TIDMRIO
RNS Number : 2383H
Rio Tinto PLC
26 July 2023
26 July 2023
Improved operational performance with 5% volume uplift supports
underlying EBITDA of $11.7 billion and interim dividend of 177 US
cents per share
-- Net cash generated from operating activities of $7.0 billion .
-- Profit after tax attributable to owners of Rio Tinto
(referred to as "net earnings" throughout this release) of $5.1
billion, after $0.8 billion of impairments relating to our
Australian alumina refineries.
-- Underlying EBITDA of $11.7 billion and underlying earnings of
$5.7 billion, leading to an interim dividend of $2.9 billion, a 50%
payout, in line with our practice.
Six months ended 30 June 2023 2022 Change
----------------------------------------------- ----------- ------------------ ---------
Net cash generated from operating activities (33)
(US$ millions) 6,975 10,474 %
----------------------------------------------- ----------- ------------------ ---------
Purchases of property, plant and equipment
and intangible assets (US$ millions) 3,001 3,146 (5) %
----------------------------------------------- ----------- ------------------ ---------
(47)
Free cash flow(1) (US$ millions) 3,769 7,146 %
----------------------------------------------- ----------- ------------------ ---------
(10)
Consolidated sales revenue (US$ millions) 26,667 29,775 %
----------------------------------------------- ----------- ------------------ ---------
(25)
Underlying EBITDA(1) (US$ millions) 11,728 15,597 %
----------------------------------------------- ----------- ------------------ ---------
Profit after tax attributable to owners (43)
of Rio Tinto (net earnings)(2) (US$ millions) 5,117 8,943 %
----------------------------------------------- ----------- ------------------ ---------
Underlying earnings per share (EPS)(1 (34)
2) (US cents) 352.9 534.9 %
----------------------------------------------- ----------- ------------------ ---------
(34)
Ordinary dividend per share (US cents) 177.0 267.0 %
Underlying return on capital employed
(ROCE)(1) 20% 34%
----------------------------------------------- ----------- ------------------ ---------
At 30 At 31 December
June 2023 2022
----------------------------------------------- ----------- ------------------
Net debt(1) (US$ millions) 4,350 4,188
----------------------------------------------- ----------- ------------------
Rio Tinto Chief Executive Jakob Stausholm said: "We have a clear
pathway to building an even stronger Rio Tinto and continue to gain
momentum in our strategy to set the business up for long-term
success. We are making good progress on pursuing our four
objectives as we build further momentum in our Pilbara iron ore
business, mindful that we need to raise our game across many of our
other operations.
"Our disciplined investment in lifting the health of our assets
and focus on culture, mindset and relationships is delivering
results, with our Pilbara iron ore business consistently improving
its performance with five consecutive quarters of year-on-year
growth. We are taking real steps to shape our portfolio for the
future, with first sustainable production from Oyu Tolgoi
underground, just as we doubled our exposure through the
acquisition of Turquoise Hill Resources. Last week we signed an
agreement to form the Matalco aluminium joint venture to enter the
exciting and fast growing aluminium recycling industry in North
America. And the Simandou iron ore project in Guinea is advancing
at pace, with final approvals expected later this year.
"Our robust financials, despite softer market conditions, are
driven by the quality of our assets and our great people,
delivering underlying EBITDA of $11.7 billion, free cash flow of
$3.8 billion and underlying earnings of $5.7 billion, after taxes
and government royalties of $4.1 billion. Our balance sheet
strength enables us to continue to invest with discipline while
also paying an interim ordinary dividend of $2.9 billion, a 50%
payout, in line with our practice.
"We will continue paying attractive dividends and investing in
the long-term strength of our business as we sustain and grow our
portfolio, while contributing to society's drive to net zero."
(1) This financial performance indicator is a non-IFRS (as
defined below) measure which is reconciled to directly comparable
IFRS financial measures (non-IFRS measures). 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. For more information on our
use of non-IFRS financial measures in this report, see the section
entitled "Alternative performance measures" (APM) and the detailed
reconciliations on pages 72 to 81 . Our financial results are
prepared in accordance with IFRS - see page 39 for further
information. Footnotes are set out in full on page 25 .
(2) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to page 41 for details.
Progress against our strategy and objectives
Objective Key achievements in the first half of 2023
-------------- ----------------------------------------------------------------
Best operator Our disciplined investment in lifting the health of
our assets and focus on shifting our culture and mindset
is delivering results:
* we are committed to having a safe work environment,
preventing catastrophic events and preventing
injuries. Our AIFR in the first half of 2023 remained
stable at 0.36. Investigations are under way
following significant process safety incidents at Rio
Tinto Iron & Titanium and Kennecott. We are
heightening our focus on managing these risks and
continue to prioritise the safety, health and
wellbeing of our workforce, and communities where we
operate.
* sustained momentum from our Pilbara Iron Ore business
with a 7% uplift in production and shipments in the
first half: Gudai-Darri reached capacity and we
lifted 2023 shipments guidance to the upper half of
the 320 to 335 million tonne range
* successfully ramping up the Oyu Tolgoi underground
copper mine, with 54 drawbells opened from Panel 0,
well ahead of plan
* stable performance at our aluminium smelters, with
Kitimat ramping up to schedule
* commenced deployment of the Safe Production System at
a further two sites, taking the total to 20 sites.
This programme focuses on continuously improving
safety, strengthening employee engagement and
sustainably lifting operational performance.
-------------- ----------------------------------------------------------------
Impeccable In 2023 first half, our Scope 1 and 2 emissions were
ESG 15.4Mt CO2e (15.5Mt in 2022 first half; 30.3Mt in 2022).
Our capital expenditure on decarbonisation projects
in 2023 first half was $95 million, lower than we anticipated
when we set our targets. Our related operational expenditure
increased to approximately $100 million.
Progress during the half on decarbonising our assets
included:
* On 3 April, Rio Tinto Iron and Titanium (RTIT)
started its BlueSmelting(TM) demonstration plant at
its metallurgical complex in Sorel-Tracy as part of
the process to validate the ground-breaking
BlueSmelting(TM) technology, which aims to
decarbonise RTIT's Quebec Operations.
* On 2 June, our Boron, California operation
successfully completed the full transition of its
heavy machinery from fossil diesel to renewable
diesel, making it the first open pit mine in the
world to achieve this milestone.
* On 12 June, we signed a Memorandum of Understanding
(MoU) with China Baowu, the world's biggest
steelmaker, to explore a range of industry-leading
new projects in China and Australia to help
decarbonise the steel value chain.
Excel in We made significant progress with our objective to excel
Development in development with the following key milestones in
the half:
* a c hiev ed first sustainable production at the Oyu
Tolgoi underground copper mine in Mongolia, set to
become the world's fourth largest copper mine by 2030
* entered into an agreement to form a joint venture
with First Quantum Minerals to unlock development of
the La Granja copper project in Peru
* approved $498 million for development of the North
Rim Skarn underground copper mine at Kennecott in
Utah
* investing $1.1 billion to expand our AP60 aluminium
smelter in Quebec
* construction under way at Western Range mine to
sustain Pilbara Iron Ore production with A$1 billion
of contracts awar ded to Western Australian
businesses
* we are advancing the starter plant at the Rincon
lithium project in Argentina: however, full
definition of the project, changes to scope and
higher inflation have unfortunately led to an
increase in the capital estimate to $335 million
(from $140 million). The learnings and design
improvements will be carried over to the full-scale
project.
* investing $0.7 billion in Matalco aluminium recycling
joint venture in North America
* the Simandou iron ore project in Guinea is advancing
at pace, with final approvals expected later this
year
-------------- ----------------------------------------------------------------
Social licence We continue to restore trust and rebuild relationships,
particularly with Indigenous peoples.
* In February, the Naskapi Nation of Kawawachikamach
and Iron Ore Company of Canada signed an agreement to
establish a mutually beneficial relationship based on
dialogue, collaboration and trust over the coming
decades
* In March, we published an independent report based on
a global audit of our Cultural Heritage Management
compliance and performance
* In May, we published our 2022 Statement on Modern
Slavery . Although we are not aware of any recorded
modern slavery incidents or complaints in our
business during 2022, we are committed to looking for
ways to improve.
* On 2 June, we announced plans to invest $395 million
in a seawater desalination plant in the Pilbara,
Western Australia, to support future water supply for
the company's coastal operations and communities in
the region.
-------------- ----------------------------------------------------------------
People and Culture
We increased our gender diversity to 23.5% (from 22.9% at year
end). The increases were distributed across all levels of the
organisation with female senior leaders increasing to 28.6% (from
28.3% at year end).
We are taking actions to ensure that everyone at Rio Tinto has a
safe, respectful and inclusive workplace:
-- expanding "Purple Banner" communications across many of our
operations to share disrespectful behaviours, leveraging our strong
safety culture
-- implementing village councils across sites to provide a safe
way for employees and contractors to raise concerns and give
feedback
-- carried out a contractor survey at Pilbara Iron Ore to better
understand their experiences, with more than 950 responses
Guidance
-- In 2023, we expect our share of capital investment (refer to
APMs on page 78 ) to be $7.0 billion, excluding Simandou. In
addition, we expect our share of investment in Simandou to be
around $0.5 billion in the second half of 2023. This guidance
assumes all Simandou costs are capitalised in the second half of
the year following the signature of agreements between the joint
venture parties. Our previous guidance was $8.0 billion, depending
on the ramp-up of spend at Simandou.
-- In 2024 and 2025, our share of capital investment is expected
to be up to $10.0 billion per year, including up to $3.0 billion in
growth per year, depending on opportunities. Each year also
includes sustaining capital of around $3.5 billion, of which around
$1.5 billion a year is for Pilbara iron ore (subject to ongoing
inflationary pressure and exchange rates) and $2.0 to $3.0 billion
of replacement capital. Guidance includes around $1.5 billion over
the next three years on decarbonisation projects. This remains
subject to Traditional Owner and other stakeholder engagement,
regulatory approvals and technology developments.
-- In 2023, we expect our exploration & evaluation expense
(excluding Simandou) to be $1.0 billion. In addition, we have
incurred $0.3 billion in evaluation costs for the Simandou iron ore
project in the first half on a 100% basis. As noted above, our
guidance assumes all Simandou costs are capitalised in the second
half of the year.
-- Effective tax rate on underlying earnings is expected to be
around 30% in 2023.
H1 2023
Unit costs Actuals 2023 Guidance
------------------------------------------------ --------------------------- ---------------------------
Pilbara iron ore unit cash costs, free on board
(FOB) basis - US$ per wet metric tonne 21.2 21.0-22.5
------------------------------------------------ --------------------------- ---------------------------
Australian dollar exchange rate 0.68 0.70
------------------------------------------------ --------------------------- ---------------------------
Copper C1 unit costs (includes Kennecott, Oyu
Tolgoi and Escondida) - US cents per lb 184 180-200
------------------------------------------------ --------------------------- ---------------------------
Production (Rio Tinto share, unless otherwise H1 2023
stated) Actuals 2023 Guidance
---------------------------------------------- -------- -------------
Pilbara iron ore (shipments, 100% basis) (Mt) 161.7 320 to 335*
Bauxite (Mt) 25.6 54 to 57**
Alumina (Mt) 3.7 7.4 to 7.7
Aluminium (Mt) 1.6 3.1 to 3.3
Mined copper (consolidated basis) (kt)(4) 290 590 to 640
Refined copper (kt) 95 160 to 190
Diamonds (M carats) 1.9 3.0 to 3.8
Titanium dioxide slag (Mt) 0.6 1.1 to 1.4**
Iron Ore Company of Canada iron ore pellets
and concentrate (Mt) 4.6 10.0 to 11.0
Boric oxide equivalent (Mt) 0.3 0.5
---------------------------------------------- -------- -------------
-- Production and unit cost guidance is consistent with our
Second Quarter Operations Review, released on 19 July 2023.
-- Iron ore shipments and bauxite production guidance remain
subject to weather impacts.
* In the upper half of the range. With higher iron ore
production anticipated in 2023 second half, SP10 is expected to be
a larger proportion of shipments (first half 2023: 10%, on a 100%
basis).
** In the lower end of the range
Other footnotes set out in full on page 25 .
Decarbonisation targets
-- Activity across our global decarbonisation portfolio
continues to accelerate and we remain committed to reducing our
Scope 1&2 emissions by 50% by 2030. Delivery of this target
remains dependent on the development and delivery of new low-carbon
energy solutions at our Pacific Aluminium operations that can
support an internationally competitive aluminium business. In 2022,
this business unit contributed 70% of our total Scope 2 electricity
emissions and 48% of total Scope 1&2 emissions.
-- In addition to the pursuit of abatement projects to 2030
across renewable electricity, fleet solutions and process heat
abatement, we are committed to our ongoing investment in scaling up
industry breakthrough technologies to support our pathway to
net-zero operations (scope 1&2) by 2050. This approach has
contributed to continued investment in ELYSIS+ for aluminium,
Hydrogen calcination for alumina(1) , BlueSmelting for titanium
dioxide and iron and trialling battery electric mining fleets and
trains in our mining operations.
-- We expect to have made financial commitments to industrial
abatement projects representing more than 15% of group emissions by
2025. However, unless we use carbon offsets, we do not expect to
achieve our targeted 15% reduction in Scope 1&2 emissions until
after 2025. Physical delivery of renewables, diesel replacement and
process heat abatement will lag our financial commitments. These
delays are the result of a range of factors including engineering
and construction timelines, the need to carefully integrate our
ambitions with the needs of our local communities and stakeholder
groups and a requirement for additional abatement to address
underlying emissions growth as our production plans evolve.
-- Developing our own nature-based solutions and securing high
quality carbon offsets remain a key part of our decarbonisation
programme as we work towards our medium and long term carbon
reduction targets.
(1) As part of our commitment to enhanced climate advocacy and
transparency , we are publishing a series of briefing papers about
our key emissions sources, efforts to decarbonise specific assets
and how policy settings can support our Scope 1 and 2 emissions
reduction targets. The first of these covers decarbonisation of our
Australian alumina refineries .
Financial performance
Income Statement
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 2023 first half was $5.1
billion (2022 first half: $8.9 billion). We recorded a profit after
tax in 2023 first half of $4.9 billion (2022 first half: $9.4
billion ) of which a loss of $0.2 billion was attributable to
non-controlling interests (2022 first half profit: $0.5
billion).
Underlying EBITDA
To provide additional insight into the performance of our
business, we report underlying EBITDA and underlying earnings.
Underlying EBITDA and underlying earnings are Non-IFRS Measures.
For definitions and a detailed reconciliation of underlying EBITDA
and underlying earnings to the nearest IFRS measures, see pages 46
and 75 , respectively.
The principal factors explaining the movements in underlying
EBITDA are set out in this table.
US$bn
---------------------------------------------- -------------------
2022 first half underlying EBITDA 15.6
---------------------------------------------- -------------------
Prices (3.3)
---------------------------------------------- -------------------
Exchange rates 0.4
---------------------------------------------- -------------------
Volumes and mix 0.4
---------------------------------------------- -------------------
General inflation (0.2)
---------------------------------------------- -------------------
Energy -
---------------------------------------------- -------------------
Operating cash unit costs (0.9)
---------------------------------------------- -------------------
Higher exploration and evaluation expenditure (0.3)
2023 first half underlying EBITDA 11.7
---------------------------------------------- -------------------
Solid financial results impacted by significant movements in
commodity prices
We saw lower prices, in general, for our commodities, in line
with slowing global demand, with the Chinese recovery predominantly
led by the service sector.
Movements in commodity prices resulted in a $3.3 billion decline
in underlying EBITDA overall compared with 2022 first half. This
was primarily from lower iron ore prices ($1.6 billion), lower
London Metal Exchange (LME) copper prices and a negative
provisional pricing impact ($0.2 billion) and lower pricing for our
Aluminium business ($1.4 billion), driven by LME prices and lower
alumina pricing. We have included a table of prices and exchange
rates on page 82 .
The monthly average Platts index for 62% iron fines converted to
a Free on Board (FOB) basis was 14% lower, on average, compared
with 2022 first half.
The average LME price for copper was 10% lower, the average LME
aluminium price was 24% lower while the gold price was 3% higher
compared with 2022 first half.
The midwest premium duty paid for aluminium in the US averaged
$583 per tonne, 27% lower than in 2022 first half.
Benefit from weaker local currencies during 2023 first half
Compared with 2022 first half, on average, the US dollar
strengthened by 6% against the Australian dollar and by 6% against
the Canadian dollar. Currency movements increased underlying EBITDA
by $0.4 billion relative to 2022 first half.
Improvement in sales volumes and mix
Higher sales volumes and changes in product mix across the
portfolio increased underlying EBITDA by $0.4 billion compared to
2022 first half. T his was mostly attributable to increased iron
ore sales and enhanced product mix, including higher lump
shipments, following improved Pilbara system performance including
the ramp-up of Gudai-Darri.
Impact of rising inflation and generally stable energy
prices
We saw a $0.1 billion benefit to underlying EBITDA on the easing
of diesel prices compared to 2022 first half: however, the benefit
of this was offset by other energy prices that remain elevated,
reducing underlying EBITDA by $0.1 billion. In addition, general
price inflation across our global operations resulted in a $0.2
billion reduction in underlying EBITDA, net of a $0.2 billion
benefit from the impact of inflation on closure provisions.
