8
607
231
297
103
264
5
2
337
163
126
23
565
176
25
156
75
210
22
1,589
675
1,709
532
2,533
765
1,165
734
1,867
1
1
245
175
154
83
1,880
724
2,844
420
559
444
129
101
2,619
954
723
62.5
56.9
61.6
61.5
56.6
61.8
57.1
62.4
56.8
61.6
59.2
63.9
57.6
61.3
62.5
56.8
61.5
59.5
58.7
38.4
65.3
57.9
62.1
57.4
61.3
61.2
56.9
61.3
57.0
62.1
55.9
60.7
59.6
62.9
56.8
62.0
60.3
61.4
56.7
61.5
61.1
55.4
38.1
65.1
532
3,416
1,214
1,667
837
2,629
19
12
671
380
416
106
2,445
900
2,869
420
715
519
497
123
4,397
1,781
2,757
–
3,401
1,190
1,625
781
2,738
20
15
671
387
414
106
2,027
660
2,591
328
646
490
514
122
4,278
1,792
2,757
57.9
62.2
57.3
61.5
61.2
56.9
61.8
57.0
62.3
56.4
61.7
59.5
63.1
56.9
61.9
60.3
61.7
56.7
61.7
60.8
56.6
38.4
65.5
–
62.2
57.3
61.5
61.1
56.7
61.8
56.9
62.3
56.4
61.7
59.5
62.9
56.8
62.0
60.1
61.6
56.7
61.6
60.8
56.8
38.4
65.5
29.5
33.5
33.5
29.5
33.5
33.5
33.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
54.0
54.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
53.0
53.0
53.0
53.0
53.0
58.7
45.1
Production, Reserves and Operations
Mineral Resources
continued
Gold
Bingham Canyon (US)
– Open Pit(j)
– North Rim Skarn
Escondida (Chile)
– Pampa Escondida – sulphide
Oyu Tolgoi (Mongolia)
– Heruga ETG
– Heruga OT
– Hugo Dummett North(n)(m)
– Hugo Dummett North Extension(n)
– Hugo Dummett South
– Oyut Open Pit(o)
– Oyut Underground
Winu (Australia)(p)
Iron Ore(q)
Hamersley Iron (Australia)(s)(r)
– Boolgeeda(t)
– Brockman
– Brockman Process Ore
– Marra Mamba
– Detrital
– Channel Iron Deposit
Eastern Range JV (Australia)(s)
– Brockman
– Brockman Process Ore(u)
Hope Downs JV (Australia)(s)
– Brockman
– Brockman Process Ore
– Marra Mamba
– Detrital
Rhodes Ridge JV (Australia)(s)
– Brockman(v)
– Brockman Process Ore(w)
– Marra Mamba(x)
– Detrital(y)
Robe JV (Australia)(s)
– Brockman(z)
– Brockman Process Ore
– Marra Mamba
– Detrital
– Channel Iron Deposit
Iron Ore Company of Canada (Canada)(aa)
Simandou (Guinea)(bb)
Likely
mining
method(a)
O/P
U/G
O/P
U/G
U/G
U/G
U/G
U/G
O/P
U/G
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
O/P
346
Annual Report 2020 | riotinto.com
Mineral Resources
Lithium
Jadar (Serbia)(cc)
Molybdenum
Bingham Canyon (US)
– Open Pit(dd)(j)
Oyu Tolgoi (Mongolia)
– Heruga ETG
– Heruga OT
Resolution Copper (US)
Silver
Bingham Canyon (US)
– Open Pit(j)
– North Rim Skarn
Oyu Tolgoi (Mongolia)
– Heruga ETG
– Heruga OT
– Hugo Dummett North(n)(m)
– Hugo Dummett North Extension(n)
– Hugo Dummett South
– Oyut Open Pit(o)
– Oyut Underground
Winu (Australia)(p)
Titanium Dioxide Feedstock
Likely
mining
method(a)
U/G
O/P
U/G
U/G
U/G
O/P
U/G
U/G
U/G
U/G
U/G
U/G
O/P
U/G
O/P
Measured resources
at end 2020
Indicated resources
at end 2020
Inferred resources
at end 2020
2020
2019
Total resources 2020 compared with 2019
Tonnage
Grade
Tonnage
Grade
Tonnage
Grade Tonnage
2020
Grade
2019
Rio Tinto
Interest
%
millions
of tonnes
% Li2O
millions
of tonnes
% Li2O
millions
of tonnes
millions
of tonnes
millions
of tonnes
% Li2O
% Li2O
% Li2O
55
1.7
84
1.8
139
136
1.8
1.9
100.0
millions
of tonnes
% Mo
millions
of tonnes
% Mo
millions
of tonnes
millions
of tonnes
millions
of tonnes
% Mo
% Mo
% Mo
128
0.020
142
0.016
15
0.003
285
42
0.017
0.018
100.0
1,448
105
1,257
0.012
0.011
0.035
1,448
105
1,787
1,448
105
1,787
0.012
0.011
0.036
0.012
0.011
0.036
29.5
33.5
55.0
530
0.039
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
grammes
per tonne
millions
of tonnes
millions
of tonnes
grammes
per tonne
grammes
per tonne
128
1
2.12
20.00
142
9
1.48
21.00
15
10
1.86
21.00
285
20
42
20
1.79
20.95
2.10
20.95
57
4.20
17
10
1.09
1.28
397
86
94
56
3.13
4.12
1.12
1.15
1,448
105
764
167
724
350
166
503
1.46
1.58
2.40
2.78
1.88
1.02
1.23
2.15
1,448
105
1,218
253
724
460
233
503
1,448
105
1,155
254
724
413
257
–
1.46
1.58
2.72
3.24
1.88
1.04
1.21
2.15
1.46
1.58
2.61
3.24
1.88
1.06
1.19
–
millions
of tonnes
% Ti
Minerals
millions
of tonnes
% Ti
Minerals
millions
of tonnes
% Ti
Minerals
millions
of tonnes
millions
of tonnes
% Ti
Minerals
% Ti
Minerals
100.0
100.0
29.5
33.5
33.5
29.5
33.5
33.5
33.5
100.0
80.0
74.0
100.0
QMM (Madagascar)
RBM (South Africa)(ee)
RTFT (Canada)
D/O
D/O+O/P
O/P
469
4.2
804
11
11
4.3
12.3
84.9
154
3.1
1,427
1,427
16
79.2
11
27
13
27
4.1
12.3
81.6
4.1
13.3
81.6
Annual Report 2020 | riotinto.com
347
Production, Reserves and Operations
Production, Reserves and Operations
Mineral Resources
continued
Uranium
Energy Resources of Australia (Australia)
–
Jabiluka(ff)
– Ranger #3 Deeps(gg)
– Ranger #3 stockpiles(gg)
Zircon
QMM (Madagascar)
RBM (South Africa)(ee)
Likely
mining
method(a)
U/G
U/G
Measured resources
at end 2020
Indicated resources
at end 2020
Inferred resources
at end 2020
2020
2019
Total resources 2020 compared with 2019
Tonnage
Grade
Tonnage
Grade
Tonnage
Grade Tonnage
2020
Grade
2019
Rio Tinto
Interest
%
millions
of tonnes
% U3O8
millions
of tonnes
% U3O8
millions
of tonnes
% U3O8
millions
of tonnes
millions
of tonnes %U3O8
% U3O8
1.2
0.887
14
0.520
10
0.545
25
–
–
25
20
27
0.547
–
–
0.547
0.224
0.040
86.3
-
-
millions
millions
millions
of tonnes % Zircon
of tonnes % Zircon
of tonnes % Zircon
millions
of tonnes
millions
of tonnes % Zircon
% Zircon
D/O
D/O+O/P
469
0.2
804
11
0.2
8.1
154
0.2
1,427
11
1,427
13
0.2
8.1
0.2
8.3
80.0
74.0
(a) Likely mining method: O/P = open pit; U/G = underground; D/O = dredging operation.
(b) Gove and Weipa Resources are stated as dry tonnes and total alumina grade.
(c) Gove Resource tonnes increased following conversion of Reserves to Resources based on updated economic assumptions. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(d) Porto Trombetas (MRN) Resources are stated as dry tonnes and available alumina grade.
(e) Sangaredi Resource tonnes are reported on a 3% moisture basis and alumina grades are reported as total alumina.
(f) East Weipa and Andoom Resource tonnes increased following conversion of Reserves to Resources based on updated economic assumptions. A JORC Table 1 in support of this change will be released
to the market contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(g) Amrun Resource tonnes increased following conversion of Reserves to Resources following updated economic assumptions. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(h) Borates Resources are reported as in situ B2O3, rather than marketable product as in Reserves.
(i) Jadar equivalent in situ Resource is 55.2 million tonnes at 17.9% B2O3 (Indicated) and 84.1 million tonnes at 12.6% B2O3 (Inferred). Jadar Resource tonnes decreased following an updated geological
model which was partially offset by conversion of Resources to Reserves. This was released to the market by Rio Tinto on 10 December 2020. A JORC Table 1 in support of this change was released to
the market and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(j) Bingham Canyon – Open Pit Resource tonnes increased and grade changed following a major pit design change on the completion of an Order of Magnitude Study. A JORC Table 1 in support of this
change will be released to the market contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(k) Escondida – mixed Resource tonnes increased as a result of additional drilling, an updated geological model and updated pit designs.
(l) Escondida – oxide Resource grade increased as a result of additional drilling, an updated geological model and updated pit designs.
(m) The Hugo Dummett North Resources include approximately 1.5 million tonnes of stockpiled material at a grade of 0.27% copper, 0.09 grammes per tonnes gold and 0.67 grammes per tonnes silver.
(n) Hugo Dummett North Resource tonnes increased and Hugo Dummett North Extension Resource tonnes decreased following changes to the underground mine design. These changes were reported
to the market on 3 July 2020, with a subsequent update on 16 December 2020. A JORC Table 1 in support of the material change was released to the market in July and can be viewed at riotinto.com/
invest/financial-news-performance/resources-and-reserves.
(o) Oyut Open Pit Resource tonnes increased following a pit design update.
(p) The maiden Winu Resource was reported to the market on 28 July 2020. A JORC Table 1 in support of this change was released to the market and can be viewed at riotinto.com/invest/financial-news-
performance/resources-and-reserves.
(q) Iron Ore Resources are reported on dry weight basis. As Rio Tinto only markets blended iron ore products from multiple mine sources, a detailed breakdown of constituent elements by individual
deposit is not reported.
(r) Channar Resource tonnes previously reported under Channar JV (Australia) are now reported under Hamersley Iron (Australia) Brockman and Brockman Process Ore following the completion of the
joint venture arrangement.
(s) The updated assessment of Mineral Resources reflects measures Rio Tinto has put in place following the events in the Juukan Gorge on 24 May 2020. These measures are intended to protect a number
of sites, and to mitigate impacts to sites where there are existing heritage approvals authorising mining impacts, or a decision has been made not to seek regulatory approval to conduct mining
activities, given the heritage considerations identified by Traditional Owners. The impact of the changes are not material to the total Resource. Rio Tinto’s approach to cultural heritage management
generally will continue to evolve in response to changes in agreements with Traditional Owners, further engagement with Traditional Owners and changing heritage legislation. Any material changes to
Mineral Resources as a result of the further refinement of Rio Tinto’s approach will be disclosed at the appropriate time.
(t) Hamersley Iron (Australia) – Boolgeeda Resources are being reported for the first time with the addition of the Poonda deposit. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(u) Eastern Ranges JV (Brockman Process Ore) Resource tonnes have decreased following mining depletion and updated pit designs.
(v) Rhodes Ridge JV (Brockman) Resource tonnes have increased following an updated geological model at Rhodes Ridge. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(w) Rhodes Ridge JV (Brockman Process Ore) Resources tonnes have increased following an updated geological model at Rhodes Ridge. A JORC Table 1 in support of this change will be released to the
market contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(x) Rhodes Ridge JV (Marra Mamba) Resources tonnes have increased mainly due to an updated geological model at Arrowhead. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(y) Rhodes Ridge JV (Detrital) Resource tonnes have increased mainly due to an updated geological model at Arrowhead. A JORC Table 1 in support of this change will be released to the market
contemporaneously with the release of this Annual Report and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(z) Robe JV (Brockman) Resource tonnes have increased due to an updated geological model.
(aa) Resources at Iron Ore Company of Canada are reported as in-situ material on a dry basis. This in-situ material has the potential to produce marketable product (57% pellets and 43% concentrate for
sale at a natural moisture content of 2%) comprising 64 million tonnes at 65% iron (Measured), 282 million tonnes at 65% iron (Indicated) and 389 million tonnes at 65% iron (Inferred) using process
recovery factors derived from current IOC concentrating and pellet operations.
(bb) Rio Tinto and Chinalco, who respectively own 45.05% and 39.95% of Simandou Blocks 3 and 4, are working with the government of Guinea to realise value from the world-class iron ore deposit.
The government of Guinea owns a 15% stake in the project.
(cc) Jadar Resource tonnes increased following an updated geological model which was partially offset by conversion of Resources to Reserves. This was released to the market by Rio Tinto on
10 December 2020. A JORC Table 1 in support of this change was released to the market and can be viewed at riotinto.com/invest/financial-news-performance/resources-and-reserves.
(dd) Bingham Canyon open pit molybdenum grades interpolated from exploration drilling assays have been factored based on a long reconciliation history to blast hole and mill samples.
(ee) RBM Resource tonnes decreased following mining depletion.
(ff) In February 2020, Rio Tinto’s interest in Energy Resources of Australia (ERA) increased from 68.4% to 86.3% as a result of new ERA shares issued to Rio Tinto under the Entitlement Offer and
Underwriting Agreement to raise funds for the rehabilitation of the Ranger Project Area.
(gg) Ranger #3 Deeps and Ranger #3 stockpiles Resources were depleted with the cessation of mining due to the expiry of the Ranger Project Area mining lease in January 2021.
348
Annual Report 2020 | riotinto.com
Mineral Resources
Mineral Resources and Ore Reserves Corporate Governance
Mineral Resources and Ore Reserves governance
Group Internal Audit
We have well-established governance processes to support the
generation and publication of Mineral Resources and Ore Reserves,
including a series of business unit and product group structures and
processes independent of operational reporting.
Audit Committee
The Audit Committee’s remit includes the governance of Mineral
Resources and Ore Reserves. This includes an annual review of Mineral
Resources and Ore Reserves at a Group level, as well as a review of
findings and progress from the Group Internal Audit programme.
Ore Reserves Steering Committee
The Ore Reserves Steering Committee (ORSC), chaired by the Group
Executive, Safety, Technical & Projects, meets at least quarterly. ORSC
comprises senior representatives across our technical, financial,
governance and business groups and oversees the appointment of
Competent Persons nominated by the business units, review of
Exploration Results, Mineral Resource or Ore Reserve data prior to public
reporting and the development of Group Mineral Resource and Ore
Reserve standards and guidance.
Orebody Knowledge Centre of Excellence
In 2019, we created the Orebody Knowledge Centre of Excellence, which
contains a dedicated Orebody Knowledge Technical Assurance team.
Orebody Knowledge Technical Assurance, in conjunction with the ORSC,
is the guardian and author of Group Mineral Resource and Ore Reserve
standards and guidance and is responsible for the governance and
compilation of Group Mineral Resource, Ore Reserve and reconciliation
reporting. The technical assurance team also monitors the external
reporting environment, facilitates internal audits and monitors actions
with Group Internal Audit.
The Mineral Resource and Ore Reserve internal audits are conducted by
independent external consulting personnel in a programme managed by
Group Internal Audit with the assistance of the Orebody Knowledge
Centre of Excellence and ORSC. During 2020, due to COVID-19
restrictions, two internal Mineral Resource and Ore Reserve audits were
completed remotely. Material findings are reported outside of the
product group reporting line to the Audit Committee, and all reports and
action plans are reviewed by the ORSC for alignment to internal and
external reporting standards.
Joint Ore Reserves Committee (JORC) compliance
We have continued developing internal systems and controls in order
to meet JORC compliance in all external reporting, including the
preparation of all reported data by Competent Persons as members
of The Australasian Institute of Mining and Metallurgy (The AusIMM),
Australian Institute of Geoscientists (AIG) or recognised professional
organisations (RPOs). JORC Table 1 reports for new or materially
upgraded significant deposits are released to the market; they are also
available on the Group’s website. JORC Table 1 and NI 43-101 technical
reports generated by non-managed units or joint venture partners are
referenced within the reporting footnotes with the location and initial
reporting date identified.
Mineral Resources and Ore Reserves from externally managed
operations, in which Rio Tinto holds a minority share, are reported as
received from the managing entity. Figures from our managed operations
are the responsibility of the managing directors of the business units and
estimates are carried out by Competent Persons as defined by JORC.
2020 Highlights
– Orebody Knowledge Centre of Excellence with dedicated
Orebody Knowledge Technical Assurance team manage
and assure the Mineral Resource and Ore Reserve
reporting
– Ongoing professional development: over 25 hours of
virtual Competent Persons workshops and training run
– Independent auditing: two remote Mineral Resource and
Ore Reserve audits completed
Annual Report 2020 | riotinto.com
349
Production, Reserves and Operations Production, Reserves and Operations
Competent Persons
Association(a)
Employer
Accountability
Deposits
Bauxite
G Rogers
A McIntyre
W Saba
M Keersemaker
M A Diallo
M A H Monteiro
J P M Franco
Borates
B Griffiths
R Torres
Copper
A Schwarz
H Martin
M Bixley
O Dendev
F Prince
R Hayes
E Mader
P Rodriguez
K Schroeder
J Vickery
E Woods
R Maureira
F B Vargara
J Marshall
J Pocoe
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
SME
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
Rio Tinto
CBG Consultant – Aluminpro
Resources
Resources
Reserves
Reserves
Compagnie des Bauxites de Guinée
Resources
Mineração Rio de Norte
MRN Consultant
Resources
Reserves
Gove, East Weipa and Andoom, North of Weipa, Amrun
Gove, East Weipa and Andoom, North of Weipa, Amrun
Gove, East Weipa and Andoom, Amrun
Sangaredi
Trombetas
Rio Tinto
Rio Tinto
Rio Tinto
Rio Tinto
Resources and Reserves
Resources
Rio Tinto Borates – Boron
Resources
Resources
Reserves
Resources
Reserves
Resources
Reserves
Resources
Resources
Resolution Copper(c)
Oyu Tolgoi(b) (c) (d)
Bingham Canyon(b) (c) (d)
Minera Escondida Ltda.
