Delivering greater value for shareholders - Rio Tinto

1 annual reportDelivering greater value for shareholders Strategic report Performance highlights IFC Group overview 1 Chairman s letter 3 Chief executive s statement 5 Strategic context 6 Group strategy 7 Business model 9 Key performance indicators 10 Capital allocation 12 Principal risks and uncertainties 14 Sustainable development 18 Independent assurance statement 25 Product groups Aluminium 26 Copper 28 Diamonds & Minerals 30 Energy 32 Iron Ore 34 Exploration 36 Technology & Innovation 37 Financial review 38 Five year review 39 Directors report Directors report 42 Additional financial information 47 Board of directors 53 Executive committee 56 Corporate governance 57 Remuneration report annual statement by the Remuneration Committee chairman 68 Remuneration Policy report 70 Remuneration Implementation report 79 Financial statements Group income statement 111 Group statement of comprehensive income 112 Group statement of cash flows 113 Group statement of financial position 114 Group statement of changes in equity 115 Notes to the 2013 financial statements 118 Company balance sheet 194 Financial information by business unit 197 Australian Corporations Act Summary of ASIC relief 201 Directors declaration 202 Auditor s independence declaration 203 Independent Auditors report 204 Financial Summary 208 Summary financial data 210 Production.

2 Reserves and operations Metals and minerals production 211 Ore reserves 215 Mineral resources 219 Competent Persons 224 Mines and production facilities 226 Additional information Shareholder information 234 Financial calendar 244 Contact details IBC2013 annual highlights 2013 financial results focus on greater value for shareholders Rio Tinto s strong results reflect the progress the Group is making to transform the business and demonstrate how it is fulfilling its commitments to improve performance, strengthen the balance sheet and deliver results. The Group achieved underlying earnings of US$ billion, exceeded cost reduction targets and set production records. In turn, this has enhanced cash flow generation and lowered net debt. The 15 per cent increase in the dividend reflects Rio Tinto s confidence in the business and its attractive prospects. Underlying earnings of US$ billion were up ten per cent on 2012.

3 Operating cash cost improvements of US$ billion exceeded the 2013 target of US$ billion. Exploration and evaluation savings delivered US$1 billion, against the 2013 target of US$750 million. Production records set for iron ore, bauxite and thermal coal and a strong recovery in copper volumes. Iron ore volumes were bolstered by the completion in August of the Pilbara phase one infrastructure expansion in Western Australia to 290 Mt/a, with ramp-up on track to reach nameplate capacity before the end of the first half of 2014. Net earnings of US$ billion reflect non-cash exchange losses of US$ billion and impairments of US$ billion, notably the impairment of a previous non-cash accounting uplift on first consolidation of Oyu Tolgoi, a significant project cost overrun at Kitimat and the previously announced curtailment of the Gove alumina refinery. Cash flows from operations of US$ billion were up 22 per cent and capital expenditure was down 26 per cent to US$ billion.

4 Net debt reduced to US$ billion at 31 December 2013 , US$ billion down on the half year and US$ billion down on the previous year end. 15 per cent increase in full year dividend to 192 US cents per share reflects the sustainable growth of the business. Year to 31 December 2013 (All amounts are US$ millions unless otherwise stated) 20132012 ChangeUnderlying earnings (a) 10,2179,269+10%Net earnings/loss (a) 3,665(3,028)Cash flows from operations 20,13116,521+22%Capital expenditure 12,94417,575-26%Underlying earnings per share US cents +10%Basic earnings/(loss) per share from continuing operations US cents ( )Ordinary dividends per share US cents +15%The financial results are prepared in accordance with IFRS as adopted by the European Union (EU IFRS). (a)Underlying earnings is the key financial performance indicator which management uses internally to assess performance.

5 It is presented here to provide greater understanding of the underlying business performance of the Group s operations attributable to the owners of Rio Tinto . Net earnings and underlying earnings relate to profit attributable to owners of Rio Tinto . Underlying earnings is defined and reconciled to net earnings on pages 134 and 135. Comparative information has been restated to reflect a number of new accounting standards. Please see note 46 on page 191. Rio Tinto is reducing the print run of this document to be more environmentally friendly. We encourage you to visit: through Rio Tinto s annual and Strategic report As of 2013 , the UK s regulatory reporting framework requires companies to produce a strategic report . The intention is to provide investors with the option of receiving a document which is more concise than the full annual report , and which is strategic in its focus.

6 The first 40 pages of Rio Tinto s 2013 annual report constitute its 2013 Strategic report . References to page numbers beyond 40 are references to pages in the full 2013 annual report . This is available online at or shareholders may obtain a hard copy free of charge by contacting Rio Tinto s registrars, whose details are set out on the inside back cover of this document. In light of the new regulatory requirement to produce a strategic report in lieu of summary financial statements, and the Group s focus on Delivering greater value for shareholders , Rio Tinto is no longer producing an annual review. Please visit Rio Tinto s website to learn more about the Group s performance in 2013 . This annual report , which includes the Group s 2013 Strategic report , complies with Australian and UK reporting requirements. Copies of Rio Tinto s shareholder documents the 2013 annual report and 2013 Strategic report , along with the 2014 Notices of annual general meeting are available to view on the Group s website: Cautionary statement about forward-looking statements This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group.

7 These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. 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. Examples of forward-looking statements in this annual report include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Group s control. For example, future ore reserves will be based in part on market prices that may vary significantly from current levels.

8 These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty. In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as to the date of this annual report . Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

9 The Group cannot guarantee that its forward-looking statements will not differ materially from actual results. Reporting centre 2013 Deliveringgreater valuefor shareholdersGroup overview 1 STRATEGIC report DIRECTORS report FINANCIAL STATEMENTS PRODUCTION, RESERVES AND OPERATIONS ADDITIONAL INFORMATION Introduction to Rio Tinto Rio Tinto is a leading global mining group that focuses on finding, mining and processing the Earth s mineral resources. Our vision is to be a company that is admired and respected for Delivering superior value , as the industry s most trusted partner. With a view to sustaining returns to shareholders over time, we take a long-term approach to our activities. This means concentrating on developing Tier 1 orebodies into long-life, low-cost, expandable operations that are capable of providing competitive returns throughout business cycles.

10 We have a diverse portfolio and a global presence: our 66,000 people work in more than 40 countries. Our five product groups summarised below are supported by our Exploration and Technology & Innovation groups (also see pages 26 to 37). We are committed to creating a culture of high performance providing challenging work and opportunities to grow, and rewarding those who help deliver superior value . Sustainable development is integrated into everything we do. Our operations give us the opportunity to bring long-lasting positive change to the communities, regions and countries in which we work, and our metals and minerals are transformed into end products that contribute to higher living standards. The safety of our people, and our values accountability, respect, teamwork and integrity are at the core of our way of working. Our responsible approach to mineral development ensures we gain and maintain our licence to operate.