Lower volumes at some assets drive up unit costs: market-linked
raw material price declines to benefit costs in second half
We remained focused on cost control, in particular maintaining
discipline on fixed costs. Lower production across several assets
triggered an overall rise in our operating cash unit costs, which
reduced underlying EBITDA by approximately $0.4 billion (on a unit
cost basis) compared with 2022 first half. This was mainly at
Kennecott from the failure of a conveyor in March and the rebuild
of the smelter and refinery that commenced in May, along with
production being impacted at Iron Ore Company of Canada (IOC) in
June following the wildfires in Northern Quebec. Increases to our
nominal cost base reduced underlying EBITDA by $0.5 billion, where
a large proportion of this is expected to be temporary. In
Aluminium, we made targeted investment to improve the integrity of
operations and we continue to see elevated market-linked raw
material prices flow through underlying EBITDA: which have
moderated but are expected to take three to four months to flow
through to the Income Statement. Costs at IOC were higher following
the recent collective bargaining agreement and where we also made
targeted investment to improve asset reliability at the mine, port
and rail, concentrator and pellet plant.
Increasing our global exploration and evaluation activity
We increased our exploration and evaluation expenditure by $0.3
billion, or 94%, to $0.7 billion. This was mainly attributable to
increased activity at the Simandou iron ore project in Guinea
(where costs are included in underlying EBITDA on a 100% basis) and
the Rincon lithium project in Argentina.
Net earnings
The principal factors explaining the movements in underlying
earnings and net earnings are set out below.
US$bn
------------------------------------------------------------------ -------------------
2022 first half net earnings 8.9
------------------------------------------------------------------ -------------------
Total changes in underlying EBITDA (3.9)
Increase in interest and finance items (pre-tax) in underlying
earnings (0.4)
------------------------------------------------------------------ -------------------
Decrease in tax on underlying earnings 0.6
------------------------------------------------------------------ -------------------
Decrease in underlying earnings attributable to outside interests 0.7
------------------------------------------------------------------ -------------------
Total changes in underlying earnings (3.0)
------------------------------------------------------------------ -------------------
Changes in exclusions from underlying earnings:
Gain recognised by Kitimat relating to LNG Canada's project (0.1)
Movement in impairment charges (0.8)
------------------------------------------------------------------ -------------------
Movement in closure estimates (non-operating and fully impaired
sites) 0.1
2023 first half net earnings 5.1
------------------------------------------------------------------ -------------------
Financial figures are rounded to the nearest million, hence
small differences may result in the totals.
Net interest and finance items
Interest and finance items (pre-tax) were higher mainly as a
result of a $0.5 billion increase in finance costs due to higher
interest rates and a non-cash modification charge on refinancing of
the Oyu Tolgoi project finance facility, partially offset by a $0.2
billion increase in finance income due to higher interest
rates.
Tax and non-controlling interests
The 2023 first half effective corporate income tax rate on
pre-tax earnings, excluding equity accounted units, was 30.5%,
compared with 24.2% (as restated) in 2022 first half, the most
significant driver of the lower rate in 2022 being the recognition
and use of additional deferred tax assets at Oyu Tolgoi. The
effective tax rate on pre-tax earnings in Australia was 30.4%,
compared with 28.7% (as restated) in 2022 first half.
Underlying earnings attributable to outside interests
Earnings attributable to non-controlling interests were lower,
mainly due to lower underlying earnings at Oyu Tolgoi, the
acquisition of the Turquoise Hill minorities in 2022, higher
evaluation spend at Simandou and higher interest costs attributable
to non-controlling interests.
Items excluded from underlying earnings
The differences between underlying earnings and net earnings are
set out in this table (all numbers are after tax and exclude
non-controlling interests).
Six months Six months
ended 30 ended 30
June 2023 June 2022
US$bn US$bn
----------------------------------------------------- ---------------------------- ----------------------------
Underlying earnings 5.7 8.7
----------------------------------------------------- ---------------------------- ----------------------------
Items excluded from underlying earnings
----------------------------------------------------- ---------------------------- ----------------------------
Impairment charges (0.8) -
----------------------------------------------------- ---------------------------- ----------------------------
Gains recognised by Kitimat relating to LNG Canada's
project - 0.1
Foreign exchange and derivative gains on net
debt and intragroup balances and derivatives
not qualifying for hedge accounting 0.2 0.2
Net earnings 5.1 8.9
----------------------------------------------------- ---------------------------- ----------------------------
Financial figures are rounded to the nearest million, hence
small differences may result in the totals.
On pages 75 to 76 there is a detailed reconciliation from net
earnings to underlying 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 46 .
We recognised impairment charges of $0.8 billion (after tax) in
2023 first half, mainly related to our alumina refineries in
Queensland, triggered by the challenging market conditions facing
these assets, together with our improved understanding of the
capital requirements for decarbonisation and the recently
legislated cost escalation for carbon emissions. There is a
detailed explanation of the impairment process on page 49 .
In 2023 first half, we recognised an exchange and derivative
gain of $0.2 billion , in line with the first half gain of $0.2
billion. The exchange gains are largely offset by currency
translation losses recognised in equity. The quantum of US dollar
debt is largely unaffected and we will repay it from US dollar
sales receipts.
Underlying EBITDA and underlying earnings by product group
Underlying Underlying
EBITDA earnings
------------------------------ ------------------------------
2023 2022 Change 2023 2022 Change
Six months ended 30 June US$bn US$bn % US$bn US$bn%
-------------------------------- -------------- -------------- --------- -------------- -------------- --------
(6) (11)
Iron Ore 9.8 10.4 % 5.8 6.5 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(60) (83)
Aluminium 1.1 2.9 % 0.3 1.6 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(29) (65)
Copper 1.1 1.5 % 0.2 0.6 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(45) (58)
Minerals 0.7 1.3 % 0.2 0.4 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(21) (29)
Reportable segment total 12.7 16.1 % 6.4 9.0 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
489 245
Simandou iron ore project (0.3) (0.1) % (0.1) - %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
Other operations (0.1) (0.1) 8 % (0.2) (0.2) 5 %
Central pension costs,
share-based
payments, insurance and (37) (38)
derivatives 0.2 0.3 % 0.1 0.2 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
Restructuring, project and
one-off (2) (2)
costs (0.1) (0.1) % (0.1) (0.1) %
Other central costs (0.5) (0.4) 25 % (0.5) (0.4) 25 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
Central exploration and
evaluation (0.1) (0.1) 19 % (0.1) (0.1) 20 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(23)
Net interest 0.1 0.1 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
(25) (34)
Total 11.7 15.6 % 5.7 8.7 %
-------------------------------- -------------- -------------- --------- -------------- -------------- ---------
Financial figures are rounded to the nearest million, hence
small differences may result in the totals and period-on-period
change.
Underlying EBITDA and underlying earnings are APMs used by
management to assess the performance of the business, and provide
additional information which investors may find useful. APMs are
reconciled to directly comparable IFRS financial measures on pages
72 to 81 .
Simandou iron ore project
Costs attributable to the Simandou iron ore project in Guinea
increased to $318 million (100% basis at EBITDA level), in line
with the rise in activity.
Central and other costs
Pre-tax central pension costs, share-based payments, insurance
and derivatives were a $0.2 billion credit compared with a $0.3
billion credit in 2022 first half, reflecting a net loss on
derivatives recognised in 2023 (of -$65 million) compared to
derivative gains recognised in 2022 (of +$65 million), offset by
lower central pension costs.
On a pre-tax basis, restructuring, project and one-off central
costs were in line with 2022 first half mainly associated with
corporate projects, in particular workstreams surrounding Everyday
Respect and to support our CSP objectives.
Other central costs of $0.5 billion were 25% higher than in 2022
first half, reflecting our increased investment in decarbonisation
to support delivery of our targets, along with investment in
technology, R&D and associated partnerships. This also includes
lower internal cost recoveries recharged to the product groups.
On an underlying earnings basis, net interest was a credit of
$0.1 billion in line with 2022 first half as the impact of higher
pre-tax interest costs was offset by an increase in amounts
attributable to non-controlling interests and tax effects.
Continuing to invest in greenfield exploration
We have a strong portfolio of greenfield exploration projects in
early exploration and studies stages, with activity in 18 countries
across eight commodities. This is reflected in our pre-tax central
spend of $0.1 billion. The bulk of this exploration expenditure was
focused on copper in Australia, Colombia, Chile, Zambia, Peru, the
US and Kazakhstan, and diamonds in Angola. Rio Tinto recently
partnered in two lithium exploration projects in Quebec and
greenfield lithium exploration continues in Canada, Australia, the
US and Africa. Exploration for nickel is ongoing in Canada,
Finland, Brazil and Peru. Mine-lease exploration continued at Rio
Tinto managed businesses including Bingham Canyon in the US,
Pilbara Iron Ore in Australia and Diavik in Canada.
Cash flow
2023 2022
Six months ended 30 June US$bn US$bn
----------------------------------------------- ---------------------------- ----------------------------
Net cash generated from operating activities 7.0 10.5
----------------------------------------------- ---------------------------- ----------------------------
Purchases of property, plant and equipment and
intangible assets (3.0) (3.1)
Lease principal payments (0.2) (0.2)
----------------------------------------------- ---------------------------- ----------------------------
Free cash flow(1) 3.8 7.1
Dividends paid to equity shareholders (3.7) (7.6)
----------------------------------------------- ---------------------------- ----------------------------
Acquisitions - (0.8)
Other (0.3) -
----------------------------------------------- ---------------------------- ----------------------------
Movement in net debt/cash(1) (0.2) (1.3)
----------------------------------------------- ---------------------------- ----------------------------
Financial figures are rounded to the nearest million, hence
small differences may result in the totals.
Footnotes are set out in full on page 25 .
-- $7.0 billion in net cash generated from operating activities,
33% lower than 2022 first half, primarily driven by price movements
for our major commodities and a $0.9 billion rise in working
capital. This reflected a build in blasted and mine stocks in the
Pilbara to support overall system health, and higher spares and
stores (including seasonality due to the Diavik winter road).
Payables were also lower due to the timing of spend, and normal
volatility in amounts due to JV partners and employees. Operating
cash flow was also impacted by lower dividends from Escondida
during the first half ($0.3 billion in 2023 first half; $0.6
billion in 2022 first half).
-- Our capital expenditure of $3.0 billion was comprised of $0.3
billion of growth, $0.7 billion of replacement, $1.9 billion of
sustaining and $0.1 billion of decarbonisation capital (in addition
to $0.1 billion of decarbonisation spend in operating costs). We
funded our capital expenditure from operating activities and
generally expect to continue funding our capital programme from
internal sources.
-- $3.7 billion of dividends paid in 2023 first half, being the
2022 final ordinary dividend.
-- The above movements, together with $0.3 billion of other
movements, resulted in net debt(1) increasing by $0.2 billion in
2023 first half to $4.4 billion at 30 June 2023.
Balance sheet
Net debt(1) increased by $0.2 billion in 2023 first half to $4.4
billion at 30 June 2023 per the above movements.
Our net gearing ratio(1) (net debt/(cash) to total capital) was
8% at 30 June 2023 (31 December 2022: 7%), see page 80 .
Our total financing liabilities excluding net debt derivatives
at 30 June 2023 (see page 79 ) were $14.1 billion (31 December
2022: $12.3 billion) and the weighted average maturity was around
12 years. At 30 June 2023, approximately 59% of these liabilities
were at floating interest rates (65% excluding leases). The maximum
amount within non-current borrowings maturing in any one cale ndar
year is $1.6 billion, which matures in 2033.
On 7 March 2023, we priced $650 million of 10-year fixed rate
SEC-registered debt securities and $1.1 billion of 30-year fixed
rate SEC-registered debt securities. The 10-year notes will pay a
coupon of 5.000 per cent and will mature 9 March 2033 and the
30-year notes will pay a coupon of 5.125 per cent and will mature 9
March 2053.
We had $10.4 billion in cash and cash equivalents plus other
short-term cash investments at 30 June 2023 (31 December 2022: $8.8
billion).
Provision for closure costs
At 30 June 2023, provisions for close-down and restoration costs
and environmental clean-up obligations were $14.8 billion (31
December 2022: $15.8 billion). The principal movement during the
period followed a revision of the closure discount rate to 2.0%
(from 1.5%), reflecting expectations of higher yields from
long-dated bonds, which resulted in a $1.1 billion reduction to the
provision. This was partly offset by the amortisation of discount
($0.6 billion) which includes the effect of elevated inflation
expectations for the year. Utilisation of the provision through
spend ($0.3 billion) and a weaker Australian dollar, Canadian
dollar and South African rand against the US dollar ($0.1 billion)
also contributed to lowering the provision.
Our shareholder returns policy
The Board is committed to maintaining an appropriate balance
between cash returns to shareholders and investment in the
business, with the intention of maximising long-term shareholder
value.
At the end of each financial period, the Board determines an
appropriate total level of ordinary dividend per share. This takes
into account the results for the financial year, the outlook for
our major commodities, the Board's view of the long-term growth
prospects of the business and the company's objective of
maintaining a strong balance sheet. The intention is that the
balance between the interim and final dividend be weighted to the
final dividend.
The Board expects total cash returns to shareholders over the
longer term to be in a range of 40% to 60% of underlying earnings
in aggregate through the cycle. Acknowledging the cyclical nature
of the industry, it is the Board's intention to supplement the
ordinary dividend with additional returns to shareholders in
periods of strong earnings and cash generation.
50% payout ratio on the interim ordinary dividend, in line with
our practice
2023 2022
US$bn US$bn
---------------------------------- --------------- ---------------
Ordinary dividend
---------------------------------- --------------- ---------------
Interim* 2.9 4.3
Payout ratio on ordinary dividend 50% 50%
---------------------------------- --------------- ---------------
* Based on weighted average number of shares and declared
dividends per share for the respective periods and excluding
foreign exchange impacts on payment.
We determine dividends in US dollars. We declare and pay Rio
Tinto plc dividends in pounds sterling and Rio Tinto Limited
dividends in Australian dollars. The 2023 interim dividend has been
converted at exchange rates applicable on 25 July 2023 (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 2023 2022
------------------------------------- --------------- ---------------
Rio Tinto Group
------------------------------------- --------------- ---------------
Interim - US cents per share 177.00 267.00
Rio Tinto plc
------------------------------------- --------------- ---------------
Interim - UK pence per share 137.67 221.63
Rio Tinto Limited
------------------------------------- --------------- ---------------
Interim - Australian cents per share 260.89 383.70
------------------------------------- --------------- ---------------
The 2023 interim ordinary dividend to be paid to our Rio Tinto
Limited shareholders will be fully franked. The Board expects Rio
Tinto Limited to be in a position to pay fully franked dividends
for the foreseeable future.
On 21 September 2023, we will pay the 2023 interim ordinary
dividend to holders of ordinary shares and holders of ADRs on the
register at the close of business on 11 August 2023 (record date).
The ex-dividend date is 10 August 2023.
Rio Tinto plc shareholders may choose to receive their dividend
in Australian dollars or New Zealand dollars, and Rio Tinto Limited
shareholders may choose to receive theirs in pounds sterling or New
Zealand dollars. Currency conversions will be based on the pound
sterling, Australian dollar and New Zealand dollar exchange rates
five business days before the dividend payment date. Rio Tinto plc
and Rio Tinto Limited shareholders must register their currency
elections by 31 August 2023.
We will operate our Dividend Reinvestment Plans for the 2023
interim dividend (visit riotinto.com for details). Rio Tinto plc
and Rio Tinto Limited shareholders' election notice for the
Dividend Reinvestment Plans must be received by 31 August 2023.
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.
Capital projects
Total
approved Approved
capital capital
cost remaining
Approved projects (100% to be spent
(Rio Tinto 100% unless from
owned unless otherwise 1 July
otherwise stated) stated) 2023 Status/Milestones
------------------------------- ----------- ------------ --------------------------------------
Ongoing
------------------------------- ----------- ------------ --------------------------------------
Iron Ore
------------------------------- ----------- ------------ --------------------------------------
Investment in the Western $1.3bn $1.0bn Announced in September 2022,
Range iron ore project, (Rio Tinto (Rio Tinto the mine will have a capacity
a joint venture between share)(3) share) of 25 million tonnes per year.
Rio Tinto (54%) and The project includes construction
China Baowu Steel Group of a primary crusher and an
Co. Ltd (46%) in the 18-kilometre conveyor connection
Pilbara to sustain production to the Paraburdoo processing
of the Pilbara Blend plant. Construction continued
from Rio Tinto's existing in line with schedule during
Paraburdoo hub. First the half with site facilities
production is anticipated completed and contractors
in 2025. mobilised, while we progressed
bulk earthworks for the fixed
plant and pre-strip earthworks
for the mine.
------------------------------- ----------- ------------ --------------------------------------
Aluminium
------------------------------- ----------- ------------ --------------------------------------
Investment to expand $1.1bn $1.1bn Approved in June 2023, the
the low-carbon AP60 investment will add 96 AP60
aluminium smelter at pots, representing 160,000
the Complexe Jonquière tonnes of primary aluminium
in Quebec. The investment per year, replacing the Arvida
includes up to $113 smelter which is set to gradually
million of financial close from 2024. Commissioning
support from the Quebec is expected in the first half
government. of 2026, with the smelter
fully ramped up by the end
of that year. Once completed,
the smelter is expected to
be in the first quartile of
the industry operating cost
curve.
------------------------------- ----------- ------------ --------------------------------------
Copper
------------------------------- ----------- ------------ --------------------------------------
Phase two of the south $1.8bn $1.3bn Approved in December 2019,
wall pushback to extend the investment will further
mine life at Kennecott extend strip waste rock mining
in Utah by a further and support additional infrastructure
six years. development. This will allow
mining to continue into a
new area of the orebody between
2026 and 2032. In March 2023,
a further $0.3 billion was
approved to primarily mitigate
the risk of failure in an
area of geotechnical instability
known as Revere, necessary
to both protect open pit value
and enable underground development.