Rio Tinto
Rio Tinto
Resources and Reserves
Reserves
Resources
Reserves
Resources
Resources
Escondida, Escondida – Chimborazo – sulphide,
Pampa Escondida – sulphide(b), Pinta Verde
Escondida
La Granja
Winu(b) (d)
350
Annual Report 2020 | riotinto.com
Competent Persons
Association(a)
Employer
Accountability
Deposits
Diamonds
S Brennan
M Rayner
K Pollock
C Auld
M Kontzamanis
Iron ore
K Tindale
M McDonald
S Roche
R Way
R Williams
P Ziemendorf
N Brajkovich
P Savory
B Sommerville
R Bleakey
L Vilela Couto
R Sarin
R Verma
Lithium
J Garcia
N Grubin
M Sweeney
G Davis
A Earl
AusIMM
AusIMM
NAPEG
NAPEG
NAPEG
AusIMM
PEGNL
AusIMM
PEGNL
PEGNL
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
AusIMM
EFG
EFG
AusIMM
AusIMM
AusIMM
Titanium dioxide feedstock
Rio Tinto
Rio Tinto
Rio Tinto
Rio Tinto
Rio Tinto
Rio Tinto
Consultant – Snowden Group
Resources and Reserves
Resources and Reserves
Resources and Reserves
Argyle Diamonds
Reserves
Reserves
Resources
Resources
Reserves
Resources
Reserves
Reserves
Resources
Resources
Resources
Reserves
Reserves
Reserves
Reserves
Resources
Resources
Resources
Reserves
Reserves
Diavik
Simandou
Iron Ore Company of Canada
Rio Tinto Iron Ore – Hamersley, Channar, Eastern Range,
Hope Downs, Robe, Rhodes Ridge
Rio Tinto Iron Ore – Hamersley, Eastern Range, Hope
Downs, Robe
Jadar(e)
F A Consuegra
J Dumouchel
D Gallant
T Daling
A Louw
S Mnunu
P De Kock
F Hees
Uranium
S Pevely
APGO
OIQ
OIQ
SAIMM
SACNASP
SACNASP
SAIMM
AusIMM
Rio Tinto
Rio Tinto
Rio Tinto
Resources and Reserves
Resources
Reserves
Reserves
Resources
Resources
Reserves
Resources
Rio Tinto Fer et Titane (RTFT)
Richards Bay Minerals (RBM)(f)
QMM Madagascar Minerals(f)
AusIMM
Rio Tinto
Resources and Reserves
Energy Resources of Australia – Ranger 3, Jabiluka
(a) AusIMM: Australasian Institute of Mining and Metallurgy
APGO: Association of Professional Geoscientists of Ontario
EFG: European Federation of Geologists
NAPEG: Association of Professional Engineers; Geologists and Geophysicists of the Northwest Territories
OIQ: L’Ordre des Ingénieurs du Québec
PEGNL: Professional Engineers and Geoscientists Newfoundland and Labrador
SACNASP: South African Council for Natural Scientific Professions
SAIMM: South African Institute of Mining and Metallurgy
SME: Society of Mining, Metallurgy and Exploration
(b) Includes gold
(c) Includes molybdenum
(d) Includes silver
(e) Includes borates
(f)
Includes zircon
Annual Report 2020 | riotinto.com
351
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
Group mines as at 31 December 2020
Iron Ore
Property
Ownership
Hamersley Iron:
100% Rio Tinto
Operator
Rio Tinto
Brockman 2
Brockman 4
Marandoo
Mount Tom Price
Nammuldi
Paraburdoo
Silvergrass
Western Turner Syncline
Yandicoogina
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Processing plants and other
available facilities
Power source
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Agreements for life of mine
with Government of
Western Australia, save for
the Yandicoogina mining
lease, which expires in 2039
with an option to extend for
21 years.
Mount Tom Price,
Marandoo, Brockman 2,
Brockman 4, Nammuldi and
Western Turner Syncline
Mineral and Mining Lease
held under Iron Ore
(Hamersley Range)
Agreement Act 1963.
Area of ML4SA subject to
current mining operations
approx 15,339 ha.
Area of M272SA subject to
current mining operations
approx 2,059 ha.
Paraburdoo and Eastern
Range Mineral Lease held
under Iron Ore (Hamersley
Range) Agreement Act 1968.
Area of ML246SA subject to
current mining operations
approx 1,943 ha
Yandicoogina Mining Lease
held under Iron Ore
(Yandicoogina) Agreement
Act 1996.
Area of M274SA subject to
current mining operations
approx 4,584 ha.
State Agreement conditions
Mount Tom Price began
Open pit
Brockman 2, Brockman 4,
Process plants are largely dry
Supplied through the
Tom Price, Paraburdoo and
crush and screen plants
integrated Hamersley
Western Turner Syncline:
producing a lump and fines
and Robe power
Mineralisation is hematite/
product. For the Silvergrass &
network operated by
goethite mineralisation hosted
Nammuldi mines, wet
Pilbara Iron
are set by the Western
operations in 1966,
Australian Government and
followed by Paraburdoo in
broadly comprise
1974. In the 1990s,
environmental compliance
Channar, Brockman 2,
and reporting obligations;
closure and rehabilitation
considerations; local
Marandoo and
Yandicoogina achieved
first ore. Since 2000,
procurement and community
Eastern Ranges,
initiatives/investment
Nammuldi, Brockman 4,
requirements; and payment of
Western Turner Syncline
and Silvergrass have
joined the network of
Hamersley Iron mines.
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
within the Brockman Fm
banded iron formations.
processing of the ore using
cyclones also occurs at the
Detrital deposits also occur at
Nammuldi plant. At Marandoo
these sites. At Tom Price and
cyclones are used for
Western Turner Syncline,
processing the fines at
some goethite/hematite
Marandoo plant. At Tom Price
mineralisation hosted within
and Western Turner Syncline
the Marra Mamba Fm also
processing is through the Tom
occurs. Marandoo and
Price plant; low grade fines are
Silvergrass: mineralisation
upgraded using heavy media
occurs as goethite/ haematite
cyclones and spirals while a
within the banded iron
formations of the Marra
heavy media separation is
used to upgrade lumps.
Mamba Fm. Some detrital
Paraburdoo is processed
mineralisation also occurs.
through the Paraburdoo
Yandicoogina goethite
process plant. Processing is
mineralisation occurring as
via a dry crush and screen
pisolite ores within a
plants producing a lump and
paleo-channel; channel iron
fines product with fines further
formations.
processed by a 2 stage
cyclone plant. Yandicoogina is
dry crush and screen to fines
only, with low grade being
processed via wet scrubbing
and calcification.
Eastern Range
54% Rio Tinto
Rio Tinto
Rio Tinto owns 54% of
the Bao-Hi joint venture
with the remaining 46%
held by China Baowu
Group
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Mineral lease expires in 2028
with successive options to
extend by 21 years.
Mineral Lease held under
Iron Ore (Hamersley Range)
Agreement Act 1963.
Area of ML4SA subject to
current mining operations
approx 990 ha.
State Agreement conditions are
The Bao-Hi joint venture
Open pit
Mineralisation is hematite/
Eastern Range is processed
Supplied through the
set by the Western Australian
was established in 2002
goethite mineralisation hosted
through the Paraburdoo
integrated Hamersley
and has delivered sales of
more than 200 million
tonnes of iron ore to
China.
within the Brockman Fm
banded iron formations.
process plant. Processing is
and Robe power
via a dry crush and screen
network operated by
plants producing a lump and
Pilbara Iron
fines product with fines further
processed by a 2 stage
cyclone plant.
Government and broadly
comprise environmental
compliance and reporting
obligations; closure and
rehabilitation considerations;
local procurement and
community initiatives/
investment requirements; and
payment of taxes and
government royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
352
Annual Report 2020 | riotinto.com
Group mines as at 31 December 2020
Iron Ore
Hamersley Iron:
100% Rio Tinto
Operator
Rio Tinto
Brockman 2
Brockman 4
Marandoo
Nammuldi
Paraburdoo
Silvergrass
Mount Tom Price
Western Turner Syncline
Yandicoogina
Pilbara region, Western
Hamersley Iron/Robe
Agreements for life of mine
Australia
railway and port network
with Government of
operated by Pilbara Iron
Western Australia, save for
Eastern Range
54% Rio Tinto
Rio Tinto
Pilbara region, Western
Hamersley Iron/Robe
Mineral lease expires in 2028
Australia
railway and port network
with successive options to
operated by Pilbara Iron
extend by 21 years.
Rio Tinto owns 54% of
the Bao-Hi joint venture
with the remaining 46%
held by China Baowu
Group
Mines and Production Facilities
Property
Ownership
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Processing plants and other
available facilities
Power source
the Yandicoogina mining
lease, which expires in 2039
with an option to extend for
21 years.
Mount Tom Price,
Marandoo, Brockman 2,
Brockman 4, Nammuldi and
Western Turner Syncline
Mineral and Mining Lease
held under Iron Ore
(Hamersley Range)
Agreement Act 1963.
Area of ML4SA subject to
current mining operations
approx 15,339 ha.
Area of M272SA subject to
current mining operations
approx 2,059 ha.
Paraburdoo and Eastern
Range Mineral Lease held
under Iron Ore (Hamersley
Range) Agreement Act 1968.
Area of ML246SA subject to
current mining operations
approx 1,943 ha
Yandicoogina Mining Lease
held under Iron Ore
(Yandicoogina) Agreement
Act 1996.
Area of M274SA subject to
current mining operations
approx 4,584 ha.
Mineral Lease held under
Iron Ore (Hamersley Range)
Agreement Act 1963.
Area of ML4SA subject to
current mining operations
approx 990 ha.
Open pit
Mount Tom Price began
operations in 1966,
followed by Paraburdoo in
1974. In the 1990s,
Channar, Brockman 2,
Marandoo and
Yandicoogina achieved
first ore. Since 2000,
Eastern Ranges,
Nammuldi, Brockman 4,
Western Turner Syncline
and Silvergrass have
joined the network of
Hamersley Iron mines.
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
Supplied through the
integrated Hamersley
and Robe power
network operated by
Pilbara Iron
Brockman 2, Brockman 4,
Tom Price, Paraburdoo and
Western Turner Syncline:
Mineralisation is hematite/
goethite mineralisation hosted
within the Brockman Fm
banded iron formations.
Detrital deposits also occur at
these sites. At Tom Price and
Western Turner Syncline,
some goethite/hematite
mineralisation hosted within
the Marra Mamba Fm also
occurs. Marandoo and
Silvergrass: mineralisation
occurs as goethite/ haematite
within the banded iron
formations of the Marra
Mamba Fm. Some detrital
mineralisation also occurs.
Yandicoogina goethite
mineralisation occurring as
pisolite ores within a
paleo-channel; channel iron
formations.
Process plants are largely dry
crush and screen plants
producing a lump and fines
product. For the Silvergrass &
Nammuldi mines, wet
processing of the ore using
cyclones also occurs at the
Nammuldi plant. At Marandoo
cyclones are used for
processing the fines at
Marandoo plant. At Tom Price
and Western Turner Syncline
processing is through the Tom
Price plant; low grade fines are
upgraded using heavy media
cyclones and spirals while a
heavy media separation is
used to upgrade lumps.
Paraburdoo is processed
through the Paraburdoo
process plant. Processing is
via a dry crush and screen
plants producing a lump and
fines product with fines further
processed by a 2 stage
cyclone plant. Yandicoogina is
dry crush and screen to fines
only, with low grade being
processed via wet scrubbing
and calcification.
Open pit
The Bao-Hi joint venture
was established in 2002
and has delivered sales of
more than 200 million
tonnes of iron ore to
China.
Mineralisation is hematite/
goethite mineralisation hosted
within the Brockman Fm
banded iron formations.
Eastern Range is processed
through the Paraburdoo
process plant. Processing is
via a dry crush and screen
plants producing a lump and
fines product with fines further
processed by a 2 stage
cyclone plant.
Supplied through the
integrated Hamersley
and Robe power
network operated by
Pilbara Iron
State Agreement conditions are
set by the Western Australian
Government and broadly
comprise environmental
compliance and reporting
obligations; closure and
rehabilitation considerations;
local procurement and
community initiatives/
investment requirements; and
payment of taxes and
government royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
Annual Report 2020 | riotinto.com
353
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Iron Ore continued
Property
Channar
Ownership
60% Rio Tinto
Operator
Rio Tinto
The Channar Mining Joint
Venture is 60% owned by
Rio Tinto (through
Channar Mining Pty Ltd)
and 40% by Sinosteel
Corporation (Sinosteel
Channar Pty Ltd)
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Processing plants and other
available facilities
Power source
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Mining lease expires in
2028 with an option to
extend by up to five years.
Mining Lease held under Iron
Ore (Channar Joint Venture)
Agreement Act 1987.
Area of M265SA subject to
current mining operations
approx 1,876 ha.
State Agreement conditions
The Channar Mining Joint
Open pit
Channar Mineralisation is
Channar is processed through
Supplied through the
hematite/goethite
the Paraburdoo process plant.
integrated Hamersley
mineralisation hosted within
Processing is via a dry crush
and Robe power
the Brockman Fm banded iron
and screen plants producing a
network operated by
formations.
lump and fines product with
Pilbara Iron
fines further processed by a 2
stage cyclone plant.
Hope Downs 1
50% Rio Tinto.
Rio Tinto
50% Hancock Prospecting
Pty Ltd
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Mining lease expires in
2027 with two options to
extend of 21 years each.
Mining Lease held under
Iron Ore (Hope Downs)
Agreement Act 1992.
Area of M282SA subject to
current mining operations
approx 3,912 ha.
State Agreement conditions
Joint venture between
Open pit
Hope Downs 1 mineralisation
Hope Downs 1 is processed at
Supplied through the
occurs as goethite/ haematite
the Hope Downs 1 process
integrated Hamersley
within the banded iron
formations of the Marra
plant which is dry crush and
and Robe power
screen plant producing a lump
network operated by
Mamba Fm. Some detrital
and fines product.
Pilbara Iron
mineralisation also occurs.
are set by the Western
Venture, established in
Australian Government and
1987, was the first
broadly comprise
large-scale mining joint
environmental compliance
venture between Chinese
and reporting obligations;
closure and rehabilitation
considerations; local
and Australian companies.
The joint venture was 60%
owned by Rio Tinto and
procurement and community
40% by Sinosteel
initiatives/investment
Corporation. It delivered
requirements; and payment of
sales of 290 million tonnes
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
of iron ore to China. The
Channar Mining Joint
Venture came to a natural
conclusion in quarter four
2020, at which time mining
operations reverted to
100% Rio Tinto (Channar
Mining Pty Ltd).
are set by the Western
Rio Tinto and Hancock
Australian Government and
Prospecting. Construction
broadly comprise
of Stage 1 to 22 million
environmental compliance
tonnes per annum
and reporting obligations;
closure and rehabilitation
considerations; local
commenced 2006 and
first production occurred
2007. Stage 2 to
procurement and community
30 million tonnes per
initiatives/investment
annum completed 2009.
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
354
Annual Report 2020 | riotinto.com
Group mines as at 31 December 2020
Iron Ore continued
Property
Channar
Ownership
60% Rio Tinto
Operator
Rio Tinto
The Channar Mining Joint
Venture is 60% owned by
Rio Tinto (through
Channar Mining Pty Ltd)
and 40% by Sinosteel
Corporation (Sinosteel
Channar Pty Ltd)
Pilbara region, Western
Hamersley Iron/Robe
Mining lease expires in
Australia
railway and port network
2028 with an option to
operated by Pilbara Iron
extend by up to five years.
Mining Lease held under Iron
Ore (Channar Joint Venture)
Agreement Act 1987.
Area of M265SA subject to
current mining operations
approx 1,876 ha.
Hope Downs 1
50% Rio Tinto.
Rio Tinto
Pilbara region, Western
Hamersley Iron/Robe
Mining lease expires in
50% Hancock Prospecting
Pty Ltd
Australia
railway and port network
2027 with two options to
operated by Pilbara Iron
extend of 21 years each.
Mining Lease held under
Iron Ore (Hope Downs)
Agreement Act 1992.
Area of M282SA subject to
current mining operations
approx 3,912 ha.
Mines and Production Facilities
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
Processing plants and other
available facilities
Power source
Channar is processed through
the Paraburdoo process plant.
Processing is via a dry crush
and screen plants producing a
lump and fines product with
fines further processed by a 2
stage cyclone plant.
Supplied through the
integrated Hamersley
and Robe power
network operated by
Pilbara Iron
Open pit
Channar Mineralisation is
hematite/goethite
mineralisation hosted within
the Brockman Fm banded iron
formations.
The Channar Mining Joint
Venture, established in
1987, was the first
large-scale mining joint
venture between Chinese
and Australian companies.
The joint venture was 60%
owned by Rio Tinto and
40% by Sinosteel
Corporation. It delivered
sales of 290 million tonnes
of iron ore to China. The
Channar Mining Joint
Venture came to a natural
conclusion in quarter four
2020, at which time mining
operations reverted to
100% Rio Tinto (Channar
Mining Pty Ltd).
Open pit
Joint venture between
Rio Tinto and Hancock
Prospecting. Construction
of Stage 1 to 22 million
tonnes per annum
commenced 2006 and
first production occurred
2007. Stage 2 to
30 million tonnes per
annum completed 2009.
Hope Downs 1 mineralisation
occurs as goethite/ haematite
within the banded iron
formations of the Marra
Mamba Fm. Some detrital
mineralisation also occurs.
Hope Downs 1 is processed at
the Hope Downs 1 process
plant which is dry crush and
screen plant producing a lump
and fines product.
Supplied through the
integrated Hamersley
and Robe power
network operated by
Pilbara Iron
Annual Report 2020 | riotinto.com
355
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Iron Ore continued
Property
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
facilities
Power source
Processing plants and other available
Hope Downs 4
50% Rio Tinto.
Rio Tinto
50% Hancock Prospecting
Pty Ltd
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Mining lease expires in
2027 with two options to
extend of 21 years each.
Mining Lease held under
Iron Ore (Hope Downs)
Agreement Act 1992.
Area of M282SA subject to
current mining operations
approx 3,138 ha.
State Agreement conditions
Joint venture between
Open pit
Mineralisation at Hope Downs
Hope Downs 4 ore is processed
Supplied through
are set by the Western
Rio Tinto and Hancock
Australian Government and
Prospecting. Construction
broadly comprise
of wet plant processing to
environmental compliance
15 million tonnes per
annum commenced 2011
and first production
occurred 2013.