------------------------------- ----------- ------------ --------------------------------------
Investment in the Kennecott $0.5bn $0.5bn Approved in June 2023, production
underground development from NRS(5) will commence
of the North Rim Skarn in 2024 and is expected to
(NRS) area. ramp up over two years, to
deliver around 250,000 tonnes
of additional mined copper
over the next ten years(6)
alongside open cut operations.
------------------------------- ----------- ------------ --------------------------------------
Development of the Oyu $7.06bn $1.4bn The delivery of infrastructure
Tolgoi underground copper/gold for ramp-up to full capacity
mine in Mongolia (Rio remains on target: we expect
Tinto 66%), which is commissioning of shafts 3
expected to produce and 4 and the conveyor to
(from the open pit and surface in the second half
underground) an average of 2024 and the concentrator
of 500,000 tonnes(7) conversion in the first half
of copper per year from of 2025.
2028 to 2036, compared We delivered first sustainable
with 130,000 tonnes underground production from
in 2022 (open pit). Panel 0 in March 2023. A total
of 54 drawbells had been opened
at 30 June, including 35 in
the first half.
------------------------------- ----------- ------------ --------------------------------------
Future options
Status
--------------------------------------------- --------------------------------------------
Iron Ore: Pilbara brownfields
--------------------------------------------- --------------------------------------------
Over the medium term, our Pilbara In addition to Western Range (Greater
system capacity remains between Paraburdoo), which is under construction,
345 and 360 million tonnes per year. we continue to progress studies
Meeting this range, and the planned for Hope Downs 1 Sustaining (Hope
product mix, will require the approval Downs 2 and Bedded Hilltop), Brockman
and delivery of the next tranche 4 Sustaining (Brockman Syncline
of replacement mines over the next 1), Greater Nammuldi Sustaining
five years. and West Angelas Sustaining. We
continue to work closely with local
communities, Traditional Owners
and governments to progress approvals
for these new mining projects
--------------------------------------------- --------------------------------------------
Iron Ore: Rhodes Ridge
--------------------------------------------- --------------------------------------------
In October 2022, Rio Tinto (50%) A resource-drilling programme is
and Wright Prospecting Pty Ltd (50%) currently underway to support future
agreed to modernise the joint venture project studies. An Order of Magnitude
covering the Rhodes Ridge project study is underway and is expected
in the Eastern Pilbara, providing to be completed in 2023. The Study
a pathway for development utilising considers the development of an
Rio Tinto's rail, port and power operation before the end of the
infrastructure. Rhodes Ridge contains decade with initial plant capacity
5.8 billion tonnes of high-grade of up to 40 million tonnes annually,
Mineral Resources at an average subject to the receipt of relevant
grade of 62.3% Fe. The project's approvals.
total resource, 6.7 billion tonnes
at an average grade of 61.6% Fe,
represents approximately one third
of our existing Resource base in
the Pilbara(8) .
--------------------------------------------- --------------------------------------------
Iron Ore: Simandou
--------------------------------------------- --------------------------------------------
The Simandou iron ore project in Negotiations continued to progress,
Guinea(9) contains one of the world's to enable the co-development of
largest known undeveloped high-grade rail and port infrastructure by
low-impurity iron ore deposits, Simfer, Winning Consortium Simandou
demand for which is increasing as and the Guinean State. The legal
steelmakers look to reduce carbon framework for the construction and
emissions. Simandou is set to diversify operations phases will establish
our strong iron ore portfolio, complementing access rights, fiscal regime and
our high-grade Iron Ore Company schedule, as well as joint venture
of Canada products and supporting arrangements. We also continued
the long-term attractiveness of to progress early works, including
our Pilbara Blend(TM) offering. establishing accommodation camps
to support continued mobilisation
on both our mine and rail scope,
earthworks and geotechnical drilling.
--------------------------------------------- --------------------------------------------
Lithium: Jadar
--------------------------------------------- --------------------------------------------
Development of the greenfield Jadar The Board committed funding in July
lithium-borates project in Serbia. 2021, subject to receiving all relevant
The development will include an approvals, permits and licences.
underground mine with associated We are focused on consultation with
infrastructure and equipment, including all stakeholders to explore all
electric haul trucks, as well as options following the Government
a beneficiation chemical processing of Serbia's cancellation of the
plant. Spatial Plan in January 2022.
--------------------------------------------- --------------------------------------------
Lithium: Rincon
--------------------------------------------- --------------------------------------------
We completed the acquisition of In July 2022, we approved $140 million
the Rincon Lithium project in Salta of investment and $54 million for
province, Argentina in March 2022. early works to support a full-scale
Development of a 3,000 tonne per operation. To date, the majority
year starter, battery-grade lithium of costs have been expensed through
carbonate plant is underway with exploration and evaluation expenditure.
first saleable production now expected In July 2023, we approved a further
at the end of 2024 (previously in $195 million to complete the starter
the first half of 2024). plant: the increase was driven by
the project now being fully defined
(previously conceptual), scope adjustments
to design (including column performance
improvements and changes to waste
and spent brine disposal facilities),
rising capital costs across the
lithium industry, particularly for
processing equipment and from broad
cost escalation in Argentina. Studies
are continuing on the full-scale
plant, which will have benefits
of economies of scale, with the
capital intensity, based on current
stage of studies, forecast to be
in line with regional lithium industry
benchmarks.
--------------------------------------------- --------------------------------------------
Mineral Sands: Zulti South
--------------------------------------------- --------------------------------------------
Development of the Zulti South project Approved in April 2019 to underpin
at Richards Bay Minerals (RBM) in RBM's supply of zircon and ilmenite
South Africa (Rio Tinto 74%). over the life of the mine. The project
remains on full suspension.
--------------------------------------------- --------------------------------------------
Copper: Resolution
--------------------------------------------- --------------------------------------------
The Resolution Copper project is The United States Forest Service
a proposed underground copper mine (USFS) continued work to progress
in the Copper Triangle, in Arizona, the Final Environmental Impact Statement
United States (Rio Tinto 55%). It and complete actions necessary for
has the potential to supply up to the land exchange. We continued
25% of US copper demand. to advance partnership discussions
with several federally-recognised
Native American Tribes who are part
of the formal consultation process.
We are also monitoring the Apache
Stronghold versus USFS case held
in the US Ninth Circuit Court of
Appeals. While there is significant
local support for the project, we
respect the views of groups who
oppose it and will continue our
efforts to address and mitigate
these concerns.
--------------------------------------------- --------------------------------------------
Copper: Winu
--------------------------------------------- --------------------------------------------
In late 2017, we discovered copper-gold We continued to strengthen our relationships
mineralisation at the Winu project and advanced agreement making with
in the Paterson Province in Western host Traditional Owners, the Martu
Australia. In 2021, we reported and Nyangumarta groups. Drilling,
our first Indicated Mineral Resource. fieldwork and study activities continued,
The pathway is expected to take strengthening the development pathway
longer than originally anticipated ahead of applications for regulatory
and remains subject to regulatory and other required approvals.
and other required approvals.
--------------------------------------------- --------------------------------------------
Copper: La Granja
--------------------------------------------- --------------------------------------------
In March 2023, we entered into an First Quantum will acquire a 55%
agreement with First Quantum Minerals stake for $105 million and commit
to form a joint venture that will to further invest up to $546 million
work to unlock the development of to sole fund capital and operational
the La Granja copper project in costs through a feasibility study
Peru, one of the largest undeveloped and toward development. Upon completion
copper deposits in the world. The of the sole funding commitment,
transaction is expected to complete all subsequent expenditures will
by the end of the third quarter be applied on a pro-rata basis in
of 2023, subject to the satisfaction line with share ownership.
of regulatory approvals.
--------------------------------------------- --------------------------------------------
Aluminium: ELYSIS
--------------------------------------------- --------------------------------------------
ELYSIS, our joint venture with Alcoa, Construction of the first commercial-scale
supported by Apple, the Government prototype cells is underway at our
of Canada and the Government of Alma smelter and is expected to
Quebec, is developing a breakthrough become operational in 2023. ELYSIS
inert anode technology that eliminates aims to have its technology available
all direct greenhouse gases from for installation from 2024 and production
the aluminium smelting process. of larger volumes of carbon-free
aluminium approximately two years
later.
--------------------------------------------- --------------------------------------------
Review of operations
Iron Ore
Six months ended 30 June 2023 2022 Change
--------------------------------------------- --------------- --------------- -----------
Pilbara production (million tonnes - 100%) 160.5 150.3 7 %
--------------------------------------------- --------------- --------------- -----------
Pilbara shipments (million tonnes - 100%) 161.7 151.4 7 %
--------------------------------------------- --------------- --------------- -----------
Salt production (million tonnes - Rio Tinto
share)(1) 3.1 2.6 18 %
--------------------------------------------- --------------- --------------- -----------
Segmental revenue (US$ millions) 15,600 16,610 (6) %
--------------------------------------------- --------------- --------------- -----------
Average realised price (US$ per dry metric
tonne, FOB basis) 107.2 120.5 (11) %
--------------------------------------------- --------------- --------------- -----------
Underlying EBITDA (US$ millions) 9,792 10,395 (6) %
--------------------------------------------- --------------- --------------- -----------
Pilbara underlying FOB EBITDA margin(2) 69% 70%
--------------------------------------------- --------------- --------------- -----------
Underlying earnings (US$ millions)(3) 5,787 6,473 (11) %
--------------------------------------------- --------------- --------------- -----------
Net cash generated from operating activities
(US$ millions) 6,782 8,512 (20) %
--------------------------------------------- --------------- --------------- -----------
Capital expenditure (US$ millions)(4) (1,094) (1,472) (26) %
--------------------------------------------- --------------- --------------- -----------
Free cash flow (US$ millions) 5,639 7,023 (20) %
--------------------------------------------- --------------- --------------- -----------
Underlying return on capital employed(5 3) 63% 72%
--------------------------------------------- --------------- --------------- -----------
Production figures are sometimes more precise than the rounded
numbers shown, hence small differences may result in the year on
year change.
Footnotes are set out in full on page 25 .
1. Dampier Salt is reported within Iron Ore, reflecting
management responsibility. Iron Ore Company of Canada continues to
be reported within Minerals. The Simandou iron ore project in
Guinea is now reported within Other Operations.
2. The Pilbara underlying free on board (FOB) EBITDA margin is
defined as Pilbara underlying EBITDA divided by Pilbara segmental
revenue, excluding freight revenue.
3. Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to page 41 for details.
4. 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.
5. Underlying return on capital employed (ROCE) is defined as
underlying earnings excluding net interest divided by average
capital employed.
Financial performance
Underlying EBITDA of $9.8 billion was 6% lower than 2022 first
half, due to lower prices ($1.2 billion), following a 14% decline
in the monthly average Platts index for 62% iron fines adjusted to
an FOB basis. This was partly offset by higher sales volumes and
improved product mix following the ramp-up of Gudai-Darri. We
continued to target investment in pit health and asset maintenance
across the Pilbara.
Unit costs of $21.2 per tonne are $0.6 per tonne lower than 2022
first half. Cost escalation from inflation was offset by a weaker
Australian dollar while increased iron ore volumes offset a higher
mine work index and mine maintenance costs.
Our Pilbara operations delivered an underlying FOB EBITDA margin
of 69%, compared with 70% in 2022 first half, largely due to the
change in the iron ore price.
We price the majority of our iron ore sales (79%) by reference
to the average index price, for the month of shipment. In 2023
first half, we priced approximately 10% of sales with reference to
the prior quarter's average index lagged by one month with the
remainder sold either on current quarter average, current month
average or on the spot market. We made approximately 74% of sales
including freight and 26% on an FOB basis.
We achieved an average iron ore price of $98.6 per wet metric
tonne on an FOB basis (2022 first half: $110.9 per wet metric
tonne) across our product suite. This equates to $107.2 per dry
metric tonne, assuming 8% moisture (2022 first half: $120.5 per dry
metric tonne), which compares with the monthly average Platts index
for 62% iron fines converted to an FOB basis of $109.8 per dry
metric tonne (2022 first half: $128.2 per dry metric tonne). The 2%
lower realised price compared to the Platts index was due to lower
average grades.
Segmental revenue for our Pilbara operations included freight
revenue of $0.9 billion (2022 first half: $1.1 billion).
Net cash generated from operating activities of $6.8 billion was
$1.7 billion lower than 2022 first half, due to lower pricing and a
build in working capital, partially offset by higher volumes. Free
cash flow of $5.6 billion was $1.4 billion lower than 2022 first
half due to the factors above, partially offset by a $0.4 billion
reduction in capital expenditure to $1.1 billion following
completion of brownfield mines in 2022.
Review of operations
Pilbara operations produced 160.5 million tonnes (Rio Tinto
share 135.8 million tonnes), 7% higher than 2022 first half.
Shipments of 161.7 million tonnes (Rio Tinto share 136.4 million
tonnes), which were also 7% higher, included 16.8 million tonnes of
lower grade SP10 products, 10% of shipments, on a 100% basis (2022
first half: 15% of shipments).
The ramp-up of Gudai-Darri continued to plan, with the mine
reaching nameplate capacity on a sustained basis during the second
quarter. We achieved record first quarter shipments and the highest
first half shipments since 2018. At Dampier Port there was planned
major maintenance and a train derailment on 17 June. The rail line
was reopened on 21 June.
We continue to see strong demand for our portside product in
China, with sales totalling 11.9 million tonnes in the first half
of 2023 (14.2 million tonnes in 2022 first half). At the end of
June, inventory levels were 5.7 million tonnes, including 2.6
million tonnes of Pilbara product. In 2023 first half,
approximately 90% of our portside sales were either screened or
blended in Chinese ports.
Aluminium
Six months ended 30 June 2023 2022 Change
------------------------------------------------------- --------------- --------------- -----------
Bauxite production ('000 tonnes - Rio Tinto
share) 25,581 27,757 (8) %
------------------------------------------------------- --------------- --------------- -----------
Alumina production ('000 tonnes - Rio Tinto
share) 3,720 3,765 (1) %
------------------------------------------------------- --------------- --------------- -----------
Aluminium production ('000 tonnes - Rio Tinto
share) 1,598 1,467 9 %
------------------------------------------------------- --------------- --------------- -----------
Segmental revenue (US$ millions) 6,263 7,796 (20) %
------------------------------------------------------- --------------- --------------- -----------
Average realised aluminium price (US$ per tonne) 2,866 3,808 (25) %
Underlying EBITDA (US$ millions) 1,140 2,866 (60) %
------------------------------------------------------- --------------- --------------- -----------
Underlying EBITDA margin (integrated operations) 21% 41%
------------------------------------------------------- --------------- --------------- -----------
Underlying earnings (US$ millions)(1) 260 1,570 (83) %
------------------------------------------------------- --------------- --------------- -----------
Net cash generated from operating activities
(US$ millions) 777 2,088 (63) %
------------------------------------------------------- --------------- --------------- -----------
Capital expenditure - excluding EAUs (US$ millions)(2) (597) (625) (4) %
------------------------------------------------------- --------------- --------------- -----------
Free cash flow (US$ millions) 165 1,450 (89) %
------------------------------------------------------- --------------- --------------- -----------
Underlying return on capital employed(3) 4% 20%
------------------------------------------------------- --------------- --------------- -----------
Footnotes are set out in full on page 25 .
1. Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to page 41 for details.
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. Underlying return on capital employed (ROCE) is defined as
underlying earnings excluding net interest divided by average
capital employed.
Financial performance
Weaker demand from western markets, partly offset by a recovery
in demand in China, where inventories are at a seven-year low, led
to a 24% reduction in the LME price and lower market and product
premiums. Market-related costs for key materials such as caustic,
coke and pitch are moderating in line with the oil price: this
benefit will not flow through to underlying EBITDA until the second
half. These two factors led to significant margin compression for
our Aluminium business and a 60% decrease in underlying EBITDA to
$1.1 billion. Underlying EBITDA margin fell 20 percentage points to
21%.
We achieved an average realised aluminium price of 2,866 per
tonne, 25% lower than 2022 first half.
Average realised aluminium prices comprise the LME price, a
market premium and a value-added product (VAP) premium. The cash
LME price averaged $2,329 per tonne, 24% lower than 2022 first
half, while in our key US market, the mid-west premium duty paid,
which is 56% of our total volumes (2022 first half: 58%), decreased
by 27% to $583 per tonne (2022 first half: $801 per tonne). Our VAP
sales represented 47% of the primary metal we sold (2022 first
half: 52%) and generated product premiums averaging $377 per tonne
of VAP sold (2022 first half: $422 per tonne).
Review of operations
Bauxite production of 25.6 million tonnes was 8% lower than 2022
first half, as our Weipa operations were affected by
higher-than-average rainfall during the wet season, resulting in
reduced pit access and longer haul distances. Production was
further affected by equipment downtime at both Weipa and Gove.
We shipped 17.0 million tonnes of bauxite to third parties, 14%
lower than 2022 first half. Segmental revenue for bauxite declined
11% to $1.1 billion; this includes freight revenue of $0.2 billion
(2022 first half: $0.3 billion).
Alumina production of 3.7 million tonnes was 1% lower than 2022
first half, with improved operational stability at our Yarwun and
Vaudreuil refineries offset by unplanned plant downtime at
Queensland Alumina Limited (QAL).
As the result of QAL's activation of a step-in process following
sanction measures by the Australian Government, we have taken on
100% of capacity for as long as the step-in continues. We are using
Rusal's 20% share of capacity under the tolling arrangement with
QAL. This additional output is excluded from our production results
as QAL remains 80% owned by Rio Tinto and 20% owned by Rusal.
Aluminium production of 1.6 million tonnes was 9% higher than
2022 first half, as we benefited from the continued ramp-up of the
Kitimat smelter. Recovery at the Boyne and Kitimat smelters is
progressing to plan with full ramp-up expected to be completed
later in the year. All of our other aluminium smelters continued to
demonstrate stable performance in the half.
Copper
Six months ended 30 June 2023 2022 Change
---------------------------------------------------- --------------- --------------- -----------
Mined copper production ('000 tonnes - consolidated
basis) 290 292 (1) %
---------------------------------------------------- --------------- --------------- -----------
Refined copper production ('000 tonnes - Rio
Tinto share) 95 104 (9) %
---------------------------------------------------- --------------- --------------- -----------
Segmental revenue (US$ millions) 3,487 3,547 (2) %
---------------------------------------------------- --------------- --------------- -----------
Average realised copper price (US cents per
pound)(1) 396 447 (11) %
---------------------------------------------------- --------------- --------------- -----------
Underlying EBITDA (US$ millions) 1,082 1,534 (29) %
---------------------------------------------------- --------------- --------------- -----------
Underlying EBITDA margin (product group operations) 43% 54%
---------------------------------------------------- --------------- --------------- -----------
Underlying earnings (US$ millions) 198 571 (65) %
---------------------------------------------------- --------------- --------------- -----------
Net cash generated from operating activities
(US$ millions)(2) 409 1,094 (63) %
---------------------------------------------------- --------------- --------------- -----------
Capital expenditure - excluding EAUs(3) (US$
millions) (917) (730) 26 %
---------------------------------------------------- --------------- --------------- -----------
Free cash flow (US$ millions) (512) (354) (45) %
---------------------------------------------------- --------------- --------------- -----------
Underlying return on capital employed (product
group operations)(4) 4% 10%
---------------------------------------------------- --------------- --------------- -----------
Footnotes are set out in full on page 25 . 2022 has been
restated following the transfer of Simandou to Other
operations.
1. Average realised price for all units sold. Realised price
does not include the impact of the provisional pricing adjustments,
which negatively impacted revenues by $4 million (2022 first half:
$30 million negative).
2. Net cash generated from operating activities excludes the
operating cash flows of equity accounted units (EAUs) but includes
dividends from EAUs (Escondida).
3. Capital expenditure is the net cash outflow on purchases less
sales of property, plant and equipment, capitalised evaluation
costs and purchases less sales of other intangible assets. It
excludes EAUs.
4. Underlying return on capital employed (ROCE) is defined as
underlying earnings (product group operations) excluding net
interest divided by average capital employed.
Financial performance
We delivered first sustainable production from the underground
mine at Oyu Tolgoi and benefited from a doubling in our interest
following the acquisition of Turquoise Hill Resources in 2022.
However, the $0.2 billion impact of lower LME prices and higher
unit costs, driven by lower production volumes from Kennecott due
to the conveyor failure and the planned smelter and refinery
rebuild, led to underlying EBITDA being down 29% to $1.1 billion.
Rising cash costs, higher energy prices and an increase in
exploration and evaluation expenditure also impacted underlying
EBITDA. Underlying EBITDA margin remained strong at 43%.
Our copper unit costs, at 184 cents per pound, increased by 36
cents, largely driven by the decline in copper volumes, together
with rising input and higher labour costs.
We generated $0.4 billion in net cash from operating activities,
a 63% decrease on 2022 first half, from the same drivers as
underlying EBITDA, together with $0.3 billion lower dividends from
Escondida.
Negative free cash flow of $0.5 billion reflected the above
movements and significant investment of $1.0 billion in our
projects. This mainly related to the ongoing development of Oyu
Tolgoi underground, the projects at Kennecott and evaluation costs
at Resolution and Winu.
Review of operations
Mined copper production, at 290 thousand tonnes, was 1% lower
than 2022 first half. While we benefited from the continued ramp-up
of the high grade underground mine at Oyu Tolgoi, this was offset
by Kennecott's concentrator operating at reduced rates, as we
recovered from a conveyor failure in March 2023.
The 9% decrease in refined copper production to 95 thousand
tonnes reflected the largest rebuild of the smelter and refinery in
Kennecott's history which commenced in May and is now expected to
conclude in September 2023, reflected in our revised refined copper
guidance.
Oyu Tolgoi underground project
During the half, Rio Tinto, Oyu Tolgoi and the Government of
Mongolia continued to work together towards the implementation of
Mongolian Parliamentary Resolution 103.
We continue to see strong performance from the underground mine,
with a total of 54 drawbells opened from Panel 0, including 35
drawbells during the half. To date we are yet to lose a drawbell or
draw point from the underground mine.
At the end of June, shafts 3 and 4 sinking had reached 627
metres and 740 metres below ground level respectively. Final depths
required for shafts 3 and 4 are 1,148 and 1,149 metres below ground
level respectively. As reported in our presentation materials for
the Oyu Tolgoi site tour in July, we now expect both shafts to be
commissioned in the second half of 2024 (previously first half of
2024) with shaft sinking rates now meeting those required for
commissioning.
Technical studies for mine design and schedule optimisation for
Panels 1 and 2 were completed during the second quarter(10) . The
operation remains on track to ramp up to deliver average mined
copper production of 500ktpa (100% basis) between 2028 and 2036(7)
.
Minerals
Six months ended 30 June 2023 2022 Change
---------------------------------------------------- --------------- --------------- ------------
Iron ore pellets and concentrates production(1)
(million tonnes - Rio Tinto share) 4.6 5.0 (8) %
---------------------------------------------------- --------------- --------------- ------------
Titanium dioxide slag production ('000 tonnes
- Rio Tinto share) 589 566 4 %
---------------------------------------------------- --------------- --------------- ------------
Borates production ('000 tonnes - Rio Tinto
share) 257 260 (1) %
---------------------------------------------------- --------------- --------------- ------------
Diamonds production ('000 carats - Rio Tinto
share) 1,924 2,140 (10) %
---------------------------------------------------- --------------- --------------- ------------
Segmental revenue (US$ millions) 2,889 3,403 (15) %
---------------------------------------------------- --------------- --------------- ------------
Underlying EBITDA (US$ millions) 689 1,259 (45) %
---------------------------------------------------- --------------- --------------- ------------
Underlying EBITDA margin (product group operations) 30% 40%
---------------------------------------------------- --------------- --------------- ------------
Underlying earnings (US$ millions)(2) 179 423 (58) %
---------------------------------------------------- --------------- --------------- ------------
Net cash generated from operating activities
(US$ millions) 89 636 (86) %
---------------------------------------------------- --------------- --------------- ------------
Capital expenditure (US$ millions)(3) (304) (268) 13 %
---------------------------------------------------- --------------- --------------- ------------
(165)
Free cash flow (US$ millions) (229) 353 %
---------------------------------------------------- --------------- --------------- ------------
Underlying return on capital employed (product
group operations)(4) 13% 21%
---------------------------------------------------- --------------- --------------- ------------
Footnotes are set out in full on page 25 .
1. Iron Ore Company of Canada (IOC) continues to be reported within Minerals.
2. Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to page 41 for details.
3. Capital expenditure is the net cash outflow on purchases less
sales of property, plant and equipment; capitalised evaluation
costs; and purchases less sales of other intangible assets.
4. Underlying return on capital employed (ROCE) is defined as
underlying earnings (product group operations) excluding net
interest divided by average capital employed.
Financial performance
Underlying EBITDA of $0.7 billion was 45% lower than 2022 first
half, primarily due to lower iron ore prices, lower volumes for
Iron & Titanium and diamonds, some of which have been deferred
to the second half of the year, and higher costs.
Net cash generated from operating activities of $0.1 billion was
86% lower than 2022 first half, while negative free cash flow of
$0.2 billion, reflected the lower underlying EBITDA and a modest
rise in capital expenditure.
Review of operations
Production of iron ore pellets and concentrate at IOC was 8%
lower than 2022 first half. Performance improved during the first
five months of the year but we then lost 3.5 weeks of production
due to wild fires in Northern Quebec, which resulted in an extended
shutdown.
Titanium dioxide production was 4% higher than 2022 first half
due to improved operational performance at our smelters, despite
some production constraints at RBM from nationwide loadshedding of
electrical power.
Borates production was 1% lower than 2022 first half, as we
adjusted to timing of customer demand, despite strong production
rates, higher grades and improved equipment reliability.
Our share of carats recovered was 10% lower than 2022 first
half, due to an underground pipe and an area of the open pit
reaching end of life of during the period.
Price and exchange rate sensitivities
The following sensitivities give the estimated effect on
underlying EBITDA, assuming that each price or exchange rate moved
in isolation. The relationship between currencies and commodity
prices is a complex one; movements in exchange rates can affect
movements in commodity prices and vice versa. The exchange rate
sensitivities quoted here include the effect on operating costs of
movements in exchange rates, but do not include the effect of the
revaluation of foreign currency working capital. Please use them
with care.
US$ million
impact on
full-year 2023
Average published underlying
price/exchange EBITDA
rate for of a 10% change
2023 first in prices/exchange
half rates
------------------------------------------ --------------------------------- -----------------------------------
Aluminium - US$ per tonne 2,329 1,151
------------------------------------------ --------------------------------- -----------------------------------
Copper - US cents per pound 396 523
------------------------------------------ --------------------------------- -----------------------------------
Gold - US$ per troy ounce 1,932 59
------------------------------------------ --------------------------------- -----------------------------------
Iron ore realised price (FOB basis) - US$
per dry metric tonne 107.2 2,786
------------------------------------------ --------------------------------- -----------------------------------
Australian dollar against the US dollar 0.68 712
------------------------------------------ --------------------------------- -----------------------------------
Canadian dollar against the US dollar 0.74 369
------------------------------------------ --------------------------------- -----------------------------------
Oil (Brent) - US per barrel 86 193
------------------------------------------ --------------------------------- -----------------------------------
Footnotes
1. This financial performance indicator is a non-IFRS (as
defined below) measure which is reconciled to directly comparable
IFRS financial measures (non-IFRS measures). 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. For more information on our
use of non-IFRS financial measures in this report, see the section
entitled "Alternative performance measures" (APM) and the detailed
reconciliations on pages 72 to 81 . Our financial results are
prepared in accordance with IFRS - see page 39 for further
information.
2. Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to page 41 for details.
3. Rio Tinto share includes 100% of funding costs for Paraburdoo plant upgrades.
4. Mined copper guidance: subsequent to Rio Tinto's acquisition
of Turquoise Hill Resources which completed on 16 December, 2023
mined copper guidance includes Oyu Tolgoi on a 100% consolidated
basis and continues to reflect our 30% share of Escondida.
5. The NRS Mineral Resources and Ore Reserves, together with the
Lower Commercial Skarn (LCS) Mineral Resources and Ore Reserves,
form the Underground Skarns Mineral Resources and Ore Reserves.
6. This production target for 2023 to 2033 is underpinned as to
25% by Probable Ore Reserves, 9% by Indicated Resources, and 66% by
Inferred Resources. Mined copper is reported as total recoverable
metal. These estimates of Mineral Resources and Ore Reserves were
reported in a release to the Australian Securities Exchange (ASX)
dated 20 June 2023 titled "Rio Tinto Kennecott Mineral Resources
and Ore Reserves" which is available on Rio Tinto's website at
Resources & Reserves (riotinto.com), and have been prepared by
Competent Persons in accordance with the requirements of the
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves, 2012 (JORC Code) and the ASX Listing
Rules.
7. The 500kpta copper and 350kozpa gold target (stated as
recoverable metal) for the Oyu Tolgoi underground and open pit
mines for the years 2028 to 2036 is underpinned 13% by Proved Ore
Reserves and 87% by Probable Ore Reserves. This production target
has been scheduled from mine designs based on the Oyu Tolgoi
Feasibility Study 2020 (OTFS20), which are not materially different
to current mine designs, by Competent Persons in accordance with
the requirements of the JORC code.
8. The Mineral Resource estimates for the Rhodes Ridge Joint
Venture (JV) were reported in our 2020 Annual Report released to
the ASX on 22 February 2021 (and form part of the Pilbara Mineral
Resource estimates reported in our 2021 Annual Report released to
the ASX on 24 February 2022). The Competent Persons responsible for
reporting these Mineral Resource estimates were Mr P Savory, who is
a Fellow of The Australasian Institute of Mining and Metallurgy,
and Ms N Brajkovich and Mr C Kyngdon, who are Members of The
Australasian Institute of Mining and Metallurgy. We are not aware
of any new information or data that materially affects these
Mineral Resource estimates and confirm that all material
assumptions and technical parameters underpinning the estimate
continue to apply and have not materially changed. The form and
context in which the Competent Persons' findings are presented have
not been materially modified from when they were reported. Mineral
Resources are quoted in this release on a 100% basis, as dry
in-situ tonnes.
9. The Simandou iron ore project operates under the Simfer joint
venture where the Government of Guinea holds 15% and Simfer Jersey
holds 85%. Simfer Jersey is owned by Rio Tinto (53%) and Chalco
Iron Ore Holdings (CIOH) (47%). CIOH is owned by Chinalco (75%),
Baowu (20%), China Civil Engineering Construction Corporation
(CCECC) (2.5%) and China Harbour Engineering Company (CHEC)
(2.5%).
10. Mine design and plans will be reviewed by regulatory bodies
as part of the OTFS23 process.
DIRECTORS' REPORT
for the half year ended 30 June 2023
Review of operations and important events
A detailed review of the Group's operations, the results of
those operations during the half year ended 30 June 2023 and likely
future developments are given on pages 1 to 25 . Important events
that have occurred during the period and up until the date of this
report are set out below.
Financial
On 6 March 2023, we resolved a previously self-disclosed
investigation by the SEC into certain contractual payments made to
a former consultant in 2011, relating to the Simandou project in
the Republic of Guinea. Without admitting to or denying the SEC's
findings, Rio Tinto paid a $15 million civil penalty for violations
of the books and records and internal controls provisions of the
Foreign Corrupt Practices Act.
On 7 March 2023, we priced US$650 million of 10-year fixed rate
SEC-registered debt securities and US$1.1 billion of 30-year fixed
rate SEC-registered debt securities. The bonds were issued by Rio
Tinto Finance (USA) plc and are fully and unconditionally
guaranteed by Rio Tinto plc and Rio Tinto Limited. The 10-year
notes will pay a coupon of 5.000% and will mature on 9 March 2033
and the 30-year notes will pay a coupon of 5.125% and will mature 9
March 2053.
On 3 April 2023, we published our 2022 Taxes and Royalties Paid
Report, detailing $10.8 billion of global taxes and royalties paid
during the year. This compares to $13.3 billion in 2021, during
very strong commodity prices, and is the third-highest annual
global taxes and royalties paid by Rio Tinto since it published its
first annual Taxes Paid report, for 2010. In the past ten years,
Rio Tinto has paid $74.9 billion in taxes and royalties globally,
of which more than 78% was paid in Australia.
On 4 April 2023, we announced our support for Energy Resources
of Australia Ltd's (ERA) plans for an Interim Entitlement Offer
(IEO), which sought to raise up to A$369 million to address funding
requirements for the Ranger Rehabilitation Project in Australia's
Northern Territory to the end of the second quarter of 2024. Rio
Tinto, which owns 86.3% of ERA's shares, subscribed for its full
entitlements under the terms of the IEO, at a cost of A$319
million. Rio Tinto notes that ERA has, in the IEO offer material,
recognised the Mirarr People's opposition to further uranium mining
on their land. This was a relevant factor in Rio Tinto's recent
decision to no longer report the Jabiluka deposit as a Mineral
Resource.
On 30 May 2023, we published a report on payments to governments
made by Rio Tinto and its subsidiary undertakings for the year
ended 31 December 2022 as required under the UK's Report on
Payments to Governments Regulations 2014 (as amended in December
2015). Rio Tinto paid $10.8 billion of taxes and royalties and a
further $1.6 billion on behalf of its employees during 2022.
On 2 June 2023, we announced plans to invest $395 million in a
seawater desalination plant in the Pilbara, Western Australia, to
support future water supply for the company's coastal operations
and communities in the region. The proposed Dampier Seawater
Desalination Plant, which remains subject to Commonwealth and State
Government approvals, will be located within Rio Tinto's existing
iron ore port operations at Parker Point. It will have an initial
nominal capacity of four gigalitres annually with the potential for
this to increase to eight gigalitres in the future. The project
includes construction of a new supply pipeline to connect to the
existing water network. Subject to relevant approvals, construction
is expected to commence in 2024 with the facility expected to be
operational and producing water in 2026.
Operations
On 30 March 2023, we announced we had entered into an agreement
with First Quantum Minerals ("First Quantum") to form a joint
venture that will work to unlock the development of the La Granja
copper project in Peru. Under the proposed transaction, First
Quantum will acquire a 55% stake in the project for $105 million,
and commit to further invest up to $546 million into the joint
venture to sole fund capital and operational costs to take the
project through a feasibility study and toward development.
On 2 May 2023, together with BHP, we invited expressions of
interest from technology providers, equipment manufacturers,
reagent suppliers, startups and research groups across the globe
with innovative ideas and technologies to help improve tailings
dewatering and management performance. Together we aim to jointly
identify a portfolio of tailings management partners with whom they
can work to accelerate the development of technologies that could
increase water recovery and reduce potential safety risks and
environmental footprints associated with tailings storage
facilities.
On 12 June 2023, we announced we had signed a Memorandum of
Understanding with China Baowu to explore a range of industry
leading new projects in China and Australia to help decarbonise the
steel value chain.
On 12 June 2023, we announced an investment of $1.1 billion to
expand our AP60 aluminium smelter equipped with low-carbon
technology at Complexe Jonquière in Canada. The total investment
includes up to $113 million of financial support from the Quebec
government. This expansion will coincide with the gradual closure
of potrooms at the Arvida smelter on the same site. While at our
Alma smelter in Lac-Saint-Jean, Quebec, we commenced construction
to increase our capacity to cast low-carbon, high-value aluminium
billets.