4 is hematite/goethite
through the HD 4 plant. Process
the integrated
mineralisation hosted within
uses dry crushing followed by wet
Hamersley and
the Brockman Fm banded iron
scrubbing and a 2 stage cyclone
Robe power
formations.
plant.
network operated
by Pilbara Iron
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment
of taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
State Agreement conditions
First shipment in 1972
Open pit
At West Angelas,
At West Angelas, ore processing is
Supplied through
are set by the Western
from Robe Valley. Interest
Australian Government and
acquired in 2000 through
broadly comprise
North Limited acquisition.
environmental compliance
First ore was shipped
from West Angelas
in 2002.
mineralisation occurs as
via dry crush and screen plants. In
the integrated
goethite/ haematite within the
the Robe Valley, dry crush and
Hamersley and
banded iron formations of the
screen plants, as well as wet
Robe power
Marra Mamba Fm. Some
processing plants (wet scrubbing
network operated
detrital mineralisation also
and screening) are used to improve
by Pilbara Iron
occurs. Robe valley deposits
iron grades for some ores.
are comprised of goethite
mineralisation occurring as
pisolite ores within a
paleo-channel; channel iron
formations.
State Agreement conditions
Construction of the
Solar
Salt is grown every year
Salt is processed through a washing
Long-term
are set by the Western
Dampier field started in
evaporation of
through solar evaporation in
plant, consisting of screening
Australian Government and
1969; first shipment in
seawater at
permanent crystallising pans.
washbelts at Lake MacLeod,
broadly comprise
1972. Lake MacLeod was
Dampier and
environmental compliance
acquired in 1978 as an
and reporting obligations;
operating field. Port
Port Hedland;
underground
closure and rehabilitation
Hedland was acquired in
brine at Lake
Gypsum is present in the top
layer covering most of the
Lake Macleod.
considerations; local
2001 as an operating
procurement and community
field.
initiatives/investment
requirements; and payment
of taxes and government
royalties.
MacLeod;
extraction of
gypsum at Lake
MacLeod.
Screwbowl classifiers and static
screens at Port Hedland and sizing
Power and on-site
screens, counter-current classifiers
generation
contracts with
Hamersley Iron
and Horizon
with dewatering screens and
centrifuges at Dampier. Dampier
produces shipping-ready product for
immediate shiploading. Washed salt
at Lake MacLeod and Port Hedland is
dewatered on stockpiles.
Lake Macleod also mines and
processes gypsum in leaching heaps.
Mineral Lease held under
Iron Ore (Robe River)
Agreement Act 1964.
Area of ML248SA subject to
current mining operations
approx 10,598 ha.
Mining and mineral leases
expiring in 2034 at
Dampier; 2029 at Port
Hedland and 2031 at Lake
MacLeod.
Mineral Leases are held
under Dampier Solar Salt
Industry Agreement Act
1967, Leslie Solar Salt
Industry Agreement Act
1966 and Evaporites (Lake
MacLeod) Agreement Act
1967 respectively.
Robe River Iron
Associates:
Robe Valley (Mesa A and
Mesa J)
West Angelas
53% Rio Tinto
Rio Tinto
Robe River is a joint
venture between
Rio Tinto (53%), Mitsui
Iron Ore Development
(33%), and Nippon Steel
Corporation (14%)
Pilbara region, Western
Australia
Hamersley Iron/Robe
railway and port network
operated by Pilbara Iron
Agreements for life of mine
with Government of
Western Australia.
Dampier Salt Port
Hedland, Dampier and
Lake Macleod
68.4% Rio Tinto
Dampier Salt is a joint
venture between
Rio Tinto (68%), Marubeni
Corporation (22%) and
Sojitz (10%).
Rio Tinto (Dampier Salt
Limited)
Gascoyne and Pilbara
regions, Western
Australia
Road and port
356
Annual Report 2020 | riotinto.com
Group mines as at 31 December 2020
Iron Ore continued
Hope Downs 4
50% Rio Tinto.
Rio Tinto
Pilbara region, Western
Hamersley Iron/Robe
Mining lease expires in
50% Hancock Prospecting
Pty Ltd
Australia
railway and port network
2027 with two options to
operated by Pilbara Iron
extend of 21 years each.
53% Rio Tinto
Rio Tinto
Pilbara region, Western
Hamersley Iron/Robe
Agreements for life of mine
Australia
railway and port network
with Government of
operated by Pilbara Iron
Western Australia.
Robe River Iron
Associates:
Mesa J)
West Angelas
Robe Valley (Mesa A and
venture between
Robe River is a joint
Rio Tinto (53%), Mitsui
Iron Ore Development
(33%), and Nippon Steel
Corporation (14%)
Dampier Salt Port
68.4% Rio Tinto
Rio Tinto (Dampier Salt
Gascoyne and Pilbara
Road and port
Mining and mineral leases
Hedland, Dampier and
Lake Macleod
Limited)
regions, Western
Australia
Dampier Salt is a joint
venture between
Rio Tinto (68%), Marubeni
Corporation (22%) and
Sojitz (10%).
Mines and Production Facilities
Property
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Processing plants and other available
facilities
Power source
Mining Lease held under
Iron Ore (Hope Downs)
Agreement Act 1992.
Area of M282SA subject to
current mining operations
approx 3,138 ha.
Mineral Lease held under
Iron Ore (Robe River)
Agreement Act 1964.
Area of ML248SA subject to
current mining operations
approx 10,598 ha.
expiring in 2034 at
Dampier; 2029 at Port
Hedland and 2031 at Lake
MacLeod.
Mineral Leases are held
under Dampier Solar Salt
Industry Agreement Act
1967, Leslie Solar Salt
Industry Agreement Act
1966 and Evaporites (Lake
MacLeod) Agreement Act
1967 respectively.
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment
of taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment of
taxes and government
royalties.
The current business also
operates under an Indigenous
Land Use Agreement (ILUA)
which includes commitments
for payments made to trust
accounts; indigenous
employment and business
opportunities; and heritage
and cultural protections.
State Agreement conditions
are set by the Western
Australian Government and
broadly comprise
environmental compliance
and reporting obligations;
closure and rehabilitation
considerations; local
procurement and community
initiatives/investment
requirements; and payment
of taxes and government
royalties.
Open pit
Joint venture between
Rio Tinto and Hancock
Prospecting. Construction
of wet plant processing to
15 million tonnes per
annum commenced 2011
and first production
occurred 2013.
Mineralisation at Hope Downs
4 is hematite/goethite
mineralisation hosted within
the Brockman Fm banded iron
formations.
Hope Downs 4 ore is processed
through the HD 4 plant. Process
uses dry crushing followed by wet
scrubbing and a 2 stage cyclone
plant.
Supplied through
the integrated
Hamersley and
Robe power
network operated
by Pilbara Iron
Open pit
First shipment in 1972
from Robe Valley. Interest
acquired in 2000 through
North Limited acquisition.
First ore was shipped
from West Angelas
in 2002.
At West Angelas,
mineralisation occurs as
goethite/ haematite within the
banded iron formations of the
Marra Mamba Fm. Some
detrital mineralisation also
occurs. Robe valley deposits
are comprised of goethite
mineralisation occurring as
pisolite ores within a
paleo-channel; channel iron
formations.
At West Angelas, ore processing is
via dry crush and screen plants. In
the Robe Valley, dry crush and
screen plants, as well as wet
processing plants (wet scrubbing
and screening) are used to improve
iron grades for some ores.
Supplied through
the integrated
Hamersley and
Robe power
network operated
by Pilbara Iron
Construction of the
Dampier field started in
1969; first shipment in
1972. Lake MacLeod was
acquired in 1978 as an
operating field. Port
Hedland was acquired in
2001 as an operating
field.
Solar
evaporation of
seawater at
Dampier and
Port Hedland;
underground
brine at Lake
MacLeod;
extraction of
gypsum at Lake
MacLeod.
Salt is grown every year
through solar evaporation in
permanent crystallising pans.
Gypsum is present in the top
layer covering most of the
Lake Macleod.
Long-term
contracts with
Hamersley Iron
and Horizon
Power and on-site
generation
Salt is processed through a washing
plant, consisting of screening
washbelts at Lake MacLeod,
Screwbowl classifiers and static
screens at Port Hedland and sizing
screens, counter-current classifiers
with dewatering screens and
centrifuges at Dampier. Dampier
produces shipping-ready product for
immediate shiploading. Washed salt
at Lake MacLeod and Port Hedland is
dewatered on stockpiles.
Lake Macleod also mines and
processes gypsum in leaching heaps.
Annual Report 2020 | riotinto.com
357
Production, Reserves and Operations
Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Copper and Diamonds
Property
Escondida
Operator
BHP
Ownership
30% Rio Tinto – 57.5%
BHP, 10% JECO
Corporation consortium
comprising Mitsubishi, JX
Nippon Mining and Metals
(10%), 2.5% JECO 2 Ltd
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
available facilities
Power source
Processing plants and other
Atacama Desert, Chile
Pipeline and road to deep
sea port at Coloso; road
and rail
Rights conferred by
Government under Chilean
Mining Code. Thirteen
mineral rights leases with a
total 57,047 ha.
Annual tenement payments (during
Production started in
Open pit
Consists of a series of
Los Colorados, Laguna
Supplied from grid under
March per year)
porphyry deposits
containing copper,
gold, silver, and
molybdenum.
Seca Line 1, and Laguna
various contracts with
Seca Line 2
local generating
Concentrators. OLAP
companies
– oxide leach facility, SL
Rom leach facility and
SX/EW facility.
Rio Tinto Kennecott
Bingham Canyon
100% Rio Tinto
Rio Tinto Kennecott
Copper
Near Salt Lake City,
Utah, US
Pipeline, road and rail
Wholly owned –
approximately 95,000
acres in total.
Rio Tinto
Khanbogd soum,
Umnugovi province,
Mongolia
Air and road
Oyu Tolgoi
Oyu Tolgoi is TRQ’s
principal and only
material mineral resource
property and is held
through a 66% interest in
Oyu Tolgoi LLC; the
remaining 34% interest is
held by the Government
of Mongolia through
Erdenes Oyu Tolgoi LLC.
Rio Tinto, with other
Rio Tinto affiliates, holds
a 50.8% majority interest
in TRQ, and is responsible
for the day-to-day
operational management
and development of the
Project.
Three mining licences are
100% held by Oyu Tolgoi LLC:
MV-006708 (the Manakht
licence: 4,533 ha),
MV-006709 (the Oyu Tolgoi
licence: 8,490 ha), and
MV-006710 (the Khukh Khad
licence: 1,763 ha).
Two further licences are held
in joint venture with Entrée
Gold LLCMV-015226 (the
Shivee Tolgoi Licence) and
MV-015225 (the Javkhlant
Licence).
The licence term under the
Minerals Law of Mongolia is
30 years with two 20-year
extensions. First renewals are
due in 2033 and 2039 for the
Oyu Tolgoi and Entrée Gold
licences respectively.
358
Annual Report 2020 | riotinto.com
Permit conditions are established
Interest acquired in 1989.
Open pit
by Utah and US Government
In 2012, the pushback of
agencies and comprise:
the south wall
–
Environmental compliance
and reporting
– Closure and reclamation
requirements
commenced, extending
the mine life from 2018 to
2032.
Copperton concentrator,
Supply contract with
Garfield smelter, refinery,
Rocky Mountain Power
Porphyry and
associated skarn
deposits containing
copper, gold, silver,
and molybdenum.
and precious metals
plant, assay lab and
tailings storage facilities.
Investment Agreement dated
6 October 2009, between the
Oyu Tolgoi was first
discovered in 1996.
Ore Reserves have
Consists of a series of
One copper concentrator
Currently sources its
been reported at the
porphyry deposits
with a nominal feed
capacity of 100ktpd
power under an
agreement with the Inner
Government of Mongolia, Oyu
Construction began in
Oyut and Hugo
containing copper,
Tolgoi LLC, TRQ, and Rio Tinto in
late 2009 after signing of
North deposits. The
gold, silver, and
comprising currently of 2
Mongolia Power
respect of Oyu Tolgoi (Investment
an Investment Agreement
Oyut deposit is
molybdenum.
SAG mills, 4 ball mills,
International Cooperation
rougher and cleaner
Company Ltd. (IMPIC), via
flotation circuits and up
the Mongolian National
to 1Mtpa copper
Power Transmission Grid
concentrate capacity.
(NPTG) authority, with
Other major facilities that
Grid power from China
support the isolated
operations include
and supplementary diesel
power generation at site.
Maintenance workshops,
Signed Tavan Tolgoi
heating plant, sealed
Power Plant Power
airstrip and terminal, and
Source Framework
camp facilities with up to
agreement in
6000 person capacity to
December 2018.
accommodate current
operations and the UG
construction project. UG
infrastructure in place
includes several shafts for
ore haulage, man haulage
and ventilation plus a
conveyor decline to
surface and associated
surface infrastructure.
1990 and since then
capacity has been
expanded numerous
times. In 1998 first
cathode was produced
from the oxide leach
plant, and during 2006
the sulphide leach plant
was inaugurated, a year
after the start of
Escondida Norte pit
production. During 2016,
the third concentrator
plant was commissioned.
with the Government of
currently mined as
Mongolia, and first
concentrate was
an open pit using a
conventional drill,
produced in 2012. First
blast, load, and haul
sales of concentrate were
method. The Hugo
made to Chinese
customers in 2013. In
2015, Underground
North deposit is
currently being
developed as an
Development Plan was
underground mine.
signed with Government
of Mongolia.
Agreement).
Amended and Restated
Shareholders Agreement dated
8 June 2011 among Oyu Tolgoi
LLC, THR Oyu Tolgoi Ltd. (formerly
Ivanhoe Oyu Tolgoi (BVI) Ltd.), Oyu
Tolgoi Netherlands B.V. and
Erdenes MGL LLC (ARSHA).
Erdenes MGL LLC has since
transferred its shares in Oyu Tolgoi
LLC and its rights and obligations
under the ARSHA to its subsidiary,
Erdenes Oyu Tolgoi LLC.
Underground Mine Development
and Financing Plan (Underground
Development Plan) dated 18 May
2015, between TRQ, the
Government of Mongolia, Erdenes
Oyu Tolgoi LLC, THR Oyu Tolgoi
Ltd., Oyu Tolgoi Netherlands B.V.,
Rio Tinto and Oyu Tolgoi LLC.
Power Source Framework
Agreement dated 31 December
2018, between the Government of
Mongolia and Oyu Tolgoi LLC,
including the amendment to the
PSFA dated 26 June 2020. This
requires obtaining numerous
permits and authorisations from
Mongolian regulatory authorities.
In terms of key government
permits, Oyu Tolgoi LLC secured a
land use permit until 2035 and
water use permit until 2039 as well
as the mineral rights.
Group mines as at 31 December 2020
Copper and Diamonds
Property
Escondida
BHP, 10% JECO
Corporation consortium
comprising Mitsubishi, JX
Nippon Mining and Metals
(10%), 2.5% JECO 2 Ltd
Oyu Tolgoi is TRQ’s
principal and only
material mineral resource
property and is held
through a 66% interest in
Oyu Tolgoi LLC; the
remaining 34% interest is
held by the Government
of Mongolia through
Erdenes Oyu Tolgoi LLC.
Rio Tinto, with other
Rio Tinto affiliates, holds
a 50.8% majority interest
in TRQ, and is responsible
for the day-to-day
operational management
and development of the
Project.
Rio Tinto Kennecott
100% Rio Tinto
Rio Tinto Kennecott
Near Salt Lake City,
Pipeline, road and rail
Wholly owned –
Bingham Canyon
Copper
Utah, US
approximately 95,000
acres in total.
Oyu Tolgoi
Rio Tinto
Air and road
Khanbogd soum,
Umnugovi province,
Mongolia
Mines and Production Facilities
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Processing plants and other
available facilities
Power source
30% Rio Tinto – 57.5%
BHP
Atacama Desert, Chile
Pipeline and road to deep
Rights conferred by
Annual tenement payments (during
March per year)
sea port at Coloso; road
Government under Chilean
and rail
Mining Code. Thirteen
mineral rights leases with a
total 57,047 ha.
Three mining licences are
100% held by Oyu Tolgoi LLC:
MV-006708 (the Manakht
licence: 4,533 ha),
MV-006709 (the Oyu Tolgoi
licence: 8,490 ha), and
MV-006710 (the Khukh Khad
licence: 1,763 ha).
Two further licences are held
in joint venture with Entrée
Gold LLCMV-015226 (the
Shivee Tolgoi Licence) and
MV-015225 (the Javkhlant
Licence).
The licence term under the
Minerals Law of Mongolia is
30 years with two 20-year
extensions. First renewals are
due in 2033 and 2039 for the
Oyu Tolgoi and Entrée Gold
licences respectively.
Permit conditions are established
by Utah and US Government
agencies and comprise:
–
Environmental compliance
and reporting
– Closure and reclamation
requirements
Investment Agreement dated
6 October 2009, between the
Government of Mongolia, Oyu
Tolgoi LLC, TRQ, and Rio Tinto in
respect of Oyu Tolgoi (Investment
Agreement).
Amended and Restated
Shareholders Agreement dated
8 June 2011 among Oyu Tolgoi
LLC, THR Oyu Tolgoi Ltd. (formerly
Ivanhoe Oyu Tolgoi (BVI) Ltd.), Oyu
Tolgoi Netherlands B.V. and
Erdenes MGL LLC (ARSHA).
Erdenes MGL LLC has since
transferred its shares in Oyu Tolgoi
LLC and its rights and obligations
under the ARSHA to its subsidiary,
Erdenes Oyu Tolgoi LLC.
Underground Mine Development
and Financing Plan (Underground
Development Plan) dated 18 May
2015, between TRQ, the
Government of Mongolia, Erdenes
Oyu Tolgoi LLC, THR Oyu Tolgoi
Ltd., Oyu Tolgoi Netherlands B.V.,
Rio Tinto and Oyu Tolgoi LLC.
Power Source Framework
Agreement dated 31 December
2018, between the Government of
Mongolia and Oyu Tolgoi LLC,
including the amendment to the
PSFA dated 26 June 2020. This
requires obtaining numerous
permits and authorisations from
Mongolian regulatory authorities.
In terms of key government
permits, Oyu Tolgoi LLC secured a
land use permit until 2035 and
water use permit until 2039 as well
as the mineral rights.
Production started in
1990 and since then
capacity has been
expanded numerous
times. In 1998 first
cathode was produced
from the oxide leach
plant, and during 2006
the sulphide leach plant
was inaugurated, a year
after the start of
Escondida Norte pit
production. During 2016,
the third concentrator
plant was commissioned.
Interest acquired in 1989.
In 2012, the pushback of
the south wall
commenced, extending
the mine life from 2018 to
2032.
Oyu Tolgoi was first
discovered in 1996.