On 13 June 2023, we announced a partnership with Gemco Rail to
bring local iron ore rail car manufacturing and bearing maintenance
to the Pilbara region in an industry-first. This partnership will
enable Gemco Rail to expand its existing operations to establish
the first ever rail ore car manufacturing and maintenance facility
in the Pilbara, creating new jobs, increasing spend with local and
Indigenous businesses and supporting local economic growth. Rio
Tinto expects to invest approximately A$150 million to purchase 100
locally built ore rail cars over six years as well as continued
investment in bearing refurbishment over ten years, to support the
company's Pilbara operations.
On 20 June 2023, we announced $498 million of funding to deliver
underground development and infrastructure for an area known as the
North Rim Skarn(1) (NRS) at Kennecott. Production from the NRS will
commence in 2024 and is expected to ramp up over two years, to
deliver 250 thousand tonnes of additional mined copper over the
next 10 years(2) alongside open cut operations.
1. The NRS Mineral Resources and Ore Reserves, together with the
Lower Commercial Skarn (LCS) Mineral Resources and Ore Reserves,
form the Underground Skarns Mineral Resources and Ore Reserves.
2. This production target for 2023 to 2033 is underpinned 25% by
Probable Ore Reserves, 9% by Indicated Resources, and 66% by
Inferred Resources. Mined copper is reported as total recoverable
metal. These estimates of Mineral Resources and Ore Reserves were
reported in a release dated 20 June 2023 titled "Rio Tinto
Kennecott Mineral Resources and Ore Reserves" (Table 1 Release)
which is available on Rio Tinto's website at resources &
reserves (riotinto.com), and have been prepared by Competent
Persons in accordance with the requirements of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves, 2012 (JORC Code) and the ASX Listing Rules.
People
On 16 March 2023, we announced that we had appointed Dean Dalla
Valle and Susan Lloyd-Hurwitz as non-executive directors effective
1 June 2023.
On 13 June 2023, we announced that Ivan Vella, Chief Executive
Aluminium will leave Rio Tinto in December 2023.
Rio Tinto 2023 Annual General Meetings (AGMs)
The annual general meetings of Rio Tinto plc and Rio Tinto
Limited were held on 6 April 2023 and 4 May 2023, respectively.
Under Rio Tinto's dual listed companies structure established in
1995, decisions on significant matters affecting shareholders of
Rio Tinto plc and Rio Tinto Limited in similar ways are taken
through a joint electoral procedure.
At Rio Tinto plc's AGM on 6 April 2023, Resolution 21 (Authority
to purchase Rio Tinto plc shares), put to Rio Tinto plc
shareholders only, was passed with less than 80% of votes in
favour. Shining Prospect (a subsidiary of the Aluminium Corporation
of China "Chinalco") voted against it. Chinalco has not sold any of
its shares in Rio Tinto plc and now has a holding of over 14% given
its non-participation in the Company's significant share buy-back
programmes. This places Chinalco close to the 14.99% holding
threshold agreed with the Australian Government at the time of its
original investment in Rio Tinto.
Directors
The directors serving on the Boards of Rio Tinto plc and Rio
Tinto Limited as at 30 June 2023 were:
Notes Date of appointment
Chairman
(P&R, N and
Dominic Barton S) 4 April 2022
Executive directors
Jakob Stausholm, Chief Executive Officer 3 September 2018
Peter Cunningham, Chief Financial Officer 17 June 2021
Non-executive directors
Sam Laidlaw (senior independent director, (P&R, N and
Rio Tinto plc) S) 10 February 2017
Simon McKeon (senior independent director, (A&R, P&R and
Rio Tinto Limited) N) 1 January 2019
(P&R, N and
Megan Clark S) 20 November 2014
Simon Henry (A&R and N) 1 April 2017
Jennifer Nason (P&R and N) 1 March 2020
(P&R, N and
Ngaire Woods S) 1 September 2020
Ben Wyatt (A&R and N) 1 September 2021
Kaisa Hietala (N and S) 1 March 2023
Dean Dalla Valle (N and S) 1 June 2023
Susan Lloyd-Hurwitz (P&R and N) 1 June 2023
Notes
(A&R) Audit & Risk Committee, (P&R) People &
Remuneration Committee, (N) Nominations Committee, (S)
Sustainability Committee
Dividend
The 2022 final dividend was paid on 20 April 2023 to holders of
Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto
plc ADR holders. The 2022 final dividend, equivalent to 225 US
cents per share was determined by the Board on 21 February 2023.
Rio Tinto plc shareholders received 185.35 pence per share for the
final dividend and Rio Tinto Limited shareholders received 326.49
Australian cents per share for the final dividend based on the
applicable exchange rates on 13 April 2023. ADR holders receive
dividends at the declared rate in US dollars.
The 2023 interim dividend, equivalent to 177 US cents per share
will be paid on 21 September 2023 to Rio Tinto Limited, Rio Tinto
plc and Rio Tinto plc ADR shareholders on the register at the close
of business on 11 August 2023. The ex-dividend date for the 2023
interim dividend for Rio Tinto Limited, Rio Tinto plc and Rio Tinto
plc ADR shareholders is 10 August 2023. Rio Tinto plc shareholders
will receive 137.67 pence per share for the interim dividend and
Rio Tinto Limited shareholders will receive 260.89 Australian cents
per share for the interim dividend based on the applicable exchange
rates on 25 July 2023. ADR holders receive dividends at the
declared rate in US dollars.
Principal risks and uncertainties
The principal risks and uncertainties that could materially
impact our ability to deliver on our strategic priorities are set
out on pages 79 to 86 of the 2022 Annual Report. For the remaining
six months of the financial year, these remain broadly consistent
with the trends reported in the Annual Report.
Our operations and growth projects continue to be impacted by
high unplanned absences, tight labour markets, rising input costs
and supply chain disruptions. We continue to monitor areas of
uncertainty in the short to medium term, including the evolving
situation with the war in Ukraine and potential further Russian
sanctions and elevated inflation.
Publication of half year results
In accordance with the UK Financial Conduct Authority's
Disclosure Guidance & Transparency Rules and the Australian
Securities Exchange Listing Rules, the half year results will be
made public and are available on the Rio Tinto Group website.
Auditor's independence declaration
KPMG, the auditors of Rio Tinto Limited, have provided the
auditor's independence declaration as required under section 307C
of the Corporations Act 2001 in Australia. This has been reproduced
on page 67 and forms part of this report.
The Directors' report is made in accordance with a resolution of
the Board.
Dominic Barton
Chairman
26 July 2023
Condensed consolidated interim financial statements for the
six months ended 30 June 2023
Contents:
Interim financial statements Page number
Group income statement 31
Group statement of comprehensive income 32
Group cash flow statement 33
Group balance sheet 35
Group statement of changes in equity 37
Selected explanatory notes to the interim financial statements
1 Basis of Preparation 39
2 Changes in accounting policies 41
3 Segmental information 44
4 Segmental information - additional information 48
5 Impairment charges 49
6 Taxation 50
7 Acquisitions 51
8 Cash and cash equivalents 52
9 Provisions including post-retirement benefits 52
10 Financial instruments 54
11 Commitments and Contingencies 58
12 Events after the balance sheet date 61
Directors' declaration 62
Independent Auditors' Review Reports of KPMG LLP
("KPMG UK") to Rio Tinto plc and of KPMG ("KPMG
Australia") to the members of Rio Tinto Limited 63
Lead Auditor's Independence Declaration under Section
307C of the Australian Corporations Act 2001 67
Additional voluntary disclosure for the shareholders
Rio Tinto financial information by business unit 68
Alternative performance measures 72
Metal prices and exchange rates 82
Group income statement
2022
2023 US$m
Six months ended 30 June Note US$m Restated(a)
Consolidated operations
Consolidated sales revenue 3, 4 26,667 29,775
Net operating costs (excluding items disclosed
separately) (17,535) (17,202)
Impairment charges 5 (1,175) -
Exploration and evaluation expenditure (net of
profit relating to interests in undeveloped projects) (710) (367)
------------------------------------------------------- ---- -------------------- ---------------------
Operating profit 7,247 12,206
Share of profit after tax of equity accounted units 431 468
Profit before finance items and taxation 7,678 12,674
Finance items
Net exchange gains on external and intragroup net
debt balances 103 387
Net gains/(losses) on derivatives not qualifying
for hedge accounting 32 (205)
Finance income 245 17
Finance costs (536) (55)
Amortisation of discount on provisions 9 (592) (503)
------------------------------------------------------- ---- -------------------- ---------------------
(748) (359)
------------------------------------------------------- ---- -------------------- ---------------------
Profit before taxation 6,930 12,315
Taxation 2, 6 (1,983) (2,867)
Profit after tax for the period 4,947 9,448
- attributable to owners of Rio Tinto (net earnings) 5,117 8,943
- attributable to non-controlling interests (170) 505
------------------------------------------------------- ---- -------------------- ---------------------
Basic earnings per share 315.7c 552.3c
Diluted earnings per share 313.9c 549.0c
------------------------------------------------------- ---- -------------------- ---------------------
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
The notes on pages 39 to 61 are an integral part of these
condensed consolidated interim financial statements.
Group statement of comprehensive income
2022
2023 US$m
Six months ended 30 June Note US$m Restated(a)
-------------------------------------------------------- ----- ---------------------- ----------------------
Profit after tax for the period 4,947 9,448
Other comprehensive (loss)/income
Items that will not be reclassified to the
income statement:
Re-measurement (losses)/gains on pension and
post-retirement healthcare plans (53) 829
Changes in the fair value of equity investments
held at fair value through other comprehensive
income (FVOCI) (17) (8)
Tax relating to these components of other comprehensive
income 16 (216)
Share of other comprehensive (losses)/income
of equity accounted units, net of tax (3) 5
(57) 610
Items that have been/may be subsequently reclassified
to the income statement:
Currency translation adjustment(b) (387) (1,532)
Fair value movements:
- Cash flow hedge gains/(losses) 50 (79)
- Cash flow hedge (gains)/losses transferred
to the income statement (26) 100
Net change in costs of hedging reserve 2 (38)
Tax relating to these components of other comprehensive
loss (16) 8
Share of other comprehensive income/(losses)
of equity accounted units, net of tax 11 (7)
--------------------------------------------------------------- ---------------------- ----------------------
(366) (1,548)
-------------------------------------------------------------- ---------------------- ----------------------
Total other comprehensive loss for the period,
net of tax (423) (938)
--------------------------------------------------------------- ---------------------- ----------------------
Total comprehensive income for the period 4,524 8,510
--------------------------------------------------------------- ---------------------- ----------------------
- attributable to owners of Rio Tinto 4,698 8,078
- attributable to non-controlling interests (174) 432
--------------------------------------------------------------- ---------------------- ----------------------
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
(b) Excludes a currency translation charge of US$66 million (30
June 2022: charge of US$185 million) arising on Rio Tinto Limited's
share capital for the period ended 30 June 2023, which is
recognised in the Group statement of changes in equity on page 37
.
Group cash flow statement
2023 2022
Six months ended 30 June Note US$m US$m
----------------------------------------------------- ---- ---------------------- --------------------
Cash flows from consolidated operations(a) 9,435 13,912
Dividends from equity accounted units 287 633
----------------------------------------------------- ---- ---------------------- --------------------
Cash flows from operations 9,722 14,545
Net interest paid (286) (217)
Dividends paid to holders of non-controlling
interests in subsidiaries (46) (41)
Tax paid (2,415) (3,813)
----------------------------------------------------- ---- ---------------------- --------------------
Net cash generated from operating activities 6,975 10,474
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (3,001) (3,146)
Sales of property, plant and equipment and
intangible assets 8 1
Acquisitions of subsidiaries, joint ventures
and associates 7 (15) (825)
Purchases of financial assets (16) (66)
Sales of financial assets(b) 862 52
Net funding of equity accounted units (88) (48)
Other investing cash flows 14 10
----------------------------------------------------- ---- ---------------------- --------------------
Net cash used in investing activities (2,236) (4,022)
Cash flows before financing activities 4,739 6,452
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (3,691) (7,595)
Proceeds from additional borrowings(c) 1,858 144
Repayment of borrowings and associated derivatives (272) (211)
Lease principal payments (213) (183)
Proceeds from issue of equity to non-controlling
interests 61 22
Purchase of non-controlling interests (23) -
Other financing cash flows - 1
----------------------------------------------------- ---- ---------------------- --------------------
Net cash used in financing activities (2,280) (7,822)
Effects of exchange rates on cash and cash
equivalents (59) (26)
----------------------------------------------------- ---- ---------------------- --------------------
Net increase/(decrease) in cash and cash equivalents 2,400 (1,396)
----------------------------------------------------- ---- ---------------------- --------------------
Opening cash and cash equivalents less overdrafts 6,774 12,805
----------------------------------------------------- ---- ---------------------- --------------------
Closing cash and cash equivalents less overdrafts 8 9,174 11,409
----------------------------------------------------- ---- ---------------------- --------------------
(a) Cash flows from consolidated operations
----------------------------------------------------- ---- ---------------------- --------------------
Profit after tax for the period (comparative
restated) 2 4,947 9,448
Adjustments for:
- Taxation (comparative restated) 2, 6 1,983 2,867
- Finance items 748 359
- Share of profit after tax of equity accounted
units (431) (468)
- Impairment charges 5 1,175 -
- Depreciation and amortisation 2,485 2,459
- Provisions (including exchange differences
on provisions) 9 63 496
Utilisation of other provisions 9 (44) (51)
Utilisation of provisions for close-down and
restoration 9 (333) (256)
Utilisation of provisions for post-retirement
benefits and other employment costs 9 (115) (122)
Change in inventories (293) (582)
Change in receivables and other assets (6) (128)
Change in trade and other payables (628) 267
Other items(d) (116) (377)
----------------------------------------------------- ---- ---------------------- --------------------
9,435 13,912
----------------------------------------------------- ---- ---------------------- --------------------
Group cash flow statement (continued)
(b) During the six months to 30 June 2023, we received net
proceeds of US$801 million (30 June 2022: US$51 million) from our
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.
(c) On 7 March 2023, we issued US$650 million 10-year fixed
rate, and US$1.1 billion of 30-year fixed rate, SEC-registered
bonds. The 10-year notes, which mature on 9 March 2033, have a
coupon of 5% and the 30-year notes, which mature on 9 March 2053
have a coupon of 5.125%. The funds were received net of issuance
fees and discount. There were no issuances during the period ended
30 June 2022.
(d) Other items includes recognition of realised gains of US$32
million on currency forwards not designated as hedges (30 June
2022: realised losses US$242 million) .
Group balance sheet
31 December
30 June 2022
2023 US$m
Note US$m Restated(a)
-------------------------------------------- ---- --------------------- ------------------------
Non-current assets
Goodwill 776 826
Intangible assets 3,697 3,645
Property, plant and equipment 63,101 64,734
Investments in equity accounted units 3,574 3,298
Inventories 214 203
Deferred tax assets 2 3,085 2,796
Receivables and other assets 1,927 1,893
Other financial assets 404 406
-------------------------------------------- ---- --------------------- ------------------------
76,778 77,801
Current assets
Inventories 6,423 6,213
Receivables and other assets 3,544 3,478
Tax recoverable 305 347
Other financial assets 1,327 2,160
Cash and cash equivalents 8 9,179 6,775
-------------------------------------------- ---- --------------------- ------------------------
20,778 18,973
Total assets 97,556 96,774
-------------------------------------------- ---- --------------------- ------------------------
Current liabilities
Borrowings (176) (923)
Leases (298) (292)
Other financial liabilities (13) (69)
Trade and other payables (7,630) (8,047)
Tax payable (204) (223)
Close-down and restoration provisions 9 (1,249) (1,142)
Provisions for post-retirement benefits and
other employment costs 9 (352) (353)
Other provisions 9 (524) (554)
-------------------------------------------- ---- --------------------- ------------------------
(10,446) (11,603)
Non-current liabilities
Borrowings (12,673) (10,148)
Leases (931) (908)
Other financial liabilities (782) (904)
Trade and other payables (587) (604)
Tax payable (35) (36)
Deferred tax liabilities 2 (3,078) (3,164)
Close-down and restoration provisions 9 (13,597) (14,617)
Provisions for post-retirement benefits and
other employment costs 9 (1,346) (1,305)
Other provisions 9 (724) (744)
-------------------------------------------- ---- --------------------- ------------------------
(33,753) (32,430)
Total liabilities (44,199) (44,033)
-------------------------------------------- ---- --------------------- ------------------------
Net assets 53,357 52,741
-------------------------------------------- ---- --------------------- ------------------------
Capital and reserves
Share capital(b)
- Rio Tinto plc 207 207
- Rio Tinto Limited 3,264 3,330
Share premium account 4,324 4,322
Other reserves 7,400 7,755
Retained earnings 36,430 35,020
-------------------------------------------- ---- --------------------- ------------------------
Equity attributable to owners of Rio Tinto 51,625 50,634
Attributable to non-controlling interests 1,732 2,107
-------------------------------------------- ---- --------------------- ------------------------
Total equity 53,357 52,741
-------------------------------------------- ---- --------------------- ------------------------
Group balance sheet (continued)
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
(b) At 30 June 2023, Rio Tinto plc had 1,255.9 million ordinary
shares in issue and held by the public, and Rio Tinto Limited had
371.2 million shares in issue and held by the public. There were no
cross holdings of shares between Rio Tinto Limited and Rio Tinto
plc in either periods presented. As required to be disclosed under
the ASX Listing Rules, the net tangible assets per share amounted
to US$29.07 (31 December 2022: US$28.48).
Group statement of changes in equity
Attributable to owners of Rio
Tinto
------------------------------------------------------------------------------------
Share
Six months ended Share premium Other Retained Non-controlling Total
30 June capital account reserves earnings Total interests equity
2023 US$m US$m US$m US$m US$m US$m US$m
Opening balance
as previously
reported 3,537 4,322 7,805 34,511 50,175 2,099 52,274
Change in
accounting
policy
(note 2) - - (50) 509 459 8 467
---------------- -------------- ---------------- ---------------- ---------------- -------------- ------------------- --------------
Restated opening
balance 3,537 4,322 7,755 35,020 50,634 2,107 52,741
Total
comprehensive
income
for the year - - (379) 5,077 4,698 (174) 4,524
Currency
translation
arising
on Rio Tinto
Limited's share
capital (66) - - - (66) - (66)
Dividends(a) - - - (3,691) (3,691) (262) (3,953)
Own shares
purchased from
Rio Tinto
shareholders to
satisfy share
awards to
employees(b) - - (3) (3) (6) - (6)
Treasury shares
reissued
and other
movements - 2 - - 2 - 2
Equity issued to
holders
of
non-controlling
interests - - - - - 61 61
Employee share
awards charged
to the income
statement - - 27 27 54 - 54
Closing balance 3,471 4,324 7,400 36,430 51,625 1,732 53,357
Attributable to owners of Rio
Tinto
---------------- ------------------------------------------------------------------------------------
Share
Six months ended Share premium Other Retained Non-controlling Total
30 June capital account reserves earnings Total interests equity
2022 US$m US$m US$m US$m US$m US$m US$m
---------------- -------------- ---------------- ---------------- ---------------- -------------- ------------------- --------------
Opening balance
as previously
reported 3,777 4,320 9,998 33,320 51,415 5,158 56,573
Change in
accounting
policy
(note 2) - - (22) 537 515 8 523
---------------- -------------- ---------------- ---------------- ---------------- -------------- ------------------- --------------
Restated opening
balance 3,777 4,320 9,976 33,857 51,930 5,166 57,096
Total
comprehensive
income
for the period
(restated:
refer to note
2) - - (1,477) 9,555 8,078 432 8,510
Currency
translation
arising
on Rio Tinto
Limited's share
capital (185) - - - (185) - (185)
Dividends(a) - - - (7,584) (7,584) (266) (7,850)
Own shares
purchased from
Rio Tinto
shareholders to
satisfy share
awards to
employees(b) - - (3) (3) (6) - (6)
Change in equity
interest
held by Rio
Tinto - - - (484) (484) 484 -
Treasury shares
reissued
and other
movements - 2 - - 2 - 2
Equity issued to
holders
of
non-controlling
interests - - - (711) (711) 733 22
Employee share
awards charged
to the income
statement - - 24 23 47 - 47
Closing balance
(restated) 3,592 4,322 8,520 34,653 51,087 6,549 57,636
---------------- -------------- ---------------- ---------------- ---------------- -------------- ------------------- --------------
Group statement of changes in equity (continued)
(a) Dividends per share announced or paid during the period are
summarised below:
2023 2022
Six months ended 30 June US$m US$m
Dividends per share: Ordinary - paid during the
period 225.0c 417.0c
Dividends per share: Special - paid during the
period - 62.0c
Ordinary dividends per share: announced with the
results for the period 177.0c 267.0c
------------------------------------------------- ------ ------
(b) Net of contributions received from employees for share
awards.
Selected explanatory notes to the interim financial
statements
1. Basis of preparation
The condensed consolidated interim financial statements included
in this report have been prepared in accordance with: International
Accounting Standards (IAS) 34 'Interim Financial Reporting' as
issued by the International Accounting Standards Board (IASB) and
as adopted for use in the United Kingdom (UK), the UK law
(Companies Act 2006) applicable to companies reporting under
International Financial Reporting Standards (IFRS), applicable
Australian law (Australian Corporations Act 2001) and in accordance
with an order, under section 340 of the Australian Corporations Act
2001, issued by the Australian Securities and Investments
Commission (ASIC) on 16 July 2021 (ASIC order).
These condensed consolidated interim financial statements
represent a 'condensed set of financial statements' as referred to
in the Disclosure Guidance and Transparency Rules sourcebook (DTR)
issued by the Financial Conduct Authority (FCA) applicable to
interim financial reporting. Accordingly, they do not include all
of the information required for a full annual financial report and
are to be read in conjunction with the Group's annual financial
statements for the year ended 31 December 2022.
The 2022 annual financial statements were prepared on a going
concern basis in accordance with UK-adopted international
accounting standards, applicable UK law and applicable Australian
law as amended by the ASIC class Order and to meet IAS as issued by
the IASB and interpretations issued from time to time by the IFRS
Interpretations Committee (IFRS IC) which were mandatory at 31
December 2022.
The above accounting standards and interpretations are
collectively referred to as 'IFRS' in this report and contain the
principles we use to create our accounting policies. 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 ours for
consistent reporting.
These condensed consolidated interim financial statements are
unaudited and do not constitute statutory accounts as defined in
Section 434 of the United Kingdom Companies Act 2006. The financial
information as at 31 December 2022 included in this report has been
extracted from the full financial statements filed with the
Registrar of Companies and adjusted for new accounting policies
(refer to note 2 for further details). The Auditors' report on
these full financial statements was unqualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis of matter and did not contain statements under section
498 (2) (regarding adequacy of accounting records and returns), or
under section 498 (3) (regarding provision of necessary information
and explanations) of the Companies Act 2006.
Going concern
Management has prepared detailed cash flow forecasts for the
next 18 months and has updated life-of-mine plan models with
longer-term cash flow projections. These forecasts demonstrate that
the Group has sufficient cash, other liquid resources and undrawn
credit facilities to enable 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 interim
financial information.
1. Basis of preparation (continued)
Alternative performance measures
We present certain alternative performance measures (APMs),
which are reconciled to directly comparable IFRS financial measures
on pages 72 to 81 of this report. These APMs are used by management
to assess the performance of the business and may therefore be
useful to investors. They are not a substitute for the IFRS
measures and should be considered supplementary to those
measures.
Reconciliation with Australian Accounting Standards
Our financial statements have been prepared in accordance with
IFRS 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). We
are required to disclose the effect of the adjustments to our
consolidated income statement, consolidated total comprehensive
income/(loss) and consolidated shareholders' funds if our accounts
were prepared under the version of IFRS that is applicable in
Australia. This is in order to satisfy 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 16 July 2021.
Prior to 1 January 2004, our financial statements were prepared
in accordance with UK GAAP. Under IFRS, goodwill on acquisitions
prior to 1998, which was eliminated directly against equity in the
Group's UK GAAP financial statements, has not been reinstated. This
was permitted under the rules governing the transition to IFRS set
out in IFRS 1. The equivalent Australian Standard, AASB 1, does not
provide for the netting of goodwill against equity. As a
consequence, shareholders' funds under AAS include the residue of
such goodwill, which amounted to US$381 million at 30 June 2023 (31
December 2022: US$380 million).
Save for the exception described above, the Group's financial
statements prepared in accordance with IFRS are consistent with the
requirements of AAS.
2. Changes in accounting policies
The condensed consolidated interim financial statements have
been drawn up on the basis of accounting policies, methods of
computation and presentation consistent with those applied in the
financial statements for the year ended 31 December 2022, except
for the accounting requirements set out below, effective as at 1
January 2023.
New standards and amendments applicable for the current
period
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 'Income Taxes' (IAS 12),
mandatory in 2023 and endorsed by the UK)
At 1 January 2023, we adopted narrow-scope amendments to IAS 12
and have restated comparative periods in accordance with the
transition arrangements. These amendments introduce an exclusion to
the initial recognition exemption application for transactions
giving rise to equal and offsetting taxable and deductible
temporary differences.
Under the amendments, separate deferred tax assets and
liabilities are calculated and recognised, prior to application of
any required recovery testing and permitted offsetting, and
subsequent movements in those deferred tax assets and liabilities
are recognised in the income statement. Our previous accounting
policy stated that "where the recognition of an asset and liability
from a single transaction gives rise to equal and offsetting
temporary differences, we apply the initial recognition exemption
allowed by IAS 12, and consequently recognise neither a deferred
tax asset nor a deferred tax liability in respect of these
temporary differences".
The most significant impact of implementing these amendments was
from temporary differences related to the Group's provisions for
close-down and restoration, and lease obligations and corresponding
capitalised closure costs and right-of-use assets. Adjustments to
deferred tax assets and liabilities related to these balances have
been recognised as at 1 January 2021, being the beginning of the
earliest comparative period to be presented in the financial
statements for the year ended 31 December 2023, with the cumulative
effect recognised as an adjustment to retained earnings or other
components of equity at that date. For other transactions, the
impact of which was immaterial, the amendments apply only to those
taking place on or after 1 January 2021. The impact on equity
attributable to owners of Rio Tinto at 1 January 2023 of
implementing the amendments to IAS 12 is as follows:
2023 2022 2021
At 1 January US$m US$m US$m
------------------------------------------------------- --------------- --------------- ---------------
Equity attributable to owners of Rio Tinto (previously
reported) 50,175 51,415 47,054
Impact of IAS 12 amendments(a) 459 515 516
Restated equity attributable to owners of Rio
Tinto 50,634 51,930 47,570
------------------------------------------------------- --------------- --------------- ---------------
(a) Retained earnings adjustments at 1 January 2023 and 2022
include the impact of income statement adjustments for the years
ended 31 December 2022 and 2021, respectively.
2. Changes in accounting policies (continued)
The restatement of deferred tax balances for the comparative
reporting date is as follows:
31 December
2022
US$m
--------------------------------------------------------- ------------------------------------
Deferred tax assets (previously reported) 2,766
Impact of IAS 12 amendments 30
========================================================= ====================================
Deferred tax assets (restated) 2,796
Deferred tax liabilities (previously reported) (3,601)
Impact of IAS 12 amendments 437
========================================================= ====================================
Deferred tax liabilities (restated) (3,164)
Net impact of IAS 12 amendments on deferred tax balances 467
========================================================= ====================================
Comprising, prior to offsetting of balances:
Deferred tax assets arising from:
- Provisions and other liabilities 1,586
- Capital allowances (57)
========================================================= ====================================
1,529
========================================================= ====================================
Deferred tax liabilities arising from Capital allowances (1,062)
========================================================= ====================================
Restatement of pre-offset balances at 31 December 2022
represents additional gross deferred tax liabilities of US$922
million and gross deferred tax assets of US$1,380 million in
relation to close-down and restoration obligations and related
capitalised closure costs, and additional gross deferred tax
liabilities of US$140 million and gross deferred tax assets of
US$149 million in relation to lease liabilities and related
right-of-use assets.
The impact of restatement on net earnings for the six months
ended 30 June 2022 is a net credit of US$35 million related to
depreciation of closure and right of use assets and settlement of
closure and lease liabilities.
IFRS 17 'Insurance Contracts' and amendments to IFRS 17
'Insurance Contracts' (mandatory in 2023 and endorsed by the
UK)
We implemented IFRS 17 'Insurance Contracts' on 1 January 2023,
which provides consistent principles for all aspects of accounting
for insurance contracts. The standard does not have a material
impact on the Group.
2. Changes in accounting policies (continued)
Other amendments
We adopted amendments to IAS 1 'Presentation of Financial
Statements' and IFRS Practice Statement 2 'Making Materiality
Judgements', requiring companies to disclose their material
accounting policies rather than their significant accounting
policies. The amendments do not have a material impact on the
Group.
We adopted amendments to IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors clarifying how companies should
distinguish changes in accounting policies from changes in
accounting estimates, with a primary focus on the definition of and
clarifications on accounting estimates. The amendments do not have
a material impact on the Group.
New standards or amendments issued but not yet effective
During the six months ended 30 June 2023, we have not early
adopted any amendments, standards or interpretations that have been
issued but are not yet effective.
3. Segmental information
Our management structure is based on principal product groups
(PG) together with global support functions whose leaders make up
the Executive Committee. The Executive Committee members each
report directly to our Chief Executive who is the chief operating
decision maker (CODM) and is responsible for allocating resources
and assessing performance of the operating segments. The CODM's
primary measure of profit is underlying EBITDA. Finance costs and
net debt are managed on a Group-wide basis and are therefore
excluded from the segmental results.
The Copper reportable segment has been adjusted to reflect a
change in management responsibility for the Simandou iron ore
project in Guinea (Simandou) to the Chief Technical Officer. As a
result, Simandou is now included in "Other Operations", which is
below reportable segments in our segmental analysis. Prior period
comparatives have been adjusted accordingly.
Our reportable segments are as follows:
Reportable segment Principal activities
================== ===================================================================
Iron ore mining and salt and gypsum production in
Iron Ore Western Australia.
================== ===================================================================
Aluminium Bauxite mining; alumina refining; aluminium smelting.
================== ===================================================================
Copper Mining and refining of copper, gold, silver, molybdenum,
other by-products and exploration activities which
is the responsibility of the Copper product group
chief executive.
================== ===================================================================
Minerals Includes businesses with products such as borates,
titanium dioxide feedstock together with the Iron
Ore Company of Canada (iron ore mining and iron concentrate/pellet
production). Also includes diamond mining, sorting
and marketing and development projects for battery
minerals, such as lithium.
================== ===================================================================
The Rio Tinto financial information by business unit provided on
pages 68 to Error! Bookmark not defined. provides additional
voluntary business unit disclosure which we consider useful to the
users of the financial statements.
3. Segmental information (continued)
2022
2023 Adjusted(a)
------------------ ------------------------------------------------------------------------- -----------------------------------------------------------------------
Segmental Underlying Capital Segmental Underlying Capital
Six months ended revenue(b) EBITDA(c) expenditure(d) revenue(b) EBITDA(c) expenditure(d)
30 June US$m US$m US$m US$m US$m US$m
================== ====================== ======================= ======================== ===================== ======================== ======================
Iron Ore 15,600 9,792 1,094 16,610 10,395 1,472
Aluminium 6,263 1,140 597 7,796 2,866 625
Copper 3,487 1,082 917 3,547 1,534 730
Minerals 2,889 689 304 3,403 1,259 268
================== ====================== ======================= ======================== ===================== ======================== ======================
Reportable
segments total 28,239 12,703 2,912 31,356 16,054 3,095
Other Operations 97 (395) 32 107 (125) 9
Inter-segment
transactions (154) (17) (149) (1)
Share of equity
accounted
units(e) (1,515) (1,539)
Central pension
costs,
share-based
payments,
insurance and
derivatives 167 265
Restructuring,
project and
one-off costs (84) (86)
Central costs (512) (397)
Central
exploration and
evaluation
expenditures (134) (113)
Proceeds from
disposal of
property, plant
and equipment 8 1
Other items 49 41
================== ====================== ======================= ======================== ===================== ======================== ======================
Consolidated sales
revenue/Purchases
of
property, plant
and equipment and
intangible
assets 26,667 3,001 29,775 3,146
------------------ ---------------------- ----------------------- ------------------------ --------------------- ------------------------ ----------------------
Underlying EBITDA 11,728 15,597
------------------ ---------------------- ----------------------- ------------------------ --------------------- ------------------------ ----------------------
(a) Comparative information has been adjusted to reflect the
movement of the Simandou iron ore project from the "Copper"
reportable segment to "Other Operations".
(b) Segmental revenue includes consolidated sales revenue plus
the equivalent sales revenue of equity accounted units in
proportion to our equity interest (after adjusting for sales
to/from subsidiaries). Segmental revenue measures revenue on a
basis that is comparable to our underlying EBITDA metric.
(c) Underlying EBITDA (calculated on page 46 ) is reported to
provide greater understanding of the underlying business
performance of Rio Tinto's operations.
(d) Capital expenditure for reportable segments includes 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. Following a change in
definition applied for the first time in the second half of 2022,
capital expenditure numbers have been adjusted to exclude
capitalised expenditure relating to equity accounted units.
(e) Consolidated sales revenue includes subsidiary sales of
US$21 million (2022: US$27 million) to equity accounted units which
are not included in segmental revenue. Segmental revenue includes
the Group's proportionate share of product sales by equity
accounted units (after adjusting for sales to subsidiaries) of
US$1,536 million (2022: US$1,566 million) which are not included in
consolidated sales revenue.
3. Segmental information (continued)
Reconciliation of profit after tax to underlying EBITDA
Underlying EBITDA represents profit before taxation, net finance
items, depreciation and amortisation adjusted to exclude the EBITDA
impact of items which do not reflect the underlying performance of
our reportable segments.
Items excluded from profit after tax are those gains and losses
that, individually or in aggregate with similar items, are of a
nature and size to require exclusion in order to provide additional
insight into the underlying business performance. The following
items are excluded from profit after tax in arriving at underlying
EBITDA in each period irrespective of materiality:
- Depreciation and amortisation in subsidiaries and equity accounted units;
- Taxation and finance items in equity accounted units;
- Taxation and finance items relating to subsidiaries;
- Unrealised gains/(losses) on embedded derivatives not qualifying for hedge accounting;
- Net gains/(losses) on disposal of interests in subsidiaries;
- Impairment charges net of reversals;
- The underlying EBITDA of discontinued operations;
- Adjustments to closure provisions where the adjustment is
associated with an impairment charge and for legacy sites where the
disturbance or environmental contamination relates to the
pre-acquisition period.
In addition, there is a final judgmental category which
includes, where applicable, other credits and charges that,
individually or in aggregate if of a similar type, are of a nature
or size to require exclusion in order to provide additional insight
into underlying business performance. In the six months ended to 30
June 2023 there is no item in this category. For the period ended
30 June 2022 the category included the gain recognised by Kitimat
relating to LNG Canada's project.