Construction began in
late 2009 after signing of
an Investment Agreement
with the Government of
Mongolia, and first
concentrate was
produced in 2012. First
sales of concentrate were
made to Chinese
customers in 2013. In
2015, Underground
Development Plan was
signed with Government
of Mongolia.
Open pit
Consists of a series of
porphyry deposits
containing copper,
gold, silver, and
molybdenum.
Los Colorados, Laguna
Seca Line 1, and Laguna
Seca Line 2
Concentrators. OLAP
– oxide leach facility, SL
Rom leach facility and
SX/EW facility.
Supplied from grid under
various contracts with
local generating
companies
Open pit
Porphyry and
associated skarn
deposits containing
copper, gold, silver,
and molybdenum.
Copperton concentrator,
Garfield smelter, refinery,
and precious metals
plant, assay lab and
tailings storage facilities.
Supply contract with
Rocky Mountain Power
Consists of a series of
porphyry deposits
containing copper,
gold, silver, and
molybdenum.
Ore Reserves have
been reported at the
Oyut and Hugo
North deposits. The
Oyut deposit is
currently mined as
an open pit using a
conventional drill,
blast, load, and haul
method. The Hugo
North deposit is
currently being
developed as an
underground mine.
Currently sources its
power under an
agreement with the Inner
Mongolia Power
International Cooperation
Company Ltd. (IMPIC), via
the Mongolian National
Power Transmission Grid
(NPTG) authority, with
Grid power from China
and supplementary diesel
power generation at site.
Signed Tavan Tolgoi
Power Plant Power
Source Framework
agreement in
December 2018.
One copper concentrator
with a nominal feed
capacity of 100ktpd
comprising currently of 2
SAG mills, 4 ball mills,
rougher and cleaner
flotation circuits and up
to 1Mtpa copper
concentrate capacity.
Other major facilities that
support the isolated
operations include
Maintenance workshops,
heating plant, sealed
airstrip and terminal, and
camp facilities with up to
6000 person capacity to
accommodate current
operations and the UG
construction project. UG
infrastructure in place
includes several shafts for
ore haulage, man haulage
and ventilation plus a
conveyor decline to
surface and associated
surface infrastructure.
Annual Report 2020 | riotinto.com
359
Production, Reserves and Operations
Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Copper and Diamonds continued
Property
Ownership
Argyle Diamonds
100% Rio Tinto
Operator
Rio Tinto
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
available facilities
Power source
Processing plants and other
East Kimberley, Western
Australia
Road and air
Mining tenement held
under Diamond (Argyle
Diamond Mines Joint
Venture) Agreement Act
1981; M259SA: 60,690 ha
Permit conditions are set by the
Mining commenced in
Underground block
Diamondiferous
On-site process plant
Long-term contract with
Western Australia State
Government and comprise
1982 with alluvial
cave (previously
Lamproite deposit.
comprised of crushing
Ord Hydro Consortium
operations. Open pit
open pit).
and screening operations,
(Pacific Hydro) coupled
heavy media
concentration, x-ray
diamond recovery, and
tailings deposition.
with on-site backup
diesel generation.
environmental compliance and
extraction of the primary
reporting; environmental security
diamond pipe was carried
and closure and rehabilitation
out from 1985 to 2013.
planning; and payment of taxes
Interest increased from
and government royalties. The
59.7% following purchase
current business also operates
of Ashton Mining in 2000.
under an Indigenous Land Use
Underground mine
Agreement (ILUA) which includes
project approved in 2005
commitments for payments made
and operational from
to trust accounts; indigenous
2013 to 2020.
employment and business
opportunities; and heritage and
cultural protections.
Diavik
60% Rio Tinto – 40%
Dominion Diamond Mines
ULC, a Calgary-based
Canadian asset of U.S.
conglomerate The
Washington Companies
Diavik Diamond Mines
(2012) Inc. is a
Yellowknife-based
Canadian subsidiary
of Rio Tinto plc in
London, UK
Northwest Territories
(NWT), Canada
Air, ice road in winter
Three mineral rights leases
with a total average of
8,016 (3,244 ha). Mining
leases are issued by the
NWT Government. One
lease was renewed in 2017
and two leases were
renewed in February 2018.
The new leases will expire
after 21 years.
Our key permit conditions are local
Deposits discovered in
employment, procurement and
1994-95. Construction
benefit sharing commitments;
approved in 2000.
Open pit and
underground
operations
environmental compliance and
Diamond production
(Blast-hole stoping
reporting; environmental security
started in 2003. Fourth
and Sub-level
and closure and rehabilitation
pipe commenced
Retreat methods).
planning; and payment of taxes
production in 2018. Mine
and government royalties.
life through 2023-25.
Diamondiferous,
Kimberlite deposit.
Includes processing plant
On-site diesel generators;
and accommodation
installed capacity
facilities onsite.
44MW and 9.2MW of
wind capacity.
Energy and Minerals
Property
Ownership
Rio Tinto Borates – Boron
100% Rio Tinto
Operator
Rio Tinto
California, United States
Road and rail
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
available facilities
Power source
Processing plants and other
Land holdings include
13,493 acres (owned
including mineral rights) for
the mining operation, plant
infrastructure, and tailings
storage facility.
A total of 6,534 hectares of
licences including two
mining concessions of total
609ha, granted by Province
of Quebec in 1949 and 1951
which, subject to certain
Mining Act restrictions,
confer rights and
obligations of an owner.
Mining lease covering
56,200 hectares, granted by
central government.
Boron Operation currently has all
Deposit discovered in
Open pit
Sedimentary sequence
Boron Operation consists
On-site co-generation
of tincal and kernite
of the open pit mine, an
units and local power grid
State and Federal environmental
1925 and acquired by
and operational permits in place to
Rio Tinto in 1967.
continue the mining and
processing operation. Regular
updates to permits are ongoing.
containing interbedded
ore crushing and
claystone enveloped
conveying system, 2
by facies consisting of
process plants (Primary
ulexite and colemanite
Process and Boric Acid
bearing claystone, and
Plant), Shipping facility,
barren claystone.
and tailings storage
facilities.
The property is held under Quebec
Production started 1950;
Open pit
Magmatic intrusion.
Lac Tio has a crushing
Supplied by Hydro
provincial government mining
interest acquired in 1989.
facility, dedicated railway,
Quebec at regulated tariff
concession permits (Concession
minière No 368 and 381). Each is of
one year duration renewable as
long as the mine is in operation.
RTFT has also a number of claims
(exclusive exploration permits)
covering ilmenite occurrences in
the region of the mine. These
claims are renewable every 2 years.
Additional renewal for 10-years
construction approved
each period are granted at QMM`s
2005. Ilmenite and zirsil
request. An annual fee is payable
production started 2008.
to government authorities following
QMM intends to extract
notification at the beginning of
ilmenite and zirsil from
January.
heavy mineral sands over
an area of about 6,000
hectares along the coast
over the next 40 years.
stockpile at the train
terminal, ship loader,
office buildings at the
mine and at the terminal
and waste dumps.
Heavy Mineral
Concentrator, Mineral
Separation Plant, Port
and bulk loading facilities.
The permit has a validity of 30
Exploration project
years as of 12th December 1996.
started in 1986;
Mineral sand
dredging
Coastal mineralised
QMM has an operating
On-site heavy fuel oil
sands.
Dredge, Dry Mine Unit,
generators
Rio Tinto Fer et Titane
100% Rio Tinto
Rio Tinto
Lac Tio
Havre-Saint-Pierre,
Province of Quebec,
Canada
Rail and port (St
Lawrence River)
QIT Madagascar
Minerals (80%)
QIT Madagascar Minerals
is 80% owned by
Rio Tinto and 20% owned
by the Government of
Madagascar.
Rio Tinto
Fort-Dauphin,
Madagascar
Road and port
360
Annual Report 2020 | riotinto.com
Mines and Production Facilities
Property
Ownership
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Underground block
cave (previously
open pit).
Diamondiferous
Lamproite deposit.
Permit conditions are set by the
Western Australia State
Government and comprise
environmental compliance and
reporting; environmental security
and closure and rehabilitation
planning; and payment of taxes
and government royalties. The
current business also operates
under an Indigenous Land Use
Agreement (ILUA) which includes
commitments for payments made
to trust accounts; indigenous
employment and business
opportunities; and heritage and
cultural protections.
Mining commenced in
1982 with alluvial
operations. Open pit
extraction of the primary
diamond pipe was carried
out from 1985 to 2013.
Interest increased from
59.7% following purchase
of Ashton Mining in 2000.
Underground mine
project approved in 2005
and operational from
2013 to 2020.
Processing plants and other
available facilities
Power source
On-site process plant
comprised of crushing
and screening operations,
heavy media
concentration, x-ray
diamond recovery, and
tailings deposition.
Long-term contract with
Ord Hydro Consortium
(Pacific Hydro) coupled
with on-site backup
diesel generation.
Diavik
60% Rio Tinto – 40%
Diavik Diamond Mines
Northwest Territories
Air, ice road in winter
Three mineral rights leases
Dominion Diamond Mines
(2012) Inc. is a
(NWT), Canada
ULC, a Calgary-based
Yellowknife-based
Canadian asset of U.S.
Canadian subsidiary
conglomerate The
of Rio Tinto plc in
Washington Companies
London, UK
Our key permit conditions are local
employment, procurement and
benefit sharing commitments;
environmental compliance and
reporting; environmental security
and closure and rehabilitation
planning; and payment of taxes
and government royalties.
Deposits discovered in
1994-95. Construction
approved in 2000.
Diamond production
started in 2003. Fourth
pipe commenced
production in 2018. Mine
life through 2023-25.
Open pit and
underground
operations
(Blast-hole stoping
and Sub-level
Retreat methods).
Diamondiferous,
Kimberlite deposit.
Includes processing plant
and accommodation
facilities onsite.
On-site diesel generators;
installed capacity
44MW and 9.2MW of
wind capacity.
Group mines as at 31 December 2020
Copper and Diamonds continued
Argyle Diamonds
100% Rio Tinto
East Kimberley, Western
Road and air
Operator
Rio Tinto
Australia
Energy and Minerals
Rio Tinto Borates – Boron
100% Rio Tinto
California, United States
Road and rail
Operator
Rio Tinto
Rio Tinto Fer et Titane
100% Rio Tinto
Rio Tinto
Lac Tio
Havre-Saint-Pierre,
Province of Quebec,
Canada
Rail and port (St
Lawrence River)
QIT Madagascar
Minerals (80%)
QIT Madagascar Minerals
Rio Tinto
Road and port
Fort-Dauphin,
Madagascar
is 80% owned by
Rio Tinto and 20% owned
by the Government of
Madagascar.
Mining tenement held
under Diamond (Argyle
Diamond Mines Joint
Venture) Agreement Act
1981; M259SA: 60,690 ha
with a total average of
8,016 (3,244 ha). Mining
leases are issued by the
NWT Government. One
lease was renewed in 2017
and two leases were
renewed in February 2018.
The new leases will expire
after 21 years.
Land holdings include
13,493 acres (owned
including mineral rights) for
the mining operation, plant
infrastructure, and tailings
storage facility.
A total of 6,534 hectares of
licences including two
mining concessions of total
609ha, granted by Province
of Quebec in 1949 and 1951
which, subject to certain
Mining Act restrictions,
confer rights and
obligations of an owner.
Mining lease covering
56,200 hectares, granted by
central government.
Property
Ownership
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Boron Operation currently has all
State and Federal environmental
and operational permits in place to
continue the mining and
processing operation. Regular
updates to permits are ongoing.
Deposit discovered in
1925 and acquired by
Rio Tinto in 1967.
Open pit
Sedimentary sequence
of tincal and kernite
containing interbedded
claystone enveloped
by facies consisting of
ulexite and colemanite
bearing claystone, and
barren claystone.
Production started 1950;
interest acquired in 1989.
Open pit
Magmatic intrusion.
Processing plants and other
available facilities
Power source
On-site co-generation
units and local power grid
Supplied by Hydro
Quebec at regulated tariff
Boron Operation consists
of the open pit mine, an
ore crushing and
conveying system, 2
process plants (Primary
Process and Boric Acid
Plant), Shipping facility,
and tailings storage
facilities.
Lac Tio has a crushing
facility, dedicated railway,
stockpile at the train
terminal, ship loader,
office buildings at the
mine and at the terminal
and waste dumps.
The property is held under Quebec
provincial government mining
concession permits (Concession
minière No 368 and 381). Each is of
one year duration renewable as
long as the mine is in operation.
RTFT has also a number of claims
(exclusive exploration permits)
covering ilmenite occurrences in
the region of the mine. These
claims are renewable every 2 years.
The permit has a validity of 30
years as of 12th December 1996.
Additional renewal for 10-years
each period are granted at QMM`s
request. An annual fee is payable
to government authorities following
notification at the beginning of
January.
Mineral sand
dredging
Coastal mineralised
sands.
On-site heavy fuel oil
generators
QMM has an operating
Dredge, Dry Mine Unit,
Heavy Mineral
Concentrator, Mineral
Separation Plant, Port
and bulk loading facilities.
Exploration project
started in 1986;
construction approved
2005. Ilmenite and zirsil
production started 2008.
QMM intends to extract
ilmenite and zirsil from
heavy mineral sands over
an area of about 6,000
hectares along the coast
over the next 40 years.
Annual Report 2020 | riotinto.com
361
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Energy and Minerals continued
Property
Ownership
Richards Bay Minerals
RBM is a joint venture
between Rio Tinto (74%)
and Blue Horizon – a
consortium of investors
and our Host
Communities Mbonambi,
Sokhulu, Mkhwanazi and
Dube – which own 24%.
The remaining shares are
held in an employee
trust.
Operator
Rio Tinto
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
available facilities
Power source
Richards Bay, KwaZulu-
Natal, South Africa
Rail, road and port
RBM operates in three lease areas,
Production started 1977;
Dune sand dredging
Coastal mineralised
RBM manages and
Contract with ESKOM
sands.
Several existing and valid
Interest acquired in 2000
Open pit
Oxide iron (specular
Concentrator (gravity
Supplied by
hematite and
magnetite).
and magnetic separation
Newfoundland and
circuits), Pellet plant,
Labrador Hydro
Mineral rights for Reserve 4
and Reserve 10 issued by
South African State and
converted to new order
mining rights from 9 May
2012. Mining rights run
until 8 May 2041 and
covers 11,645 hectares
including mined
Tisand area.
Mining leases, surface
rights and a tailings
disposal license are held by
the Labrador Iron Ore
Royalty Company (LIORC)
under the Labrador Mining
and Exploration Act. LIORC
subleases these rights to
IOC. The mining leases
cover 10,356 hectares, the
surface rights cover 8,805
hectares and the tailings
license covers 2,784
hectares. These subleased
rights are valid until 2050.
In addition to the above
rights, IOC also holds a
number of mineral licenses,
either directly or under
sublease from LIORC.
ERA Mining Tenure
comprises two leases; the
Ranger Project Area (RPA,
79 km2) which hosts the
now mined out Ranger 1
and 3 uranium deposits,
and MLN1 (73 km2), which
hosts the undeveloped Tier
1 Jabiluka uranium deposit.
Mining tenure granted by
Federal Government as per
Section 41 of the Atomic
Energy Act. The Authority
to mine and process at
Ranger is due to expire
on 8 January 2021, when
“ERA shall cease or
suspend, as the case
may be, all mining
operations permitted
under this Authority by
8 January 2021”.
Tisand, Zulti North and Zulti South
initial interest acquired
by means of a notarial deed. Tisand
1989. Fifth mining plant
(which contains the stockpiled
commissioned in 2000.
tails) and Zulti North leases are
One mining plant
held by Tisand (Pty) Ltd. In
September 2012, Rio Tinto
decommissioned in 2008.
In September 2012,
completed the acquisition of BHP
Rio Tinto doubled its
Billiton’s entire interests in RBM.
holding in Richards Bay
The acquisition resulted in
Minerals to 74% following
Rio Tinto effectively doubling its
the acquisition of BHP
holding (74%) in RBM. The
Billiton’s entire interests.
remaining 26% of RBM is owned by
a consortium of local communities
and businesses (24%) and RBM
employees (2%), in line with South
Africa’s Broad-Based Black
Economic Empowerment
legislation.
Newfoundland and Labrador
through North. Current
permits such as TMP Release,
operation began in 1962
Tailings Disposal Licence, Approval
and has processed over
for Asbestos Disposal Site at Main
one billion tonnes of
landfill Facility, Mill licence, PCB
crude ore since. Annual
Storage Facility, Landfill, Water
capacity 23 million
withdrawal and use of bodies of
tonnes of concentrate of
water, Dewatering & Excavation of
which 12.5 million tonnes
Maggie Lake, Infilling of Carol Lake
can be pelletised.
Lagoon and unnamed water body,
Sewage System/Water Supply for
Crusher Building. IOC holds also
Federal Permits (Fish Habitat
Compensation Agreement, Tailings
Management Plan and dewatering.
been processing ore
stockpiles. Processing of
uranium ore is legislated to
finish on 8 January 2021.
and closure activities.
MLN1 – Northern Territory Mineral
Lease granted in 1982 under the
NT Mining Act for an initial period
of 42 years – Expires in 2024, which
can be renewed by the Minister for
a further period not exceeding 10
years provided ERA has complied
with the NT Mining Act and the
conditions of MLN1.
RPA – Granted under s41 of the
Mining commenced 1981.
Stockpile
Paleo-Proterozoic,
Crushing (primary,
On-site diesel generation
Atomic Energy Act – Authority to
Interest acquired through
process uranium expires 8 Jan
acquisition of North 2000.
2021. Lease expires 8 Jan 2026,
Open pit mining ended
allowing for 5 years of rehabilitation
2012, since then ERA has
structurally-hosted
secondary and tertiary
“unconformity-type”
crushing circuits);
uraninite.
Processing plants and other
operates several dredges,
dry mining units, heavy
mineral concentrators
and mineral separation
plant. RBM has also a
smelter with furnaces to
produce titania slag, pig
iron in addition to rutile
and zircon.
Warehouses, Workshops,
Heating plant, Ore delivery
system (crusher/conveyor
and automated train
system) Explosives plant,
Train loadout facilities,
Rail line (Labrador City to
Sept-Îles), Stockyards,
Shiploaders.
Grinding plant; Leaching
circuit; Counter Current
Decant circuit; solvent
extraction circuit;
precipitation, drying
and packing circuit;
Neutralisation and
tailings disposal system.
Iron Ore Company of
Canada (IOC)
Rio Tinto
IOC is a joint venture
between Rio Tinto
(58.7%), Mitsubishi
(26.2%) and the Labrador
Iron Ore Royalty Income
Corporation (15.1%).