2022
2023 US$m
Six months ended 30 June US$m Restated(a)
Profit after tax for the period 4,947 9,448
Taxation 1,983 2,867
======================================================== ================ ================
Profit before taxation 6,930 12,315
======================================================== ================ ================
Depreciation and amortisation in subsidiaries excluding
capitalised depreciation(b) 2,405 2,405
Depreciation and amortisation in equity accounted units 238 242
Finance items in subsidiaries 748 359
Taxation and finance items in equity accounted units 373 363
Gains on embedded commodity derivatives not qualifying
for hedge accounting (including foreign exchange) (112) (14)
Impairment charges(c) 1,175 -
Change in closure estimates (non-operating and fully
impaired sites)(d) (29) 43
Gain recognised by Kitimat relating to LNG Canada's
project(e) - (116)
Underlying EBITDA 11,728 15,597
-------------------------------------------------------- ---------------- ----------------
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
3. Segmental information (continued)
(b) Depreciation and amortisation in subsidiaries for the period
ended 30 June 2023 is net of capitalised depreciation of US$80
million (30 June 2022: US$54 million).
(c) Refer to note 5.
(d) For the period ended 30 June 2023, the credit to the income
statement relates to the impact of a change in discount rate
applied to provisions for close-down, restoration and environmental
liabilities at legacy sites where the environmental damage preceded
ownership by Rio Tinto, from 1.5% to 2%. In the six months ended 30
June 2022, the charge relates to re-estimates of underlying closure
cash flows of these sites.
(e) During the first half of 2022, LNG Canada elected to
terminate their option to purchase additional land and facilities
for expansion of their operations at Kitimat, Canada. The resulting
gain was excluded from underlying EBITDA consistent with prior
periods as it was part of a series of transactions that together
were material.
4. Segmental information - additional information
Consolidated sales revenue by destination(a)
2023 2022 2023 2022
% % US$m US$m
Six months ended 30 June Adjusted Adjusted
---------------------------------- --------------- --------------- -------------------- -------------------
Greater China(b) 58.1 % 54.6 % 15,482 16,261
United States of America 14.6 % 16.3 % 3,885 4,848
Asia (excluding Greater China and
Japan) 7.3 % 6.6 % 1,957 1,958
Japan 6.7 % 6.8 % 1,791 2,039
Europe (excluding UK) 5.8 % 6.7 % 1,537 1,995
Canada 2.9 % 3.1 % 785 933
Australia 1.7 % 2.0 % 451 596
UK 0.2 % 0.4 % 66 133
Other countries 2.7 % 3.5 % 713 1,012
---------------------------------- --------------- --------------- -------------------- -------------------
100.0 100.0
Consolidated sales revenue % % 26,667 29,775
---------------------------------- --------------- --------------- -------------------- -------------------
(a) Consolidated sales revenue by geographical destination is
based on the ultimate country of the product's destination, if
known. Where the ultimate destination is not known, we have
defaulted to the shipping address of the customer. Rio Tinto is
domiciled in both the UK and Australia.
(b) Consolidated sales revenue by destination has been adjusted
to classify Taiwan and China together as "Greater China", as noted
in our 2022 Annual Report.
Consolidated sales revenue by product
Revenue
from
contracts
Revenue
with Other Consolidated from contracts Other
sales Consolidated
customers revenue(a) revenue with customers revenue(a) sales revenue
2023 2023 2023 2022 2022 2022
Six months ended 30 June US$m US$m US$m US$m US$m US$m
-------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
Iron ore 16,319 12 16,331 17,547 91 17,638
Aluminium, alumina and
bauxite 6,194 (45) 6,149 7,321 298 7,619
Copper 1,695 (6) 1,689 1,702 (38) 1,664
Industrial minerals
(comprising
titanium dioxide slag,
borates and salt) 1,246 (1) 1,245 1,233 (3) 1,230
Gold 236 3 239 322 9 331
Diamonds 250 - 250 465 - 465
Other products(b) 765 (1) 764 829 (1) 828
-------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
Consolidated sales revenue 26,705 (38) 26,667 29,419 356 29,775
-------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
(a) Consolidated sales revenue includes both revenue from
contracts with customers, accounted for under IFRS 15 and
subsequent movements in provisionally priced receivables, accounted
for under IFRS 9, and included in "Other revenue" above.
(b) "Other products" includes metallic co-products, molybdenum,
silver and other commodities. Individually the revenue from each of
these products is less than 15% of the total "Other products"
category.
5. Impairment charges
2023 2022
Six months ended 30 June US$m US$m
Aluminium - Alumina refineries (1,175) -
Allocated as:
Property, plant and equipment (1,175) -
============================== ==================== ======================
30 June 2023
Aluminium - Alumina refineries, Australia
The Gladstone alumina refineries are responsible for more than
half of our scope 1 carbon dioxide emissions in Australia and
therefore have been a key focus as we evaluate options to
decarbonise our assets. In March 2023, the Australian Parliament
legislated to introduce a requirement for large heavy industrial
carbon emitters to purchase carbon credits based upon their scope 1
emissions with a reducing baseline for these emissions. The
challenging market conditions facing these assets, together with
our improved understanding of the capital requirements for
decarbonisation and the now legislated cost escalation for carbon
emissions have been identified as impairment triggers.
Using a fair value less cost of disposal methodology and
discounting real-terms post-tax cash flows at 6.6%, we have
recognised a pre-tax impairment charge of US$1,175 million
(post-tax US$828 million). This represents a full impairment of the
property, plant and equipment at the Yarwun alumina refinery
(US$948 million) and an impairment of US$227 million for the
property, plant and equipment of Queensland Alumina Limited (QAL).
These impairments reflect market participant assumptions and the
difficult trading conditions for these assets which have operated
below our planned output.
For QAL, the recoverable amount (net present value of US$325
million) is represented by future cash flows attributable to the
double digestion project. This major capital project improves the
energy efficiency of the alumina production process and
significantly reduces carbon emissions. These cash flows have been
risk adjusted to reflect the pre-feasibility study stage of project
evaluation. If investment in the double digestion project was not
approved, the post-tax impairment charge would be US$325 million
greater and result in a full impairment of QAL.
Impact of climate change on our business - Gladstone alumina
refineries
We are committed to the decarbonisation of our assets to reduce
scope 1 and scope 2 emissions by 50% by 2030 and to net zero
emissions by 2050 relative to our 2018 equity baseline. We
anticipate that further carbon action may be necessary to align
with the goals of the Paris agreement to limit temperature
increases to 1.5(o) C. To illustrate the sensitivity of the
refinery valuations to the cost of carbon credits, we have modelled
a 10% increase in those unit costs across all years, before the
impact of decarbonisation projects with all other inputs remaining
constant. For QAL, this sensitivity indicates a reduction in the
pre-tax value by US$99 million, however this is expected to be
largely mitigated by decarbonisation projects, including double
digestion. There is no impact at Yarwun as all property, plant and
equipment is already fully impaired.
30 June 2022
There were no impairment charges during the six months ended 30
June 2022.
6. Taxation
Prima facie tax reconciliation
2022 (a)
2023 US$m
Six months ended 30 June US$m Restated(b)
-------------------------------------------------------- ------------------------- -------------------------
Profit before taxation 6,930 12,315
Prima facie tax payable at UK rate of 23.5% (2022:
19%)(c) 1,628 2,340
Higher rate of taxation of 30% on Australian earnings
(2022: 30%) 373 924
Other tax rates applicable outside the UK and Australia (130) 68
Tax effect of profit from equity accounted units
and related expenses(d) (101) (89)
Impact of changes in tax rates - (12)
Resource depletion allowances (6) (14)
Recognition of previously unrecognised deferred
tax assets(e) (62) (209)
Write-down of previously recognised deferred tax
assets 40 8
Utilisation of previously unrecognised deferred
tax assets (10) (50)
Unrecognised current period operating losses(f) 259 71
Adjustments in respect of prior periods(g) (4) (137)
Other items (4) (33)
-------------------------------------------------------- ------------------------- -------------------------
Total taxation charge 1,983 2,867
-------------------------------------------------------- ------------------------- -------------------------
(a) Consistent with the presentation adopted in the 2022
Financial Statements, prima facie tax reconciliation comparatives
have been revised. We have allocated the tax relating to exclusions
(historically shown separately in the financial statements) to the
appropriate tax line items above. The presentation of the impact of
including profit after tax from equity accounted units within the
Group profit before tax has also been revised as described in note
(d) below.
(b) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
(c) As a UK headquartered and listed Group, the reconciliation
of expected tax on accounting profit to tax charge uses the UK
corporation tax rate to calculate the prima facie tax payable.
Given the increase in the UK corporation tax rate from 19% to 25%
effective 1 April, the UK rate for the year will be 23.5%. Rio
Tinto is also listed in Australia, and the reconciliation includes
the impact of the higher tax rate in Australia where a significant
proportion of the Group's profits are currently earned. The impact
of other tax rates applicable outside the UK and Australia is also
included. The weighted average statutory corporate tax rate on
profit before tax is approximately 30% (30 June 2022: 29%).
(d) The Group profit before tax includes profit after tax of
equity accounted units. Consequently, the tax effect on the profit
from equity accounted units is included as a separate reconciling
item in this prima facie tax reconciliation.
(e) Recognition of previously unrecognised deferred tax assets
includes amounts in respect of Oyu Tolgoi where ongoing progress
towards sustainable underground production reduces the risk that
tax losses will expire if not recovered against taxable profits
within eight years.
6. Taxation (continued)
(f) Unrecognised current period operating losses include tax
losses around the Group for which no tax benefit is currently
recognised due to uncertainty for the purposes of IAS 12 regarding
whether suitable taxable profits will be earned in future to obtain
value for the tax losses.
(g) In the six months ended 30 June 2022, adjustments in respect
of prior periods include amounts related to the settlement of all
tax disputes with the Australian Tax Office for the years 2010 to
2021.
Future tax developments
We continue to monitor and evaluate the Organisation for
Economic Co-operation and Development's (OECD) Two Pillar Solution
to Address the Tax Challenges Arising from the Digitalisation of
the Economy. Pillar Two of those proposals seeks to apply a 15%
global minimum tax and was substantively enacted by the United
Kingdom on 20 June 2023, with application from 1 January 2024.
We have adopted the guidance contained in International Tax
Reform - Pillar Two Model Rules - Amendments to IAS 12 released on
23 May 2023 that provides a temporary mandatory exception from
deferred tax accounting for Pillar Two. Under these amendments, any
Pillar Two taxes incurred by the Group will be accounted for as
current taxes from 1 January 2024. We are in the process of
evaluating the cash tax implications of the global minimum tax
rules and will include disclosures related to expected impacts, if
any, in the Group's 2023 full year consolidated financial
statements.
On 17 May 2023, the Chamber of Deputies of Chile approved a new
mining royalty which will impact Escondida through a 1% ad-valorem
component and an increased operating margin component, all limited
by a maximum overall tax rate of 46.5%. The new mining royalty will
be effective as of 1 January 2024. The legislation was not
substantively enacted at 30 June 2023 and therefore the impact on
our results for the year ended 31 December 2023, which is not
expected to be material, will be accounted for in the second half
of the year following substantive enactment.
7. Acquisitions
30 June 2023
There were no material acquisitions during six months to 30 June
2023.
30 June 2022
On 29 March 2022, we completed the acquisition of Rincon Mining
Pty Limited, the owner of a lithium project in Argentina. Total
cash consideration was US$825 million. The transaction was treated
as an asset purchase with US$822 million of capitalised exploration
and evaluation recorded for the principal economic resource. The
balance of total consideration was allocated to property, plant
& equipment and other assets/liabilities. For the Group cash
flow statement we had determined that, since Rincon constitutes a
group of companies, it was appropriate to present the cash outflow
as "Acquisitions of subsidiaries, joint ventures and associates"
rather than as separate asset purchases even though it did not meet
the definition of a business combination.
8. Cash and cash equivalents
Closing cash and cash equivalents less overdrafts for the
purposes of the cash flow statement differs from cash and cash
equivalents on our balance sheet as per the following
reconciliation:
30 June 31 December 30 June
2023 2022 2022
------------------------------------------------
Closing cash and cash equivalents less
overdrafts US$m US$m US$m
------------------------------------------------ ------- ----------- -------
Balance per Group balance sheet 9,179 6,775 11,412
Bank overdrafts repayable on demand (unsecured) (5) (1) (3)
Balance per Group cash flow statement 9,174 6,774 11,409
------------------------------------------------ ------- ----------- -------
9. Provisions including post-retirement benefits
Post-retirement
benefits
and other Close-down,
employee restoration Other 30 June 31 December
entitlements(a) and environmental(b) provisions 2023 2022
US$m US$m US$m US$m US$m
Opening balance as previously
reported 1,658 15,759 1,298 18,715 18,053
Adjustment on currency translation 14 (105) (7) (98) (841)
Adjustments to mining properties/right
of use assets:
* changes to existing and new provisions - (55) - (55) 524
* change in discount rate(c) - (960) - (960) -
Charged/(credited) to profit:
* increases to existing and new provisions 100 185 51 336 1,137
* change in discount rate(c) - (166) (18) (184) -
* decreases and unused amounts reversed (2) (52) (24) (78) (150)
* exchange (gains)/losses on provisions - (9) (2) (11) 17
* amortisation of discount(d) - 578 14 592 1,519
Utilised in the period (115) (333) (44) (492) (1,039)
Re-measurement losses/(gains)
recognised in other comprehensive
income 42 - - 42 (701)
Transfers and other movements 1 4 (20) (15) 196
----------------------------------------------- -------------------------- ---------------------------- ------------------ ------------------ --------------------
Closing balance 1,698 14,846 1,248 17,792 18,715
----------------------------------------------- -------------------------- ---------------------------- ------------------ ------------------ --------------------
Balance sheet analysis:
Current 352 1,249 524 2,125 2,049
Non-current 1,346 13,597 724 15,667 16,666
----------------------------------------------- -------------------------- ---------------------------- ------------------ ------------------ --------------------
Total 1,698 14,846 1,248 17,792 18,715
----------------------------------------------- -------------------------- ---------------------------- ------------------ ------------------ --------------------
(a) The provision for post-retirement benefits and other
employee entitlements includes a provision for long service leave
of US$281 million (31 December 2022: US$271 million), based on the
relevant entitlements in certain Group operations and includes
US$28 million (31 December 2022: US$32 million) of provision for
redundancy and severance payments.
9. Provisions including post-retirement benefits (continued)
(b) Close-down, restoration and environmental liabilities at 30
June 2023 have not been adjusted for closure-related receivables
amounting to US$348 million (31 December 2022: US$351 million) due
from the ERA trust fund and other financial assets held for the
purposes of meeting closure obligations. These are included within
"Receivables and other assets" on the balance sheet.
(c) Provisions of US$14,846 million (31 December 2022: US$15,759
million) for close-down and restoration costs and environmental
clean-up obligations are based on risk-adjusted discounted cash
flows expressed in real-terms. The present volatility in interest
rates has filtered down to expectations of higher yields from
long-dated bonds, including the 30-year US Treasury Inflation
Protected Securities, which is a key input to our closure provision
discount rate. On 30 June 2023 we revised the closure discount rate
to 2% (from 1.5%), applied prospectively from that date.
(d) The present value of close-down, restoration and
environmental liabilities has been uplifted due to the
re-measurement of underlying cash flows for inflation in the year.
The amortisation of discount of US$578 million (30 June 2022:
US$503 million) is used to systematically uplift cash-flows
including a forecast of full year inflation at the start of each
reporting period. At the end of each half-year we updated the
underlying cash flows for the latest estimate of experienced
inflation for the current period and recorded this as "changes to
existing provisions". For operating sites this adjustment usually
results in a corresponding adjustment to Property, Plant and
Equipment and for closed and fully impaired sites the adjustment is
charged or credited to the income statement.
10. Financial Instruments
Valuation hierarchy of financial instruments carried at fair
value on a recurring basis
The table below shows the classifications of our financial
instruments by valuation method in accordance with IFRS 13 at 30
June 2023 and 31 December 2022.
All instruments shown as being held at fair value have been
classified as fair value through the profit and loss unless
specifically footnoted.
At 30 June 2023 At 31 December 2022
------------------------------------------------------------------------------- ---------------------------------------------------------------------------------
Held at fair value Held at fair value
---------------------------------------------- -----------------------------------------------
Held Held
at at
Level Level Level amortised Level Level Level amortised
Total 1(a) 2(b) 3(c) cost Total 1(a) 2(b) 3(c) costs
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
-------------- -------------- -------------- -------------- --------------- --------------- -------------- --------------- -------------- ---------------
Assets
Cash and cash
equivalents(d) 9,179 2,455 - - 6,724 6,775 2,725 - - 4,050
Investments in
equity shares
and funds(e) 167 86 - 81 - 222 147 - 75 -
Other
investments,
including
loans(f) 1,474 1,232 - 200 42 2,275 2,018 - 229 28
Trade and other
financial
receivables(g) 2,908 13 1,242 - 1,653 2,765 18 1,306 - 1,441
Forward, option
and embedded
derivatives
contracts, not
designated
as hedges(h) 90 - 18 72 - 67 - 16 51 -
Derivatives
related to net
debt(i) - - - - - 2 - 2 - -
--------------- -------------- -------------- -------------- -------------- --------------- --------------- -------------- --------------- -------------- ---------------
Liabilities
Trade and other
financial
payables(j) (6,175) - (72) - (6,103) (6,485) - (30) - (6,455)
Forward, option
and embedded
derivatives
contracts,
designated
as hedges(h) (104) - - (104) - (189) - - (189) -
Forward, option
and embedded
derivatives
contracts, not
designated
as hedges(h) (27) - (12) (15) - (92) - (57) (35) -
Derivatives
related to net
debt(i) (664) - (664) - - (692) - (692) - -
--------------- -------------- -------------- -------------- -------------- --------------- --------------- -------------- --------------- -------------- ---------------
10. Financial Instruments (continued)
(a) Valuation is based on unadjusted quoted prices in active
markets for identical financial instruments.