Labrador City, Province of
Newfoundland and
Labrador, Canada
Railway and port facilities
in Sept-Îles, Quebec
(owned and operated
by IOC)
Energy Resources of
Australia – Ranger
86.3% Rio Tinto with the
remaining 13.7% held by
minority shareholders
Energy Resources
of Australia
Northern Territory,
Australia
Road, rail and port
362
Annual Report 2020 | riotinto.com
Richards Bay Minerals
RBM is a joint venture
Rio Tinto
Richards Bay, KwaZulu-
Rail, road and port
Natal, South Africa
Group mines as at 31 December 2020
Energy and Minerals continued
between Rio Tinto (74%)
and Blue Horizon – a
consortium of investors
and our Host
Communities Mbonambi,
Sokhulu, Mkhwanazi and
Dube – which own 24%.
The remaining shares are
held in an employee
trust.
Iron Ore Company of
IOC is a joint venture
Rio Tinto
Labrador City, Province of
Railway and port facilities
Mining leases, surface
Canada (IOC)
between Rio Tinto
(58.7%), Mitsubishi
(26.2%) and the Labrador
Iron Ore Royalty Income
Corporation (15.1%).
Newfoundland and
Labrador, Canada
in Sept-Îles, Quebec
rights and a tailings
(owned and operated
by IOC)
Energy Resources of
86.3% Rio Tinto with the
Energy Resources
Northern Territory,
Road, rail and port
ERA Mining Tenure
Australia – Ranger
remaining 13.7% held by
of Australia
Australia
minority shareholders
Mines and Production Facilities
Property
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
Production started 1977;
initial interest acquired
1989. Fifth mining plant
commissioned in 2000.
One mining plant
decommissioned in 2008.
In September 2012,
Rio Tinto doubled its
holding in Richards Bay
Minerals to 74% following
the acquisition of BHP
Billiton’s entire interests.
Interest acquired in 2000
through North. Current
operation began in 1962
and has processed over
one billion tonnes of
crude ore since. Annual
capacity 23 million
tonnes of concentrate of
which 12.5 million tonnes
can be pelletised.
RBM operates in three lease areas,
Tisand, Zulti North and Zulti South
by means of a notarial deed. Tisand
(which contains the stockpiled
tails) and Zulti North leases are
held by Tisand (Pty) Ltd. In
September 2012, Rio Tinto
completed the acquisition of BHP
Billiton’s entire interests in RBM.
The acquisition resulted in
Rio Tinto effectively doubling its
holding (74%) in RBM. The
remaining 26% of RBM is owned by
a consortium of local communities
and businesses (24%) and RBM
employees (2%), in line with South
Africa’s Broad-Based Black
Economic Empowerment
legislation.
Several existing and valid
Newfoundland and Labrador
permits such as TMP Release,
Tailings Disposal Licence, Approval
for Asbestos Disposal Site at Main
landfill Facility, Mill licence, PCB
Storage Facility, Landfill, Water
withdrawal and use of bodies of
water, Dewatering & Excavation of
Maggie Lake, Infilling of Carol Lake
Lagoon and unnamed water body,
Sewage System/Water Supply for
Crusher Building. IOC holds also
Federal Permits (Fish Habitat
Compensation Agreement, Tailings
Management Plan and dewatering.
RPA – Granted under s41 of the
Atomic Energy Act – Authority to
process uranium expires 8 Jan
2021. Lease expires 8 Jan 2026,
allowing for 5 years of rehabilitation
and closure activities.
MLN1 – Northern Territory Mineral
Lease granted in 1982 under the
NT Mining Act for an initial period
of 42 years – Expires in 2024, which
can be renewed by the Minister for
a further period not exceeding 10
years provided ERA has complied
with the NT Mining Act and the
conditions of MLN1.
Mineral rights for Reserve 4
and Reserve 10 issued by
South African State and
converted to new order
mining rights from 9 May
2012. Mining rights run
until 8 May 2041 and
covers 11,645 hectares
including mined
Tisand area.
disposal license are held by
the Labrador Iron Ore
Royalty Company (LIORC)
under the Labrador Mining
and Exploration Act. LIORC
subleases these rights to
IOC. The mining leases
cover 10,356 hectares, the
surface rights cover 8,805
hectares and the tailings
license covers 2,784
hectares. These subleased
rights are valid until 2050.
In addition to the above
rights, IOC also holds a
number of mineral licenses,
either directly or under
sublease from LIORC.
comprises two leases; the
Ranger Project Area (RPA,
79 km2) which hosts the
now mined out Ranger 1
and 3 uranium deposits,
and MLN1 (73 km2), which
hosts the undeveloped Tier
1 Jabiluka uranium deposit.
Mining tenure granted by
Federal Government as per
Section 41 of the Atomic
Energy Act. The Authority
to mine and process at
Ranger is due to expire
on 8 January 2021, when
“ERA shall cease or
suspend, as the case
may be, all mining
operations permitted
under this Authority by
8 January 2021”.
Dune sand dredging
Coastal mineralised
sands.
Processing plants and other
available facilities
Power source
Contract with ESKOM
RBM manages and
operates several dredges,
dry mining units, heavy
mineral concentrators
and mineral separation
plant. RBM has also a
smelter with furnaces to
produce titania slag, pig
iron in addition to rutile
and zircon.
Open pit
Oxide iron (specular
hematite and
magnetite).
Supplied by
Newfoundland and
Labrador Hydro
Concentrator (gravity
and magnetic separation
circuits), Pellet plant,
Warehouses, Workshops,
Heating plant, Ore delivery
system (crusher/conveyor
and automated train
system) Explosives plant,
Train loadout facilities,
Rail line (Labrador City to
Sept-Îles), Stockyards,
Shiploaders.
Stockpile
Paleo-Proterozoic,
structurally-hosted
“unconformity-type”
uraninite.
Mining commenced 1981.
Interest acquired through
acquisition of North 2000.
Open pit mining ended
2012, since then ERA has
been processing ore
stockpiles. Processing of
uranium ore is legislated to
finish on 8 January 2021.
Crushing (primary,
secondary and tertiary
crushing circuits);
Grinding plant; Leaching
circuit; Counter Current
Decant circuit; solvent
extraction circuit;
precipitation, drying
and packing circuit;
Neutralisation and
tailings disposal system.
On-site diesel generation
Annual Report 2020 | riotinto.com
363
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Group mines as at 31 December 2020
Aluminium
Property
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
other available facilities
Power source
CBG Sangaredi
Rio Tinto Group 22.95%,
Guinean Government
49%, Alcoa 22.95%,
Dadco Investments
Limited 5.1%
La Compagnie des
Bauxites de Guinée
Sangaredi, Guinea
Road, air and port
Mining concession expires
in 2040.
Leases comprise 2,939 km2.
The obligations of CBG relative to
Bauxite mining commenced in
Open cut
Bauxite
Processing plants and
Drill, blast and
crushing plant
only to reduce
oversize material –
no screening required.
On-site generation
(fuel oil)
Gove
100% Rio Tinto
Rio Tinto through
Rio Tinto Alumina
Gove P/L
Gove, Northern Territory,
Australia
Road, air and port
MRN is a non-managed JV.
All decisions are approved
by shareholders Board
of Directors
Porto Trombetas, Para,
Brazil
Air or port
MRN Porto Trombetas
MRN’s shareholders are:
Rio Tinto (12%), Vale
(40%), Hydro (5%), South
32 (14.8%),
CBA (Companhia
Brasileira de Alumínio
10%) and Alcoa (18.2%).
*Alcoa’s 18.2% is
comprised of Alcoa
Alumínio (8.58%),
AWA Brasil (4.62%) and
AWA LLC (5%), each a
subsidiary of Alcoa (10%).
Weipa/Ely
100% Rio Tinto
Rio Tinto through
Rio Tinto Alumina
Weipa P/L
Weipa, Queensland,
Australia
Road, air and port
All leases were renewed in
2011 for a further period of
42 years. The residue
disposal area is leased from
the Arnhem Land
Aboriginal Land Trust.
The Northern Territory
government is the lessor of
the balance of the leases;
however, on expiry of the
42-year renewed term, the
land subject to the
balances of the leases will
all vest to the Arnhem Land
Aboriginal Land Trust.
Leases comprise 233.5 km2.
Mining concession granted
by Brazilian Mining Agency
(ANM), following the
Brazilian mining code with
no expiration date.
The current 44 MRN mining
leases cover 22 major
plateaus, which spread
across 143,000 hectares
and all of them have the
status of a mining
concession.
The Queensland
Government Comalco
(ML7024) lease expires in
2042 with an option of a
21-year extension, then two
years’ notice of termination;
the Queensland
Government Alcan lease
(ML7031) expires in 2048
with a 21-year right of
renewal with a two-year
notice period.
Leases comprise 2,716.9
km2 [ML7024 = 1340.8 km2;
ML7031 = 1376.1 km2].
364
Annual Report 2020 | riotinto.com
Key permit conditions are
prescribed by the Northern
Bauxite mining commenced in
Open cut
Bauxite
1970, feeding both the Gove
Crushing plant
only to reduce
oversize material –
no screening required.
On-site diesel fired
power station
health and safety of workers and to
1973. Shareholders are 51% Halco
the environment and to the
and 49% Government of Guinea.
rehabilitation of mined out areas
Rio Tinto holds a 45% interest in
are subject to the Mining Code
Halco. Expansion of the CBG
(2011) and Environmental Code of
bauxite mine, processing plant,
the Republic of Guinea.
port facility and associated
infrastructure is currently near
completion with ramp up to
18.5 million tonnes per annum
underway.
Territory Government in the form
refinery, and export market capped
of a Mine Management Plan (MMP).
at two million tonnes per annum.
The current MMP runs for a period
Bauxite export ceased in 2006 with
of 12 years, until 2031, and
feed intended for the expanded
authorises all activities at the
Gove refinery. Bauxite exports
operation. Lease payments are
recommenced in 2008, increasing
prescribed by the terms of the
progressively following the
relevant leases.
curtailment of the refinery
production in 2014 and the
permanent shut decision made by
the Board of Rio Tinto in October
2017. Current annual production
capacity is 12.5 million tonnes on a
dry basis.
from Amazonas State, the MRN
1979. Initial production capacity
mining leases are within the
3.4 million tonnes annually.
Saracá-Taquera National Forest, a
From 2003, production capacity
preservation environmental area.
up to 16.3 million tonnes per year
However, the right of mining is
on a dry basis.
preserved initially by the Federal
law which created the National
Forest (that is subsequent to
mining concessions), as well as
by the management plan, which
acknowledges a formal mining
zone within the confines of the
National Forest.
Environmental licensing is granted
by Brazilian Environmental Agency
(IBAMA) up to 2026 for East Zone.
For West Zone it will require new
licensing from 2027 to 2048.
to the Comalco Agreement Act
1961 at Weipa. Major upgrade
(Comalco Agreement) and Alcan
completed in 1998. Rio Tinto
Agreement Act (Alcan Agreement);
interest increased from 72.4% to
the relevant State Agreements for
100% in 2000. In 1997, Ely Bauxite
the Weipa operations. Key permit
Mining Project Agreement signed
conditions are prescribed by the
with local Aboriginal land owners.
Queensland Government in the
Bauxite Mining and Exchange
relevant Environmental Authority
Agreement signed in 1998 with
applicable to each lease (ML7024
Comalco to allow for extraction of
and ML7031, respectively). Lease
ore at Ely. The Western Cape
payments are subject to the terms
Communities Co-Existence
of the leases and the respective
Agreement, an Indigenous Land
State Agreements.
Use Agreement, was signed in
2001. Following the ramp up to full
production of Amrun the current
annual production of the Weipa
mines is 35.5 million tonnes.
With the exception of concessions
Mineral extraction commenced in
Open cut
Consists of a series
The beneficiation
On-site generation
of bauxite tabular
process is formed
fuel oil + diesel)
deposits with
2 mining plan
by a primary
crusher, conveyors,
sequencing: East
scrubbers, secondary
Zone (1979 – 2025)
crushers, screenings,
and West Zone
(2026-2048).
hydrocyclones and
vacuum filters. The
superfines tailings are
pumped to a tailing
system facility.
The respective leases are subject
Bauxite mining commenced in
Open cut
Bauxite
Andoom, East Weipa
On-site
and Amrun – wet
generation (diesel)
crushing and
supplemented
screening plants to
by a solar
remove ultra fine
generation facility
proportion.
Group mines as at 31 December 2020
Aluminium
CBG Sangaredi
Rio Tinto Group 22.95%,
La Compagnie des
Sangaredi, Guinea
Road, air and port
Mining concession expires
Guinean Government
Bauxites de Guinée
49%, Alcoa 22.95%,
Dadco Investments
Limited 5.1%
Gove
100% Rio Tinto
Gove, Northern Territory,
Road, air and port
Rio Tinto through
Rio Tinto Alumina
Gove P/L
Australia
MRN Porto Trombetas
MRN’s shareholders are:
MRN is a non-managed JV.
Porto Trombetas, Para,
Air or port
All decisions are approved
Brazil
by shareholders Board
of Directors
Rio Tinto (12%), Vale
(40%), Hydro (5%), South
32 (14.8%),
CBA (Companhia
Brasileira de Alumínio
10%) and Alcoa (18.2%).
*Alcoa’s 18.2% is
comprised of Alcoa
Alumínio (8.58%),
AWA Brasil (4.62%) and
AWA LLC (5%), each a
subsidiary of Alcoa (10%).
Weipa/Ely
100% Rio Tinto
Weipa, Queensland,
Road, air and port
The Queensland
Rio Tinto through
Rio Tinto Alumina
Weipa P/L
Australia
Mines and Production Facilities
Property
Ownership
Operator
Location
Access
Title/lease/acreage
Key permit conditions
History
Type of mine
Type of mineralisation
in 2040.
Leases comprise 2,939 km2.
All leases were renewed in
2011 for a further period of
42 years. The residue
disposal area is leased from
the Arnhem Land
Aboriginal Land Trust.
The Northern Territory
government is the lessor of
the balance of the leases;
however, on expiry of the
42-year renewed term, the
land subject to the
balances of the leases will
all vest to the Arnhem Land
Aboriginal Land Trust.
Leases comprise 233.5 km2.
Mining concession granted
by Brazilian Mining Agency
(ANM), following the
Brazilian mining code with
no expiration date.
The current 44 MRN mining
leases cover 22 major
plateaus, which spread
across 143,000 hectares
and all of them have the
status of a mining
concession.
Government Comalco
(ML7024) lease expires in
2042 with an option of a
21-year extension, then two
years’ notice of termination;
the Queensland
Government Alcan lease
(ML7031) expires in 2048
with a 21-year right of
renewal with a two-year
notice period.
Leases comprise 2,716.9
km2 [ML7024 = 1340.8 km2;
ML7031 = 1376.1 km2].
The obligations of CBG relative to
health and safety of workers and to
the environment and to the
rehabilitation of mined out areas
are subject to the Mining Code
(2011) and Environmental Code of
the Republic of Guinea.
Key permit conditions are
prescribed by the Northern
Territory Government in the form
of a Mine Management Plan (MMP).
The current MMP runs for a period
of 12 years, until 2031, and
authorises all activities at the
operation. Lease payments are
prescribed by the terms of the
relevant leases.
With the exception of concessions
from Amazonas State, the MRN
mining leases are within the
Saracá-Taquera National Forest, a
preservation environmental area.
However, the right of mining is
preserved initially by the Federal
law which created the National
Forest (that is subsequent to
mining concessions), as well as
by the management plan, which
acknowledges a formal mining
zone within the confines of the
National Forest.
Environmental licensing is granted
by Brazilian Environmental Agency
(IBAMA) up to 2026 for East Zone.
For West Zone it will require new
licensing from 2027 to 2048.
The respective leases are subject
to the Comalco Agreement Act
(Comalco Agreement) and Alcan
Agreement Act (Alcan Agreement);
the relevant State Agreements for
the Weipa operations. Key permit
conditions are prescribed by the
Queensland Government in the
relevant Environmental Authority
applicable to each lease (ML7024
and ML7031, respectively). Lease
payments are subject to the terms
of the leases and the respective
State Agreements.
Bauxite mining commenced in
1973. Shareholders are 51% Halco
and 49% Government of Guinea.
Rio Tinto holds a 45% interest in
Halco. Expansion of the CBG
bauxite mine, processing plant,
port facility and associated
infrastructure is currently near
completion with ramp up to
18.5 million tonnes per annum
underway.
Bauxite mining commenced in
1970, feeding both the Gove
refinery, and export market capped
at two million tonnes per annum.
Bauxite export ceased in 2006 with
feed intended for the expanded
Gove refinery. Bauxite exports
recommenced in 2008, increasing
progressively following the
curtailment of the refinery
production in 2014 and the
permanent shut decision made by
the Board of Rio Tinto in October
2017. Current annual production
capacity is 12.5 million tonnes on a
dry basis.
Mineral extraction commenced in
1979. Initial production capacity
3.4 million tonnes annually.
From 2003, production capacity
up to 16.3 million tonnes per year
on a dry basis.
Bauxite mining commenced in
1961 at Weipa. Major upgrade
completed in 1998. Rio Tinto
interest increased from 72.4% to
100% in 2000. In 1997, Ely Bauxite
Mining Project Agreement signed
with local Aboriginal land owners.
Bauxite Mining and Exchange
Agreement signed in 1998 with
Comalco to allow for extraction of
ore at Ely. The Western Cape
Communities Co-Existence
Agreement, an Indigenous Land
Use Agreement, was signed in
2001. Following the ramp up to full
production of Amrun the current
annual production of the Weipa
mines is 35.5 million tonnes.
Open cut
Bauxite
Processing plants and
other available facilities
Power source
On-site generation
(fuel oil)
Drill, blast and
crushing plant
only to reduce
oversize material –
no screening required.
Open cut
Bauxite
Crushing plant
only to reduce
oversize material –
no screening required.
On-site diesel fired
power station
Open cut
On-site generation
fuel oil + diesel)
Consists of a series
of bauxite tabular
deposits with
2 mining plan
sequencing: East
Zone (1979 – 2025)
and West Zone
(2026-2048).
The beneficiation
process is formed
by a primary
crusher, conveyors,
scrubbers, secondary
crushers, screenings,
hydrocyclones and
vacuum filters. The
superfines tailings are
pumped to a tailing
system facility.
Open cut
Bauxite
Andoom, East Weipa
and Amrun – wet
crushing and
screening plants to
remove ultra fine
proportion.
On-site
generation (diesel)
supplemented
by a solar
generation facility
Annual Report 2020 | riotinto.com
365
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Group smelters and refineries (Rio Tinto’s interest 100% unless otherwise shown)
Smelter/refinery
Location
Title/lease
Plant type / Product
Capacity (based on
100% ownership)
Aluminium
Alma
Alma, Quebec, Canada
100% freehold
Alouette (40%)
Sept-Îles, Quebec, Canada
100% freehold
Arvida
Arvida AP60
Bécancour (25.1%)
Bell Bay
Saguenay, Quebec,
Canada
Saguenay, Quebec,
Canada
Bécancour, Quebec,
Canada
Bell Bay, Northern
Tasmania, Australia
100% freehold
100% freehold
100% freehold
100% freehold
Aluminium smelter producing aluminium rod,
t-foundry, molten metal, high purity, remelt
473,000 tonnes per
year aluminium
Aluminium smelter producing aluminium high
purity, remelt
622,000 tonnes per
year aluminium
Aluminium smelter producing aluminium billet,
molten metal, remelt
174,000 tonnes per
year aluminium
Aluminium smelter producing aluminium high
purity, remelt
60,000 tonnes per
year aluminium
Aluminium smelter producing aluminium slab,
billet, t-foundry, remelt, molten metal
454,000 tonnes per
year aluminium
Aluminium smelter producing aluminium slab,
molten metal, small form and t-foundry, remelt
192,000 tonnes per
year aluminium
Boyne Smelters (59.4%)
Boyne Island, Queensland,
Australia
100% freehold
Aluminium smelter producing aluminium billet,
EC grade, small form and t-foundry, remelt
510,000 tonnes per
year aluminium
ELYSIS (48.24%)
Grande-Baie
Saguenay, Quebec,
Canada
Saguenay, Quebec,
Canada
100% freehold
100% freehold
ISAL
Reykjavik, Iceland
100% freehold
Aluminium zero-carbon smelting pilot cell
producing aluminium high purity
275 tonnes per year
aluminium
Aluminium smelter producing aluminium slab,
molten metal, high purity, remelt
233,000 tonnes per
year aluminium
Aluminium smelter producing aluminium
remelt, billet
212,000 tonnes per
year aluminium
Jonquière (Vaudreuil)
Jonquière, Quebec,
Canada
100% freehold
Refinery producing smelter grade alumina
1,560,000 tonnes
per year alumina
Kitimat
Laterrière
Kitimat, British Columbia,
Canada
100% freehold
Saguenay, Quebec,
Canada
100% freehold
Aluminium smelter producing aluminium slab,
remelt, high purity
432,000 tonnes per
year aluminium
Aluminium smelter producing aluminium slab,
remelt, molten metal
257,000 tonnes per
year aluminium
Queensland Alumina
(80%)
Gladstone, Queensland,
Australia
73.3% freehold; 26.7% leasehold (of which
more than 80% expires in 2026 and after)
Refinery producing smelter grade alumina
São Luis (Alumar) (10%)
São Luis, Maranhão, Brazil
100% freehold
Refinery producing smelter grade alumina
3,950,000 tonnes
per year alumina
3,830,000 tonnes
per year alumina
Sohar (20%)
Sohar, Oman
100% leasehold (expiring 2039)
Tiwai Point (New Zealand
Aluminium Smelters)
(79.4%)
Invercargill, Southland,
New Zealand
19.6% freehold; 80.4% leasehold
(expiring in 2029 and use of certain
Crown land)
Aluminium smelter producing aluminium, high
purity, remelt
395,000 tonnes per
year aluminium
Aluminium smelter producing aluminium billet,
slab, small form foundry, high purity, remelt
373,000 tonnes per
year aluminium
Tomago (51.6%)
Tomago, New South
Wales, Australia
100% freehold
Aluminium smelter producing aluminium billet,
slab, remelt
590,000 tonnes per
year aluminium
Yarwun
Gladstone, Queensland,
Australia
97% freehold; 3% leasehold (expiring
2101 and after)
Refinery producing smelter grade alumina
3,200,000 tonnes
per year alumina
Copper and Diamonds
Rio Tinto Kennecott
Magna, Salt Lake City,
Utah, US
100% freehold
Flash smelting furnace/Flash convertor furnace
copper refinery and precious metals plant
335,000 tonnes per
year refined copper
366
Annual Report 2020 | riotinto.com
Mines and Production Facilities
Group smelters and refineries (Rio Tinto’s interest 100% unless otherwise shown)
Smelter/refinery
Location
Title/lease
Plant type / Product
Energy and Minerals
Boron
California, United States
100% freehold
Borates refinery
Capacity (based on
100% ownership)
576,000 tonnes per
year boric oxide
IOC Pellet plant (58.7%)
Labrador City, Province of
Newfoundland and
Labrador, Canada
100% freehold (asset), 100% leasehold
(land) under sublease with Labrador
Iron Ore Royalty Corporation for life of
mine.
Pellet induration furnaces producing multiple
iron ore pellet types
12.5 million tonnes
per year pellet
Richards Bay Minerals
(74%)
Richards Bay, South Africa
100% freehold
Ilmenite smelter
Rio Tinto Fer et Titane
Sorel Plant
Sorel-Tracy, Quebec,
Canada
100% freehold
Ilmenite smelter
1,050,000 tonnes
per year titanium
dioxide slag,
565,000 tonnes per
year iron
1,300,000 tonnes
per year titanium
dioxide slag,
1,000,000 tonnes
per year iron
Annual Report 2020 | riotinto.com
367
Production, Reserves and Operations Production, Reserves and Operations
Mines and Production Facilities
continued
Information on Group power plants (Rio Tinto’s interest 100% unless otherwise shown)
Power plant
Location
Title/lease
Plant type / Product
Capacity (based on
100% ownership)
Iron Ore
Cape Lambert power
station (67%)
Cape Lambert, Western
Australia, Australia
Paraburdoo power station
Paraburdoo, Western
Australia, Australia
West Angelas power
station (67%)
West Angelas, Western
Australia, Australia
Lease
Lease
Two LM6000PS gas-fired turbines
80MW
Three LM6000PC gas-fired turbines
One Frame5 dual-fuel turbine
138MW
Miscellaneous licence
Two LM6000PF dual-fuel turbines
80MW
Yurralyi Maya
power station (84.2%)
Dampier, Western
Australia, Australia
Miscellaneous licence
Four LM6000PD gas-fired turbines
One LM6000PF gas-fired turbine
(dual-fuel potential)
Aluminium
Amrun power station
Amrun, Australia
100% leasehold
Diesel generation
Gladstone power station
(42%)
Gladstone, Queensland,
Australia
Gove power station
Nhulunbuy, Northern
Territory, Australia
100% freehold
Thermal power station
100% leasehold
Diesel generation
Kemano power station
Kemano, British Columbia,
Canada
100% freehold
Hydroelectric power
200MW
24MW
1,680MW
24MW
896MW
Quebec power stations
Saguenay, Quebec, Canada
(Chute-à-Caron, Chute-à-la-
Savane, Chute-des-Passes,
Chute-du-Diable, Isle-
Maligne, Shipshaw)
100% freehold (certain facilities
leased from Quebec Government
until 2058 pursuant to Peribonka
Lease)
Hydroelectric power
3,147MW
Weipa power stations and
solar generation facility
Lorim Point, Andoom, and
Weipa, Australia
100% leasehold
Diesel generation supplemented by solar
generation facility
38MW
Yarwun alumina refinery
co-generation plant
Gladstone, Queensland,
Australia
100% freehold
Gas turbine and heat recovery steam generator
160MW
368
Annual Report 2020 | riotinto.com
Mines and Production Facilities
Information on Group power plants (Rio Tinto’s interest 100% unless otherwise shown)
Power plant
Location
Title/lease
Plant type / Product
Capacity (based on
100% ownership)
Copper and Diamonds
Rio Tinto Kennecott
power stations
Salt Lake City, Utah, US
100% freehold
Thermal power station
75MW
Energy and Minerals
Boron co-generation
plant
Boron, California, US
100% freehold
Energy Resources of
Australia (Rio Tinto:
86.3%)
Ranger Mine, Jabiru,
Northern Territory,
Australia
Lease
Steam turbine running off waste heat boilers at
the copper smelter
31.8MW
Combined heat and power plant supplying
steam to the copper refinery
6.2MW
Co-generation uses natural gas to generate
steam and electricity, used to run Boron’s
refining operations
48MW
Five diesel generator sets rated at 5.17MW; one
diesel generator set rated at 2MW; four
additional diesel generator sets rated at 2MW
35.8MW
IOC power station
Sept-Îles, Quebec, Canada
Statutory grant
Hydroelectric power
QMM power plant
Fort Dauphin, Madagascar
100% freehold
Diesel generation
22MW
24MW
Annual Report 2020 | riotinto.com
369
Production, Reserves and Operations Additional
Information
An employee at our Pilbara Iron Ore
operations. Steel, made from iron ore, has
shaped the skylines of cities the world over.
370
Annual Report 2020 | riotinto.com
i
i
A
m
n
g
t
o
s
t
r
e
n
g
t
h
e
n
i
o
u
r
s
u
s
t
a
n
a
b
i
l
i
t
y
p
e
r
f
o
r
m
a
n
c
e
Annual Report 2020 | riotinto.com
371
26.1%
of senior leadership roles are held by women.
Additional Information
Additional
Information
Independent Limited Assurance Report – Sustainability
Shareholder Information
Contact Details
Cautionary Statement about Forward-Looking Statements
373
375
383
384
372
Annual Report 2020 | riotinto.com
Independent Limited Assurance Report
Independent Limited Assurance Report
of KPMG (KPMG Australia) to the Directors of Rio Tinto plc and Rio Tinto Limited
CONCLUSION
Based on the evidence we obtained from the procedures performed, we are not aware of any material misstatements in the
Information Subject to Assurance presented in the Sustainability sections of the Rio Tinto Annual Report 2020 and the Rio Tinto
Sustainability Fact Book 2020 for the year ended 31 December 2020, which has been prepared by Rio Tinto plc and Rio Tinto Limited
(together Rio Tinto) in accordance with the Reporting Criteria.
Information Subject to Assurance
The Information Subject to Assurance is summarised below:
Rio Tinto’s assertion that it has incorporated the requirements of the International Council on Mining and Metals (ICMM) 10 Principles for
sustainable development, and the mandatory requirements set out in the ICMM Position Statements, into its own policies, strategies and
standards.
Rio Tinto’s assertions regarding the approach that it has adopted to identify and prioritise its material sustainable development risks and
opportunities set out in the Sustainability sections of the Rio Tinto Annual Report 2020.
Rio Tinto’s assertions regarding the existence and status of implementation of systems and approaches used to manage the following
selected sustainable development risk areas:
-
-
Safety
Business Integrity
- Health
- Greenhouse gas emissions and energy use
The following Rio Tinto performance data related to the selected sustainable development risk areas:
-
Fatalities at managed operations
- Number of business integrity cases
- All-injury frequency rate
-
Total managed greenhouse gas emissions (Scope 1 & 2)
-
Lost time injury frequency rate
- Greenhouse gas emissions intensity index
- Number of lost time injuries
- New cases of occupational illness
-
Community investment (discretionary)
-
-
Total managed energy
Tier 1 Water Target performance
Our assurance does not extend to information in respect of earlier periods or to any other information included in the Sustainability sections of
the Rio Tinto Annual Report 2020 and the Rio Tinto Sustainability Fact Book 2020 for the year ended 31 December 2020.
Reporting Criteria
The Reporting Criteria used for the reporting of the Information Subject to Assurance are the ICMM Sustainable Development Framework:
ICMM Principles (Revised 2015) and the definitions and approaches within the basis of reporting glossary presented on Rio Tinto’s website at
www.riotinto.com.
Basis for Conclusion
We conducted our work in accordance with International Standard on Assurance Engagements ISAE 3000 (Revised) Assurance Engagements
other than Audits and Reviews of Historical Financial Information and in respect of greenhouse gas emissions, International Standard on
Assurance Engagements ISAE 3410 Assurance Engagements on Greenhouse Gas Statements issued by the International Auditing and Assurance
Standards Board (Standards). In accordance with the Standards we have:
used our professional judgment to plan and perform the engagement to obtain limited assurance that we are not aware of any material
misstatements in the Information Subject to Assurance, whether due to fraud or error;
considered relevant internal controls when designing our assurance procedures, however we do not express a conclusion on their
effectiveness; and
ensured that the engagement team possess the appropriate knowledge, skills and professional competencies.
Annual Report 2020 | riotinto.com
373
Additional Information
Additional information
Independent Limited Assurance Report
of KPMG (KPMG Australia) to the Directors of Rio Tinto plc and Rio Tinto Limited
Summary of Procedures Performed
Our limited assurance conclusion is based on the evidence obtained from performing the following procedures:
enquiries with relevant Rio Tinto personnel to understand and evaluate the design and implementation of the key systems, processes and
internal controls relevant to the Information Subject to Assurance;
analytical procedures over the Information Subject to Assurance;
risk analysis to validate the completeness of Rio Tinto’s materiality assessment;
substantively tested performance data within the Information Subject to Assurance, on a sample basis at a corporate and operational level,
which included testing a selection of six operations such as Kennecott Copper, Yarwun Refinery, Brockman Region, Richards Bay Minerals,
QIT Madagascar Minerals and the Gudai-Darri Project;
evaluated the design and effectiveness of controls implemented by the Rio Tinto Health, Safety and Environment (HSE) Services reporting
function over the Information Subject to Assurance;
assessed Rio Tinto’s incorporation of the requirements of the ICMM 10 Principles for sustainable development, and the mandatory
requirements set out in the ICMM Position Statements, into its own policies, strategies and standards; and
reviewed the Rio Tinto Annual Report 2020 and Rio Tinto Sustainability Fact Book 2020 in its entirety to ensure they are consistent with
our overall knowledge of Rio Tinto.
How the Standard Defines Limited Assurance and Material Misstatement
The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for a reasonable
assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the
assurance that would have been obtained had a reasonable assurance engagement been performed.
Misstatements, including omissions, are considered material if, individually or in the aggregate, they could reasonably be expected to influence
relevant decisions of the Directors of Rio Tinto.
Use of this Assurance Report
This report has been prepared for the Directors of Rio Tinto for the purpose of providing an assurance conclusion on the Information Subject to
Assurance and may not be suitable for another purpose. We disclaim any assumption of responsibility for any reliance on this report, to any
person other than the Directors of Rio Tinto, or for any other purpose than that for which it was prepared.
Management’s responsibility
Management are responsible for:
determining that the Reporting Criteria is appropriate to meet
their needs;
preparing and presenting the Information Subject to Assurance
in accordance with the Reporting Criteria; and
establishing internal controls that enable the preparation and
presentation of the Information Subject to Assurance that is free
from material misstatement, whether due to fraud or error.
Our Responsibility
Our responsibility is to perform a limited assurance engagement in
relation to the Information Subject to Assurance for 31 December
2020, and to issue an assurance report that includes our conclusion.
Our Independence and Quality Control
We have complied with our independence and other relevant ethical
requirements of the Code of Ethics for Professional Accountants
(including Independence Standards) issued by the IFAC Ethical
Standards Board, and complied with the applicable requirements of
International Standard on Quality Control 1 to maintain a
comprehensive system of quality control.
KPMG
22 February 2021
Adrian King
Partner
Melbourne, Australia
374
Annual Report 2020 | riotinto.com
Shareholder information
Shareholder Information
Organisational structure
The Rio Tinto Group consists of Rio Tinto plc (registered in England and
Wales as company number 719885 under the UK Companies Act 2006
and listed on the London Stock Exchange), and Rio Tinto Limited
(registered in Australia as ABN 96 004 458 404 under the Australian
Corporations Act 2001 and listed on the Australian Securities Exchange).
Rio Tinto is headquartered in London with a corporate office in
Melbourne.
Rio Tinto plc has a sponsored American depositary receipts (ADR) facility,
with underlying shares registered with the US Securities and Exchange
Commission and listed on the New York Stock Exchange.
Nomenclature and financial data
Rio Tinto plc and Rio Tinto Limited operate together and are referred to in
this report as Rio Tinto, the Rio Tinto Group or the Group. These
expressions are used for convenience, since both companies, and other
companies in which they directly or indirectly own investments, are
separate and distinct legal entities. Likewise, the words “we”, “us”, “our”
and “ourselves” are used in some places to refer to the companies of the
Rio Tinto Group in general. These expressions are also used where no
useful purpose is served by identifying any particular company or
companies. We usually omit “Limited”, “plc”, “Pty”, “Inc.”, “Limitada”,
“L.L.C.”, “A.S.” or “SA” from Group company names, except to distinguish
between Rio Tinto plc and Rio Tinto Limited. Financial data in US dollars
($) is derived from, and should be read in conjunction with, the 2020
financial statements. In general, where we have provided financial data in
pounds sterling (£) and Australian dollars (A$), it has been translated
from the consolidated financial statements, and is provided solely for
convenience; exceptions arise where data has been extracted directly
from source records. Certain key information has been provided in US
dollars, pounds sterling and Australian dollars in the 2019 financial
statements.
History
Rio Tinto plc was incorporated on 30 March 1962 (then called The
Rio Tinto-Zinc Corporation Limited (RTZ)) and was formed by the merger
of The Rio Tinto Company Limited and The Consolidated Zinc Corporation
Limited. The Rio Tinto Company was incorporated in 1873 to reopen
ancient copper workings in Spain. The Consolidated Zinc Corporation
Limited began operations in the early twentieth century as part of the
Australian mining industry. Based at Broken Hill in New South Wales, it
began mining silver, lead and zinc deposits and later expanded into lead
and zinc smelting.
Rio Tinto Limited was incorporated on 17 December 1959 (then called
The Rio Tinto Mining Company of Australia Pty Limited). In 1962 the
Australian interests of The Consolidated Zinc Corporation Limited and
The Rio Tinto Company Limited were merged to form Conzinc Riotinto of
Australia Limited, a limited liability company under the laws of the State
of Victoria, Australia. In 1980, Conzinc Riotinto of Australia Limited
changed its name to CRA Limited.
Between 1962 and 1995, both RTZ and CRA discovered important
mineral deposits, developed major mining projects and grew through
acquisition.
RTZ and CRA began operating in 1995 through a dual listed companies
structure. In 1997, RTZ became Rio Tinto plc and CRA became Rio Tinto
Limited.
Dual listed companies structure
In 1995, Rio Tinto shareholders approved the terms of the dual listed
companies’ merger (the DLC structure). The aim was to put shareholders
of both companies in substantially the same position they would be in if
they held shares in a single entity owning all assets of both companies.
Following the approval of the DLC structure, both companies entered into
a DLC Merger Sharing Agreement (the Sharing Agreement). As part of
this both companies agreed to be managed in a unified way, to share the
same Board of Directors, and to put in place arrangements to provide
shareholders of both companies with a common economic interest in the
DLC structure.
To achieve this third objective, the Sharing Agreement fixed the ratio of
dividend, voting and capital distribution rights attached to each Rio Tinto
plc share and each Rio Tinto Limited share at an Equalisation Ratio of 1:1.
This has remained unchanged ever since, although the Sharing
Agreement makes clear this can be revised in special circumstances, for
example where certain modifications are made to the share capital of one
company (such as rights issues, bonus issues, share splits and share
consolidations) but not to the other.
Outside the circumstances specified in the Sharing Agreement, the
Equalisation Ratio can only be altered with the approval of shareholders
under the class rights action approval procedure, described in the Voting
arrangements section below. Any adjustments must be confirmed by the
Group’s external auditors.
Consistent with the DLC structure, the directors of both companies aim
to act in the best interests of Rio Tinto as a whole. The class rights action
approval procedure exists to deal with instances where there may be a
conflict of interest between the shareholders of the two companies.
To ensure that the Boards of both companies are identical, resolutions to
appoint or remove directors must be put to shareholders of both
companies as Joint Decisions, described in the Voting arrangements
section below. The Articles of Association of Rio Tinto plc and the
Constitution of Rio Tinto Limited make clear that a person can only be a
director of one company if he or she is also a director of the other. This
means that if a person were removed as a director of Rio Tinto plc, he or
she would also cease to be a director of Rio Tinto Limited.
One consequence of the DLC merger is that Rio Tinto is subject to a wide
range of laws, rules and regulatory reviews across multiple jurisdictions.
Where these rules differ, Rio Tinto will comply with the requirements in
each jurisdiction at a minimum.
Dividend arrangements
The Sharing Agreement ensures that dividends paid on Rio Tinto plc and
Rio Tinto Limited shares are equalised on a net cash basis without taking
into account any associated tax credits. Dividends are determined in US
dollars and (with the exception of ADR holders, paid in sterling and
Australian dollars) both companies are required to announce and pay
dividends and other distributions at the same time or as close to this
as possible.
The payment of dividends between companies and their subsidiaries,
including the payment of dividends on the DLC dividend shares, provides
the Group with flexibility to manage internal funds and distributable
reserves to enable the payment of equalised dividend or equalised
capital distributions.
If the payment of an equalised dividend would contravene the law
applicable to one of the companies, they can depart from the Equalisation
Ratio. In that situation, the relevant company must put aside reserves for
payment on the relevant shares at a later date.
Rio Tinto shareholders have no direct rights to enforce the dividend
equalisation provisions of the Sharing Agreement.
Voting arrangements
In principle, the Sharing Agreement enables the shareholders of Rio Tinto
plc and Rio Tinto Limited to vote as a joint electorate on any matters that
affect them in similar ways. These are referred to as Joint Decisions, and
include the creation of new classes of share capital, the appointment or
removal of directors and auditors, and the receiving of annual financial
statements. All shareholder resolutions that include Joint Decisions are
voted on a poll.
Annual Report 2020 | riotinto.com
375
Additional Information Additional Information
Shareholder Information continued
The Sharing Agreement also protects shareholders of both companies by
requiring joint approval for decisions that do not affect the shareholders
of both companies equally. These are known as class rights actions, and
are voted on a poll. For example, fundamental elements of the DLC
structure cannot be changed unless approved separately by the
shareholders of both companies.
Exceptions to these principles can arise in situations such as where
legislation requires the separate approval of a decision by the appropriate
majority of shareholders in one company, and where approval of the
matter by shareholders of the other company is not required.
Where a matter has been expressly categorised as either a Joint Decision
or a class rights action, the directors cannot change that categorisation. If
a matter falls within both categories, it is treated as a class rights action.
In addition, if an issue is not expressly listed in either category, directors
can decide how it should be put to shareholders for approval.
To support joint voting arrangements, both companies have entered into
shareholder voting agreements, where a Special Voting Share is issued to
a special purpose company (SVC) and held in trust for shareholders by a
common trustee. Rio Tinto plc (RTP) has issued its Special Voting Share
(RTP Special Voting Share) to Rio Tinto Limited (RTL) Shareholder SVC,
while Rio Tinto Limited has issued its Special Voting Share (RTL Special
Voting Share) to RTP Shareholder SVC. The total number of votes cast on
Joint Decisions by the shareholders of one company are decided at a
parallel meeting of the other company. The exact role of these SVCs is
described below.
In exceptional circumstances, certain shareholders can be excluded from
voting at their respective company’s general meetings. For example, they
may have acquired shares in the other company in excess of a given
threshold without making an offer for all the shares in the other
company. In this situation, votes cast by these excluded shareholders are
disregarded.
Following the companies’ general meetings, the overall results of the
voting are announced to relevant stock exchanges and the media, and
published on the Rio Tinto website.
At a Rio Tinto plc shareholders’ meeting during which a Joint Decision is
considered, each Rio Tinto plc share carries one vote. The holder of the
Special Voting Share has one vote for each vote cast by the public
shareholders of Rio Tinto Limited in their parallel meeting. The holder of
the Special Voting Share must vote in accordance with the votes cast by
public shareholders for and against the equivalent resolution at the
parallel Rio Tinto Limited shareholders’ meeting. The holders of Rio Tinto
Limited ordinary shares do not hold voting shares in Rio Tinto plc by
virtue of their holding in Rio Tinto Limited, and cannot enforce the voting
arrangements relating to the Special Voting Share.
Similarly, at a Rio Tinto Limited shareholders’ meeting during which a
Joint Decision is considered, each Rio Tinto Limited share carries one vote
and the holder of its Special Voting Share will have one vote for each vote
cast by the public shareholders of Rio Tinto plc in their parallel meeting.
The holder of the Special Voting Share must vote in accordance with the
votes cast for and against the equivalent resolution at the parallel
Rio Tinto plc shareholders’ meeting. The holders of Rio Tinto plc ordinary
shares do not hold any voting shares in Rio Tinto Limited by virtue of their
holding in Rio Tinto plc, and cannot enforce the voting arrangements
relating to the Special Voting Share.
Capital distribution arrangements
If either company goes into liquidation, the Sharing Agreement ensures a
valuation is made of the surplus assets of both companies. If the surplus
assets available for distribution by one company on each of the shares
held by its shareholders exceed the surplus assets available for
distribution by the other company on each of the shares held by its
shareholders, then an equalising payment must be made – to the extent
permitted by applicable law – such that the amount available for
distribution on each share held by shareholders of both companies
reflects the Equalisation Ratio.
376
Annual Report 2020 | riotinto.com
The aim is to ensure the shareholders of both companies have equivalent
entitlements to the assets of the combined Group on a per share basis,
taking account of the equalisation ratio.
The Sharing Agreement does not grant any enforceable rights to the
shareholders of either company upon liquidation of either company.
Limitations on ownership of shares and merger obligations
The laws and regulations of the UK and Australia impose restrictions and
obligations on persons who control interests in publicly listed companies
in excess of defined thresholds. These can include an obligation to make
a public offer for all outstanding issued shares of the relevant company.
The threshold applicable to Rio Tinto plc under UK law and regulations is
30% and to Rio Tinto Limited under Australian law and regulations is
20% on both a standalone and Joint Decision basis.
As part of the DLC merger, the Articles of Association of Rio Tinto plc and
the Constitution of Rio Tinto Limited were amended with the aim of
extending these laws and regulations to the combined enterprise. This
amendment also ensures that a person cannot exercise control over one
company without having made offers to the public shareholders of both
companies.
This guarantees the equal treatment of both sets of shareholders, and
that the two companies are considered as a single economic entity. The
Articles of Association of Rio Tinto plc and the Constitution of Rio Tinto
Limited impose restrictions on any person who controls, directly or
indirectly, 20% or more of the votes on a Joint Decision. If, however, such
a person has an interest in either Rio Tinto Limited or Rio Tinto plc only,
then the restrictions only apply if they control, directly or indirectly, 30%
or more of the votes at that company’s general meetings.
If one of these thresholds is exceeded, the person cannot attend or vote
at general meetings of the relevant company, cannot receive dividends or
other distributions from the relevant company, and may be divested of
their interest by the directors of the relevant company (subject to certain
limited exceptions and notification by the relevant company). These
restrictions continue to apply until that person has either made a public
offer for all the publicly held shares of the other company, has reduced
their controlling interest below the thresholds specified, or has acquired
through a permitted means at least 50% of the publicly held shares of
each company.
This arrangement ensures that offers for the publicly held shares of both
companies would be required to avoid the restrictions set out above, even
if the interests which breach the thresholds are held in just one of the
companies. The directors do not have the discretion to exempt a person
from the operation of these rules.
Under the Sharing Agreement, the companies agree to co-operate to
enforce the above restrictions contained in their Articles of Association
and Constitution.
Guarantees
In 1995, each company entered into a deed poll guarantee in favour of
creditors of the other company. In addition, each company guaranteed
the contractual obligations of the other and the obligations of other
persons guaranteed by the other company, subject to certain limited
exceptions.
Beneficiaries under deed poll guarantees can make demands on the
relevant guarantor without first having recourse to the company or
persons whose obligations are being guaranteed. The obligations of the
guarantor under each deed poll guarantee expire upon termination of the
Sharing Agreement and under other limited circumstances, but only in
respect of obligations arising after such termination and, in the case of
other limited circumstances, the publication and expiry of due notice.
Shareholder Information
Markets
Rio Tinto plc
The principal market for Rio Tinto plc shares is the London Stock Exchange, with shares trading through the Stock Exchange Electronic Trading Service
(SETS) system.
Rio Tinto plc American depositary receipts (ADRs) are listed on the New York Stock Exchange.
Further details relating to Rio Tinto plc ADRs are available in Rio Tinto’s Annual Report on Form 20-F.
Rio Tinto Limited
Rio Tinto Limited shares are listed on the Australian Securities Exchange (ASX).
The ASX is the principal trading market for Rio Tinto Limited shares. The ASX is a national stock exchange with an automated trading system.
Share ownership
Substantial shareholders
Under the UK Disclosure and Transparency Rules and the Australian Corporations Act 2001, any shareholder of Rio Tinto plc with voting rights of 3% or
more, or any person with voting power of 5% or more in Rio Tinto Limited, is required to provide the relevant company with notice.
The shareholders who have provided this notice or an equivalent as of 5 February 2021, being the last practicable date, are:
Rio Tinto Plc
BlackRock, Inc.(b)
Shining Prospect Pte. Ltd
The Capital Group Companies, Inc.
Rio Tinto Limited
BlackRock, Inc.
BlackRock, Inc.(e)
Shining Prospect Pte. Ltd
The Vanguard Group, Inc.(g)
Date of notice
4 Dec 2009
7 Dec 2018
21 May 2020
13 Apr 2015
13 Feb 2019
9 Feb 2018
18 Mar 2020
Number of shares
Percentage of capital(a)
127,744,871
182,550,329
62,352,014
See footnote(d)
22,870,305
See footnote(f)
22,304,083
8.38
14.02(c)
5.00
See footnote(d)
6.16
See footnote(f)
6.01
(a) The percentage of voting rights detailed above was as disclosed in the notice received by the Company, calculated at the time of the relevant disclosures.
(b) On 1 February 2021, BlackRock, Inc. filed an Amendment to Schedule 13G with the SEC and disclosed beneficial ownership of 107,935,590 ordinary shares of Rio Tinto Plc as of 31 December 2021,
representing 8.7% of that class of shares.
(c) In its notification of major holdings filed on 7 December 2018, Shining Prospect Pte. Ltd, a Singapore-based entity owned by Chinalco (Aluminium Corporation of China) disclosed that its percentage
of voting rights in Rio Tinto plc had increased to 14.02% on 18 October 2018. This increase in voting rights is due to the ongoing on-market share buy-back programme of Rio Tinto plc shares and the
number of shares held by Shining Prospect Pte. Ltd has remained unchanged.
(d) In its substantial holding notice filed on 13 April 2015, BlackRock, Inc. and its associates disclosed a holding of 120,174,604 shares in Rio Tinto plc and 22,330,443 shares in Rio Tinto Limited, which
gave BlackRock, Inc. and its associates voting power of 7.7% in the Rio Tinto Group on a Joint Decision matter. Accordingly, in addition to being substantial shareholders of Rio Tinto plc, through the
operation of the Australian Corporations Act 2001 as modified and the DLC structure, these entities are substantial shareholders of Rio Tinto Limited.
(e) On 1 February 2021, BlackRock, Inc. filed an Amendment to Schedule 13G with the SEC and disclosed beneficial ownership of 23,271,914 ordinary shares in Rio Tinto Limited as of 31 December 2020,
(f)
representing 6.3% of that class of shares.
In its notice of change of interests of substantial holder filed on 9 February 2018, Shining Prospect Pte. Ltd disclosed a holding of 182,550,329 shares in Rio Tinto plc which, as at 28 November 2017,
accordingly, in addition to being substantial shareholders of Rio Tinto plc, through the DLC structure, these entities are substantial shareholders of Rio Tinto Limited.
(g) On 10 February 2021, The Vanguard Group, Inc. filed an Amendment to Schedule 13G with the SEC and disclosed beneficial ownership of 22,604,578 ordinary shares in Rio Tinto Limited as of 31
December 2020, representing 6.09% of that class of shares.
As far as is known, Rio Tinto plc and Rio Tinto Limited are not directly or indirectly owned or controlled by another corporation or by any government or
natural person. Rio Tinto is not aware of any arrangement that may result in a change in control of Rio Tinto plc or Rio Tinto Limited. No shareholder
possesses voting rights that differ from those attaching to Rio Tinto plc’s and Rio Tinto Limited’s securities.
As of 5 February 2021 the total amount of the Group’s voting securities owned by the directors and executives in Rio Tinto plc was 207,472 ordinary
shares of 10p each or ADRs, and in Rio Tinto Limited was 82,364 ordinary shares, in aggregate representing less than 1% of the Group’s total number of
ordinary shares in issue.
Unquoted equity securities in Rio Tinto Limited
As at 5 February 2021, there were Rio Tinto Limited unquoted equity securities on issue, comprising 80,050 unvested Bonus Deferral Awards held by 34
holders, 1,260,224 unvested Management Share Awards held by 857 holders and 1,368,850 unvested Performance Share Awards held by 235 holders, all
of which granted under the Rio Tinto Limited Equity Incentive Plan, and 892,228 unvested matching share rights granted under the Rio Tinto Limited
Global Employee Share Plan held by 9,940 holders. This information is provided in compliance with ASX Listing Rule 4.10.16.
Annual Report 2020 | riotinto.com
377
Additional Information Additional Information
Shareholder Information continued
Shareholder information
Analysis of ordinary shareholders
As at 5 February 2021
(last practicable date)
1 to 1,000 shares
1,001 to 5,000 shares
5,001 to 10,000 shares
10,001 to 25,000 shares
25,001 to 125,000 shares
125,001 to 250,000 shares
250,001 to 1,250,000 shares
1,250,001 to 2,500,000 shares
2,500,001 shares and over(a)
Number of holdings less than
marketable parcel of A$500
Rio Tinto plc
Rio Tinto Limited
No. of
accounts
23,812
5,460
608
439
554
185
223
59
65
%
75.82
17.38
1.94
1.40
1.77
0.59
0.71
0.18
0.21
Shares
7,224,838
11,005,909
4,224,633
7,081,940
33,137,006
32,991,032
124,973,363
102,873,970
932,251,748(b)
1,255,764,439(c)
%
0.57
0.87
0.34
0.56
2.64
2.63
9.96
8.19
74.24
100.00
No. of
accounts
136,264
21,043
1,631
578
128
14
22
3
9
2,574
%
85.33
13.18
1.02
0.36
0.08
0.01
0.01
0.00
0.01
Shares
37,118,379
41,656,853
11,218,126
8,472,307
5,655,612
2,621,392
11,095,787
5,328,244
248,049,514
371,216,214(d)
%
10.00
11.22
3.02
2.28
1.52
0.71
2.99
1.44
66.82
100
(a) Excludes shares held in Treasury.
(b) This includes 115,544,129 shares held in the name of a nominee on the share register. The shares are listed on the NYSE in the form of American Depositary Receipts (ADRs).
(c) The total issued share capital is made up of 1,255,764,439 publicly held shares: 8,777,566 shares held in Treasury.
(d) Publicly held shares in Rio Tinto Limited.
Twenty largest registered shareholders
The following table lists the 20 largest registered holders of Rio Tinto Limited shares in accordance with the ASX listing rules, together with the number of
shares and the percentage of issued capital each holds, as of 5 February 2021, being the last practicable date.
Number of
shares
121,359,077
71,444,513
23,611,425
9,778,987
9,288,068
5,561,696
2,828,519
2,533,643
2,516,616
2,097,139
2,073,431
1,285,589
907,695
899,013
725,960
709,211
675,282
669,120
604,874
556,661
Percentage of
issued
share capital
32.69
19.25
6.36
2.63
2.50
1.50
0.76
0.68
0.68
0.56
0.56
0.35
0.24
0.24
0.20
0.19
0.18
0.18
0.16
0.15
Rio Tinto Limited
HSBC Custody Nominees (Australia) Limited
J. P. Morgan Nominees Australia Limited
Citicorp Nominees Pty Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
BNP Paribas Noms Pty Ltd (DRP)
HSBC Custody Nominees (Australia) Limited (NT-Comnwlth Super Corp A/C)
Computershare Trustees Jey Ltd (RE 3000086 A/C)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Argo Investments Limited
Australian Foundation Investment Company Limited
Computershare Comp Noms Ltd (VS4 A/C)
Custodial Services Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd (Hub24 Custodial Serv Ltd DRP)
CS Third Nominees Pty Limited (HSBC Cust Nom AU Ltd 13 A/c)
Computershare Trustees Jey Ltd (RE 3000091 A/C)
Milton Corporation Limited
Australian United Investment Co Ltd
National Nominees Limited (N A/C)
378
Annual Report 2020 | riotinto.com
Shareholder Information
Material contracts
Articles of Association, Constitution, and DLC Sharing
Agreement
As explained on pages 375-376, under the terms of the DLC structure
shareholders of Rio Tinto plc and of Rio Tinto Limited entered into certain
contractual arrangements designed to place the shareholders of both
companies in substantially the same position as if they held shares in a
single entity which owned all the assets of both companies. As far as is
permitted by the UK Companies Act 2006, the Australian Corporations
Act 2001 and ASX Listing Rules, this principle is reflected in the Articles
of Association of Rio Tinto plc and in the Constitution of Rio Tinto Limited.
The following summaries describe the material rights of shareholders of
both Rio Tinto plc and Rio Tinto Limited.
Objects
At the 2009 AGMs, shareholders of Rio Tinto plc and Rio Tinto Limited
approved amendments to their Articles of Association and Constitution
whereby the object clauses were removed to allow the companies to have
the widest possible scope of activities.
Directors’ interests
Under Rio Tinto plc’s Articles of Association, a director may not vote in
respect of any proposal in which he or she, or any other person connected
with him or her, has any interest, other than by virtue of his or her
interests in shares or debentures or other securities of, in or through the
company, except in certain circumstances, including in respect of
resolutions:
– indemnifying him or her or a third party in respect of obligations
incurred by the director on behalf of, or for the benefit of, the
company, or in respect of obligations of the company, for which
the director has assumed responsibility under an indemnity, security
or guarantee;
– relating to an offer of securities in which he or she may be interested
as a holder of securities or as an underwriter;
– concerning another body corporate in which the director is beneficially
interested in less than 1% of the issued shares of any class of shares
of such a body corporate;
– relating to an employee benefit in which the director will share equally
Rights attaching to shares
Under UK law, dividends on shares may only be paid out of profits
available for distribution, as determined in accordance with generally
accepted accounting principles and by the relevant law. Shareholders are
entitled to receive such dividends as may be declared by the directors.
Directors may also pay shareholders interim dividends as justified by the
financial position of the Group.
Under the Australian Corporations Act 2001, dividends on shares may
only be paid if the company’s assets exceed its liabilities immediately
before the dividend is declared, the excess is sufficient for the payment of
the dividend, the payment is fair and reasonable to the company’s
shareholders as a whole, and the payment does not materially prejudice
the company’s ability to pay its creditors. Any Rio Tinto plc dividend
unclaimed after 12 years from the date the dividend was declared, or
became due for payment, will be forfeited and returned to the company.
Any Rio Tinto Limited dividend unclaimed may be invested or otherwise
used by the Board for the benefit of the company until claimed or
otherwise disposed of according to Australian law. Rio Tinto Limited is
governed by the State of Victoria’s unclaimed monies legislation, which
requires the company to pay to the state revenue office any unclaimed
dividend payments of A$20 or more that on 1 March each year have
remained unclaimed for over 12 months.
Voting
Voting at any general meeting of shareholders on a resolution on which
the holder of the Special Voting Share is entitled to vote shall be decided
by a poll, and any other resolution shall be decided by a show of hands
unless a poll has been duly demanded. On a show of hands, every
shareholder who is present in person or by proxy (or other duly
authorised representative) and is entitled to vote, has one vote
regardless of the number of shares held. The holder of the Special Voting
Share is not entitled to vote in a show of hands. On a poll, every
shareholder who is present in person or by proxy (or other duly
authorised representative) and is entitled to vote, has one vote for every
ordinary share for which he or she is the holder. In the case of Joint
Decisions, the holder of the Special Voting Share has one vote for each
vote cast in respect of the publicly held shares of the other company.
A poll may be demanded by any of the following:
with other employees;
– the chairman of the meeting;
– relating to liability insurance that the company is empowered to
purchase for the benefit of directors of the company in respect of
actions undertaken as directors (or officers) of the company; and
– concerning the giving of indemnities in favour of directors or the
funding of expenditure by directors to defend criminal, civil or
regulatory proceedings or actions against a director.
Under Rio Tinto Limited’s Constitution, a director may be present at a
meeting of the Board while a matter in which the director has a material
personal interest is being considered and may vote in respect of that
matter, except where a director is constrained by Australian law.
The directors are empowered to exercise all the powers of the companies
to borrow money, to charge any property or business of the companies or
all, or any, of their uncalled capital, and to issue debentures or give any
other security for a debt, liability or obligation of the companies or of any
other person. The directors shall restrict the borrowings of Rio Tinto plc
to the limitation that the aggregate amount of all monies borrowed by
the company and its subsidiaries shall not exceed an amount equal to
1½ times the companies’ share capital plus aggregate reserves unless
sanctioned by an ordinary resolution of the company.
Directors are not required to hold any shares of either company by
way of qualification. The Remuneration Report on pages 140-185
provides information on shareholding policies relating to executive and
non-executive directors. Please refer to the Directors’ Report for
information on the appointment of directors.
– at least five shareholders entitled to vote on the resolution;
– any shareholder(s) representing in the aggregate not less than one
tenth (Rio Tinto plc) or one 20th (Rio Tinto Limited) of the total voting
rights of all shareholders entitled to vote on the resolution;
– any shareholder(s) holding Rio Tinto plc shares conferring a right to
vote at the meeting on which there have been paid-up sums in the
aggregate equal to not less than one tenth of the total sum paid up on
all the shares conferring that right; or
– the holder of the Special Voting Share of either company.
A proxy form gives the proxy the authority to demand a poll, or to join
others in demanding one.
The necessary quorum for a Rio Tinto plc general meeting is three
members present (in person or by proxy or other duly authorised
representative) and entitled to vote. For a Rio Tinto Limited general
meeting it is two members present (in person or by proxy or other duly
authorised representative).
Matters are transacted at general meetings by the proposing and passing
of resolutions as:
– ordinary resolutions (for example the election of directors), which
require the affirmative vote of a majority of persons voting at a
meeting for which there is a quorum; and
– special resolutions (for example amending the Articles of Association
of Rio Tinto plc or the Constitution of Rio Tinto Limited), which require
the affirmative vote of not less than three-quarters of the persons
voting at a meeting at which there is a quorum.
Annual Report 2020 | riotinto.com
379
Additional Information Additional Information
Shareholder Information continued
The Sharing Agreement further classifies resolutions as Joint Decisions
and class rights actions as explained on pages 375-376.
Annual general meetings must be convened with 21 days’ written notice
for Rio Tinto plc and with 28 days’ notice for Rio Tinto Limited. In
accordance with the authority granted by shareholders at the Rio Tinto
plc AGM in 2020, other meetings of Rio Tinto plc may be convened with
14 days’ written notice for the passing of a special resolution, and with
14 days’ notice for any other resolution, depending on the nature of the
business to be transacted. All meetings of Rio Tinto Limited require
28 days’ notice. In calculating the period of notice, any time taken to
deliver the notice and the day of the meeting itself are not included.
The notice must specify the nature of the business to be transacted.
Variation of rights
If, at any time, the share capital is divided into different classes of shares,
the rights attached to each class may be varied, subject to the provisions
of the relevant legislation, the written consent of holders of three-
quarters in value of the shares of that class, or upon the adoption of a
special resolution passed at a separate meeting of the holders of the
shares of that class. At every such meeting, all of the provisions of the
Articles of Association and Constitution relating to proceedings at a
general meeting apply, except that the quorum for Rio Tinto plc should
be two or more persons who hold or represent by proxy not less than
one-third in nominal value of the issued shares of the class.
Rights upon a winding-up
Except as the shareholders have agreed or may otherwise agree, upon a
winding-up, the balance of assets available for distribution after the
payment of all creditors (including certain preferential creditors, whether
statutorily preferred creditors or normal creditors) and subject to any
special rights attaching to any class of shares, is to be distributed among
the holders of ordinary shares according to the amounts paid-up on the
shares held by them. This distribution should generally be made in cash.
A liquidator may, however, upon the adoption of a special resolution of
the shareholders, divide among the shareholders the whole or any part of
the assets in specie or kind.
The Sharing Agreement describes the distribution of assets of each of the
companies in the event of a liquidation, as explained on pages 375-376.
Facility agreement
Details of the Group’s $7.5 billion multi-currency committed revolving
credit facilities are set out in note 29 to the 2020 financial statements.
Exchange controls and foreign investment
Rio Tinto plc
There are no UK foreign exchange controls or other restrictions on the
import or export of capital by, or on the payment of dividends to,
non-resident holders of Rio Tinto plc shares, or that materially affect the
conduct of Rio Tinto plc’s operations. It should be noted, however, that
various sanctions, laws, regulations or conventions may restrict the
import or export of capital by, or the payment of dividends to, non-
resident holders of Rio Tinto plc shares. There are no restrictions under
Rio Tinto plc’s Articles of Association or under UK law that limit the right
of non-resident owners to hold or vote Rio Tinto plc shares. However,
certain of the provisions of the Australian Foreign Acquisitions and
Takeovers Act 1975 (the Takeovers Act) described below also apply to
the acquisition by non-Australian persons of interests in securities of
Rio Tinto plc.
Rio Tinto Limited
Under current Australian legislation, Australia does not impose general
exchange or foreign currency controls. Subject to some specific
requirements and restrictions, Australian and foreign currency may be
freely brought into and sent out of Australia. There are requirements to
report cash transfers in or out of Australia of A$10,000 or more. There is
a prohibition on (or in some cases the specific prior approval of the
Department of Foreign Affairs and Trade or Minister for Foreign Affairs
must be obtained for) certain payments or other dealings connected with
countries or parties identified with terrorism, or to whom United Nations
or autonomous Australian sanctions apply. Sanction, anti-money
laundering and counterterrorism laws may restrict or prohibit payments,
transactions and dealings or require reporting of certain transactions.
Rio Tinto Limited may be required to deduct withholding tax from foreign
remittances of dividends, to the extent that they are unfranked, and from
payments of interest.
Acquisitions of interests in shares, and certain other equity instruments
in Australian companies by non-Australian (“foreign”) persons are
subject to review and approval by the Treasurer of the Commonwealth of
Australia under the Takeovers Act.
In broad terms, the Takeovers Act applies to acquisitions of interests in
securities in an Australian entity by a foreign person where, as a result, a
single foreign person (and any associate) would control 20% or more of
the voting power or potential voting power in the entity, or several foreign
persons (and any associates) would control 40% or more of the voting
power or the potential voting power in the entity. The potential voting
power in an entity is determined having regard to the voting shares in the
entity that would be issued if all rights (whether or not presently
exercisable) in the entity were exercised.
The Takeovers Act also applies to direct investments by foreign
government investors, in certain circumstances regardless of the size of
the investment. Persons who are proposing relevant acquisitions or
transactions may be required to provide notice to the Treasurer before
proceeding with the acquisition or transaction.
The Treasurer has the power to order divestment in cases where relevant
acquisitions or transactions have already occurred, including where prior
notice to the Treasurer was not required. The Takeovers Act does not
affect the rights of owners whose interests are held in compliance with
the legislation.
Limitations on voting and shareholding
Except for the provisions of the Takeovers Act, there are no limitations
imposed by law, Rio Tinto plc’s Articles of Association or Rio Tinto
Limited’s Constitution, on the rights of non-residents or foreigners to
hold the Group’s ordinary shares or ADRs, or to vote that would not apply
generally to all shareholders.
380
Annual Report 2020 | riotinto.com
Metal prices and exchange rates
Metal prices – average for the year
Copper
Aluminium
Gold
– US cents/lb
– US$/tonne
– US$/troy oz
2020
281
1,702
1,770
Average exchange rates against the US dollar
Sterling
Australian dollar
Canadian dollar
Euro
South African rand
1.28
0.69
0.75
1.14
0.06
Year-end exchange rates against the US dollar
Sterling
Australian dollar
Canadian dollar
Euro
South African rand
1.36
0.77
0.78
1.23
0.07
2019
273
1,791
1,393
increase/
(decrease)
2.93%
-4.97%
27.06%
1.28
0.70
0.75
1.12
0.07
1.31
0.70
0.77
1.12
0.07
0.00%
-1.43%
0.00%
1.79%
-11.59%
3.82%
10.00%
1.30%
9.82%
-4.23%
Shareholder Information
Directors
Appointment and removal of directors
The appointment and replacement of directors is governed by Rio Tinto
plc’s Articles of Association and Rio Tinto Limited’s Constitution, relevant
UK and Australian legislation, and the UK Corporate Governance Code.
The Board may appoint a director either to fill a casual vacancy or as
an addition to the Board, so long as the total number of directors does
not exceed the limit prescribed in these constitutional documents.
An appointed director must retire and seek election to office at the next
AGM of each company. In addition to any powers of removal conferred by
the UK Companies Act 2006 and the Australian Corporations Act 2001,
the company may by ordinary resolution remove any director before
the expiry of his or her period of office and may, subject to these
constitutional documents, by ordinary resolution appoint another person
who is willing to act as a director in their place. In line with the UK
Corporate Governance Code, all directors are required to stand for
re-election at each AGM.
Directors’ powers
The Board manages the business of Rio Tinto under the powers set out in
these constitutional documents. These powers include the directors’
ability to issue or buy-back shares. Shareholders’ authority to empower
the directors to purchase its own ordinary shares is sought at the AGM
each year. The constitutional documents can only be amended, or
replaced, by a special resolution passed in general meeting by at least
75% of the votes cast.
UK listing rules cross reference table
The following table contains only those sections of UK listing rule 9.8.4 C
which are relevant. The remaining sections of listing rule 9.8.4 C are not
applicable.
Listing rule
Description of listing rule
Reference in report
9.8.4 (1)
9.8.4 (12)
A statement of any interest
capitalised by the Group during
the year
Note 8 Finance income and
finance costs and note 17
Deferred taxation
Details of any arrangement
under which a shareholder has
waived or agreed to waive any
dividends
Note 11 Dividends
Shareholder security
Shareholders tell us that they sometimes receive unsolicited approaches,
usually by telephone, inviting them to undertake a transaction in shares
they own.
If a shareholder does not know the source of the call, they should check
the details against the Financial Conduct Authority (FCA) website below
and, if they have specific information, report it to the FCA using the
consumer helpline or the online reporting form.
If a shareholder is worried that they are a victim of fraud and is resident in
the UK, they should report the facts immediately using the Action Fraud
helpline on 0300 123 2040. More information about potential scams and
other investment-based fraud can be found at actionfraud.police.uk or
fca.org.uk/scamsmart.
Annual Report 2020 | riotinto.com
381
Additional Information Additional Information
Shareholder Information continued
Financial calendar
2021
19
17
4
5
January
Fourth quarter 2020 operations review
February
Announcement of results for 2020
March
March
Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto plc ADRs quoted “ex-dividend” for the 2020 final dividend
Record date for the 2020 final dividend for Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto plc ADRs
23
March
Final date for elections under the Rio Tinto plc and Rio Tinto Limited dividend reinvestment plans and under facilities for dividends to be paid in
alternative currency for the 2020 final dividend
8
9
15
20
6
16
28
12
13
2
16
23
15
April
April
April
April
May
July
July
August
August
Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio Tinto Limited holders electing to receive
pounds sterling)
Annual general meeting for Rio Tinto plc, UK
Payment date for the 2020 final dividend to holders of ordinary shares and ADRs
First quarter 2021 operations review
Annual general meeting for Rio Tinto Limited, Australia
Second quarter operations review 2021
Announcement of half-year results for 2021
Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto plc ADRs quoted “ex-dividend” for the 2021 interim dividend
Record date for the 2021 interim dividend for Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto plc ADRs
September
Final date for elections under the Rio Tinto plc and Rio Tinto Limited dividend reinvestment plans and under facilities for dividends to be paid in
alternative currency for the 2021 interim dividend
September
Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio Tinto Limited holders electing to receive
pounds sterling)
September Payment date for the 2021 interim dividend to holders of ordinary shares and ADRs
October
Third quarter 2021 operations review
382
Annual Report 2020 | riotinto.com
Shareholder information
Registered offices
Rio Tinto plc
6 St James’s Square
London
UK
SW1Y 4AD
Registered in England No. 719885
Telephone: +44 (0)20 7781 2000
Website: riotinto.com
Rio Tinto Limited
Level 7
360 Collins Street
Melbourne
Victoria 3000
Australia
ABN 96 004 458 404
Telephone: +61 (0) 3 9283 3333
Website: riotinto.com
Rio Tinto’s agent in the US is Cheree Finan,
who may be contacted at
Rio Tinto Services Inc.
80 State Street
Albany
NY 12207-2543
US
Rio Tinto Limited
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne
Victoria 3001
Australia
Telephone: +61 (0) 3 9415 4030
Australian residents only, toll free: 1800 813
292
New Zealand residents only, toll free:
0800 450 740
Website: computershare.com
Former Alcan Inc. shareholders
Computershare Investor Services Inc.
8th Floor
100 University Avenue
Toronto, ON
Canada
M5J 2Y1
Telephone: +1 514-982-7555
North American residents only,
toll free: +1 (800) 564-6253
Website: computershare.com
Shareholders
Please refer queries about shareholdings to
the investor centre
of the respective registrar.
Rio Tinto plc
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
UK
Telephone: +44 (0)370 703 6364
Fax: +44 (0)370 703 6119
UK residents only
Freephone: +44 (0)800 435021
Website: computershare.com
Holders of Rio Tinto American depositary
receipts (ADRs)
Please contact the ADR administrator if
you have any queries
about your ADRs.
ADR administrator
JPMorgan Chase & Co
PO Box 64504
St. Paul
MN 55164-0854
US
Telephone: +1 (651)453 2128
US residents only, toll free general:
+1(800) 990 1135
US residents only, toll free Global invest direct:
+1 (800) 428 4267
Website: adr.com
Email: jpmorgan.adr@eq-us.com
Annual Report 2020 | riotinto.com
383
Additional Information Additional Information
Shareholder Information continued
Investor Centre
Investor Centre is Computershare’s free, secure, self-service website,
where shareholders can manage their holdings online. The website
enables shareholders to:
– View share balances
– Change address details
– View payment and tax information
– Update payment instructions
In addition, shareholders who register their email address can be notified
electronically of events such as annual general meetings, and can receive
shareholder communications such as the Annual Report or notice of
meeting electronically online.
Rio Tinto plc shareholders
Website: www.investorcentre.co.uk
Rio Tinto Limited shareholders
Website: www-au.computershare.com/Investor
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.
384
Annual Report 2020 | riotinto.com
riotinto.com
Printed by Park Communications on FSC® certified paper.
Park works to the EMAS standard and its Environmental
Management System is certified to ISO 14001.
This publication has been manufactured using 100% offshore wind
electricity sourced from UK wind.
100% of the inks used are vegetable oil based, 95% of press
chemicals are recycled for further use and, on average 99% of any
waste associated with this production will be recycled and the
remaining 1% used to generate energy.
This document is printed on Splendorgel Extra White and GalerieArt
Matt, both papers are made of material from well-managed,
FSC®-certified forests and other controlled sources.
Produced by Black Sun
Rio Tinto plc
6 St James's Square
London SW1Y 4AD
United Kingdom
Rio Tinto Limited
Level 7, 360 Collins Street
Melbourne VIC 3000
Australia
riotinto.com