(b) Valuation is based on inputs that are observable for the
financial instruments, which include quoted prices for similar
instruments or identical instruments in markets which are not
considered to be active, or inputs, either directly or indirectly
based on observable market data.
(c) Valuation is based on inputs that cannot be observed using
market data (unobservable inputs). The change in valuation of our
level 3 instruments for the period to 30 June 2023 is below:
30 June 2023
------------------------------------------------------------ ----------------------------------
Level 3 financial assets and liabilities US$m
------------------------------------------------------------ ----------------------------------
Opening balance 131
Currency translation adjustments (6)
Total realised gains/(losses) included in:
* consolidated sales revenue 5
* net operating costs (13)
Total unrealised gains included in:
* net operating costs 66
Total unrealised gains transferred into other comprehensive
income through cash flow hedges 49
Additions to financial assets/(liabilities) 13
Disposals/maturity of financial instruments (11)
Closing balance 234
------------------------------------------------------------ ----------------------------------
Net gains included in the income statement for assets
and liabilities held at period end 70
------------------------------------------------------------ ----------------------------------
(d) Our "cash and cash equivalents" of US$9,179 million (31
December 2022: US$6,775 million), includes US$2,455 million (31
December 2022: US$2,725 million) relating to money market funds
which are treated as fair value through profit or loss (FVPL) under
IFRS 9 with the fair value movements going into finance income.
(e) Investments in equity shares and funds include US$152
million (31 December 2022: US$153 million) of equity shares, not
held for trading, where we have irrevocably elected to present fair
value gains and losses on revaluation in other comprehensive income
(FVOCI). The election is made at an individual investment
level.
(f) Other investments, including loans, covers, cash deposits in
rehabilitation funds, government bonds, managed investment funds
and royalty receivables.
(g) Trade receivables include provisionally priced invoices. The
related revenue is initially based on forward market selling prices
for the quotation periods stipulated in the contracts with changes
between the provisional price and the final price recorded
separately within "Other revenue". The selling price can be
measured reliably for the Group's products, as it operates in
active and freely traded commodity markets. At 30 June 2023,
US$1,154 million (31 December 2022: US$1,234 million) of
provisionally priced receivables were recognised.
10. Financial Instruments (continued)
(h) Level 3 derivatives consist of derivatives embedded in
electricity purchase contracts linked to the LME, midwest premium
and billet premium with terms expiring between 2025 and 2036 (31
December 2022: 2025 and 2036).
(i) Net debt derivatives include interest rate swaps and
cross-currency swaps. As part of the International Swaps and
Derivatives Association (ISDA) Fallbacks Protocol, on 1 July 2023
we completed the transition of our US LIBOR derivatives to SOFR on
cessation of US LIBOR at 30 June 2023. There has been no impact on
our hedging arrangements after taking into account the IFRS 9
'Financial Instruments' LIBOR reform reliefs.
(j) Trade and other financial payables comprise trade payables,
other financial payables, accruals and amounts due to equity
accounted units.
There were no material transfers between level 1 and level 2, or
between level 2 and level 3 in the period ended 30 June 2023 or in
the year ended 31 December 2022.
Valuation techniques and inputs
The techniques used to value our more significant fair value
assets/(liabilities) categorised under Level 2 and Level 3 are
summarised below:
Fair Value
Description US$m Valuation technique Significant Inputs
Level 2
Interest rate swaps (346) Discounted cash Applicable market quoted
flows swap yield curves
Credit default spread
------------------------- ------------------- -------------------
Cross currency interest (320) Discounted cash Applicable market quoted
rate swaps flows swap yield curves
Credit default spread
Market quoted FX rate
------------------------- ------------------- -------------------
Provisionally priced 1,154 Closely related Applicable forward quoted
receivables listed product metal price
------------------------- ------------------- -------------------
Level 3
Derivatives embedded (79) Option pricing LME forward aluminium price
in electricity contracts model Midwest premium and billet
premium
------------------------- ------------------- -------------------
Royalty receivables 191 Discounted cash Forward commodity price
flows Mine production
------------------------- ------------------- -------------------
Sensitivity analysis in respect of level 3 financial
instruments
For assets/(liabilities) classified under level 3, the effect of
changing the significant unobservable inputs on carrying value has
been calculated using a movement that we deem to be reasonably
probable.
To value the long-term aluminium embedded power derivatives, we
use unobservable inputs when the term of the derivative extends
beyond observable market prices. Changing the level 3 inputs to
reasonably possible alternative assumptions does not change the
fair value significantly, taking into account the expected
remaining term of contracts for either reported period. The fair
value of these derivatives is a net liability of US$79 million at
30 June 2023 (31 December 2022: US$208 million).
10. Financial Instruments (continued)
Royalty receivables include amounts arising from our divested
coal businesses with a carrying value of US$191 million (31
December 2022: US$209 million). These are classified as "Other
investments, including loans" within "Other financial assets". The
fair values are determined using level 3 unobservable inputs. These
royalty receivables include US$82 million from forecast production
beyond 2030. These have not been adjusted for potential changes in
production rates that could occur due to climate change targets
impacting the operator.
The main unobservable input is the long-term coal price used
over the life of these royalty receivables. A 15% increase in the
coal spot price would result in a US$61 million increase (31
December 2022: US$68 million increase) in the carrying value. A 15%
decrease in the coal spot price would result in a US$21 million
decrease (31 December 2022: US$18 million decrease) in the carrying
value. We have used a 15% assumption to calculate our exposure as
it represents the annual coal price movement that we deem to be
reasonably probable (on an annual basis over the long run).
Fair values disclosure of financial instruments
The following table shows the carrying amounts and fair values
of our borrowings including those which are not carried at an
amount which approximates their fair value at 30 June 2023 and 31
December 2022. The fair values of our remaining financial
instruments approximate their carrying values because of their
short maturity, or because they carry floating rates of interest
.
31 December
30 June 2023 2022
---------------------------------- -------------------------- --------------------------
Carrying Fair Carrying Fair
value value value value
US$m US$m US$m US$m
---------------------------------- ------------ ------------ ------------ ------------
Borrowings (including overdrafts) 12,849 13,048 11,071 11,192
---------------------------------- ------------ ------------ ------------ ------------
Total borrowings with a carrying value of US$8.4 billion (31
December 2022: US$6.6 billion) relate to listed bonds with a fair
value of US$8.4 billion (31 December 2022: US$6.6 billion) and are
categorised as level 1 in the fair value hierarchy. Borrowings with
a carrying value of US$3.8 billion (31 December 2022: US$3.8
billion) relate to project finance drawn down by Oyu Tolgoi, with a
fair value of US$4.1 billion (31 December 2022: US$3.9 billion )
using a number of level 3 valuation inputs. We refinanced the
project finance on 16 February 2023 with a syndicate of
international financial institutions, export credit agencies and
commercial lenders. The lenders have agreed to a deferral of the
principal repayments by three years to June 2026 and to an
extension of the final maturity date by five years from 2030 to
2035. As part of refinancing, the debt transitioned to the SOFR
benchmark to which we applied the Phase 2 IBOR reform relief under
IFRS 9. The refinancing did not result in a derecognition of the
drawn down amount, however we recognised an accounting loss on
modification of US$123 million related to changes other than the
benchmark transition and capitalised transaction costs incurred of
US$50 million. 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.
11. Commitments and contingencies
Contingent liabilities (subsidiaries, joint operations, joint
ventures and associates)
Contingent liabilities, indemnities and other performance
guarantees represent the potential outflow of funds from the Group
for the satisfaction of obligations including those under
contractual arrangements (for example undertakings related to
supplier agreements) not provided for in the balance sheet, where
the likelihood of the contingent liabilities, guarantees or
indemnities being called is assessed as possible rather than
probable or remote.
Contingent liabilities, indemnities and other performance
guarantees were US$486 million at 30 June 2023 (31 December 2022:
US$498 million).
There were no material contingent liabilities arising in
relation to the Group's joint ventures and associates. We have 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 our 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 in the future incur judgments or enter into
settlements of claims that could lead to material cash outflows. We
do not believe that any of these proceedings will have a materially
adverse effect on our financial position.
Contingent liabilities - not quantifiable
The current status of contingent liabilities where it is not
practicable to provide a reliable estimate of possible financial
exposure is:
11. Commitments and contingencies (continued)
Litigation disputes
Litigation matter Latest update
========================== =========================================================
Timing of the impairment In October 2017, Rio Tinto announced that it had
of Rio Tinto Coal been notified by the U.S. Securities and Exchange
Mozambique (US securities Commission (SEC) that the SEC had filed a complaint
and exchange commission) in relation to Rio Tinto's disclosures and timing
of the impairment of Rio Tinto Coal Mozambique
(RTCM). The impairment was reflected in Rio Tinto's
2012 year-end accounts. The SEC alleges that Rio
Tinto, a former chief executive, Tom Albanese,
and a former chief financial officer, Guy Elliott,
committed violations of the antifraud, reporting,
books and records, and internal control provisions
of the federal securities law by not accurately
disclosing the value of RTCM and not impairing
it when Rio Tinto published its 2011 year-end accounts
in February 2012 or its 2012 interim results in
August 2012. In June 2019, the trial court dismissed
an associated US class action on behalf of securities
holders. In August 2020, the appeals court partially
overturned the court's dismissal and the trial
court dismissed the case again in 2022. The securities
holders have appealed further to reinstate their
claims, and the court received briefing in 2023.
No provision has been recognised for this case.
2011 Contractual Rio Tinto continues to co-operate fully with relevant
payments in Guinea 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.
On 6 March 2023, we resolved a previously self-disclosed
investigation by the SEC into certain contractual
payments totalling US$10.5 million made to a consultant
who had provided advisory services in 2011, relating
to the Simandou project in the Republic of Guinea.
Without admitting to or denying the SEC's findings,
Rio Tinto paid US$15 million civil penalty for
violations of the books and records and internal
controls provisions of the Foreign Corrupt Practices
Act.
No provision has been recognised for other related
investigations.
========================== =========================================================
At 30 June 2023, the outcome of these matters remains uncertain,
but they could ultimately result in a material financial impact. We
believe these cases are unwarranted and will defend against the
allegations vigorously. A dedicated Board committee continues to
monitor the progress of these matters.
11. Commitments and contingencies (continued)
Other contingent liabilities
We are modernising agreements with Traditional Owner groups in
response to the Juukan Gorge incident. We have created provisions,
within "Other provisions", based on our best estimate of historical
claims; however, the process is incomplete and it is possible that
further claims could arise relating to past events.
Close-down and restoration provisions are not recognised for
those operations that have no known restrictions on their lives as
the date of closure cannot be reliably estimated. This applies
primarily to our Canadian aluminium smelters, which are not
dependent upon a specific orebody and have access to
indefinite-lived power from owned hydro-power stations with water
rights permitted by local governments. In these instances, a
closure obligation may exist at the reporting date; however, due to
the indefinite nature of asset lives it is not possible to arrive
at a sufficiently reliable estimate for the purposes of recognising
a provision. Close-down and restoration provisions are recognised
at these operations for separately identifiable closure activities
which can be reasonably estimated, such as the demolition and
removal of fixed structures after a pre-determined period. Any
contingent liability for these assets will crystallise into a
closure provision if and when a decision is taken to cease
operations.
Capital commitments at 30 June 2023
Capital commitments, excluding the Group's share of joint
venture capital commitments, were US$3,743 million (31 December
2022: US$3,354 million). Our capital commitments include open
purchase orders for managed operations and expenditure on major
projects already authorised by our Investment Committee for
non-managed operations. They do not include the estimated
incremental capital expenditure relating to decarbonisation
projects of US$7.5 billion between 2022 and 2030 unless otherwise
contractually committed. On a legally enforceable basis, capital
commitments would be approximately US$1.3 billion (31 December
2022: US$1.0 billion) as many of the contracts relating to the
Group's projects have various cancellation clauses.
The Group's share of joint venture capital commitments was US$13
million at 30 June 2023 (31 December 2022: US$15 million).
12. Events after the balance sheet date
On 21 July 2023, we announced that the Group would form a joint
venture with the Giampaolo Group to manufacture and market recycled
aluminium products. Under the terms of the agreement, the Group
will acquire a 50% equity stake in Giampaolo Group's wholly-owned
Matalco business for US$700 million, subject to usual closing
adjustments. Matalco has 6 facilities in the US and 1 in Canada,
with capacity to produce around 900,000 tonnes of recycled
aluminium a year. Matalco's leadership team will continue to manage
its operations and Rio Tinto will be responsible for sales and
marketing following a transition period after completion of the
transaction. We expect the transaction to complete in the first
half of 2024, subject to customary regulatory approvals.
There were no other significant events after the balance sheet
date requiring disclosure.
Directors' declaration
Directors' statement of responsibility
In the directors' opinion:
The condensed consolidated interim financial statements on pages
31 to 61 including the notes have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted by the UK,
applicable UK law, and applicable Australian law as amended by the
Australian Securities and Investments Commission Order dated 16
July 2021. We have used the most appropriate accounting policies
for Rio Tinto's business, supported by reasonable and prudent
judgements.
The condensed consolidated interim financial statements give a
true and fair view of the Rio Tinto Group's financial position as
at 30 June 2023 and of its performance, as represented by the
results of its operations, comprehensive income and expense and its
cash flows for the six months then ended. There are reasonable
grounds to believe that each of the Rio Tinto Group, Rio Tinto
Limited and Rio Tinto plc will be able to pay its debts as and when
they become due and payable.
The interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated interim financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
Signed in accordance with a resolution of the Board of
Directors.
Dominic Barton
Chairman
26 July 2023
Jakob Stausholm
Chief executive
26 July 2023
Peter Cunningham
Chief financial officer
26 July 2023
Independent Auditors' Review Reports of KPMG LLP ("KPMG UK") to
Rio Tinto plc and of KPMG ("KPMG Australia") to the members of Rio
Tinto Limited
Conclusions
For the purpose of these reports, the terms 'we' and 'our'
denote KPMG UK in relation to UK responsibilities and reporting
obligations to Rio Tinto plc, and KPMG Australia in relation to
Australian responsibilities and reporting obligations to the
members of Rio Tinto Limited.
We have been engaged and have reviewed the accompanying
condensed consolidated interim financial statements ("Interim
Financial Statements") in the Interim Results 2023 ("Interim
Report") of the Rio Tinto Group ("the Group") as at and for the six
months ended 30 June 2023 which comprises the:
-- Group income statement
-- Group statement of comprehensive income;
-- Group cash flow statement;
-- Group balance sheet;
-- Group statement of changes in equity; and
-- The related explanatory notes to the Interim Financial Statements on pages 39 to 61 .
The Rio Tinto Group consists of Rio Tinto plc, Rio Tinto Limited
and their respective subsidiaries including the Group's share of
joint arrangements and associates at 30 June 2023 or during the six
months ended 30 June 2023. KPMG Australia considers the Directors'
Declaration to be part of the Interim Financial Statements when
forming its conclusion.
Review conclusion by KPMG UK
Based on our review, nothing has come to our attention that
causes us to believe that the Interim Financial Statements in the
Interim Report are not prepared, in all material respects, in
accordance with International Accounting Standard ('IAS') 34
Interim Financial Reporting as adopted for use in the UK and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Review conclusion by KPMG Australia
Based on our review, which is not an audit, we have not become
aware of any matter that makes us believe that the Interim
Financial Statements of the Rio Tinto Group, including the
Directors' Declaration, do not comply with the Australian
Corporations Act 2001 as amended by the Australian Securities and
Investments Commission Order dated 16 July 2021, including:
-- giving a true and fair view of the Group's financial position
as at 30 June 2023 and of its performance for the six months ended
on that date; and
-- complying with International Accounting Standard ('IAS') 34
Interim Financial Reporting as adopted for use in the UK and the
Australian Corporations Regulations 2001.
KPMG, an Australian partnership and KPMG LLP, a UK limited
liability partnership, are member firms of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by
guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of
the KPMG global organisation. KPMG Australia's liability limited by
a scheme approved under Professional Standards Legislation.
Basis for conclusions
KPMG UK conducted its review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK.
In conducting its review, KPMG UK has complied with the ethical
and independence requirements of the UK FRC Ethical Standard as
applied to listed public interest entities.
KPMG Australia conducted its review in accordance with Auditing
Standard on Review Engagements ASRE 2410 Review of a Financial
Report Performed by the Independent Auditor of the Entity ("ASRE
2410"), as issued by the Australian Auditing and Assurance
Standards Board.
KPMG Australia is independent of the Group in accordance with
the auditor independence requirements of the Australian
Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board's APES 110 Code
of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to its audit of the annual
Group financial statements in Australia. In conducting its review,
KPMG Australia has also fulfilled its other ethical
responsibilities in accordance with these requirements.
KPMG UK's and KPMG Australia's responsibilities are further
described in the Auditors' Responsibilities for the Review of the
Interim Financial Statements section of our report.
KPMG UK's conclusions relating to going concern
Based on KPMG UK's review procedures, which are less extensive
than those performed in an audit as described in the Basis for
conclusions section of this report, nothing has come to KPMG UK's
attention that causes it to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
Responsibilities of the Directors for the Interim Financial
Statements and Interim Report
The Interim Report is the responsibility of, and has been
approved by, the Directors of Rio Tinto plc and the Directors of
Rio Tinto Limited.
The Directors of Rio Tinto plc are responsible for:
-- preparing the Interim Report in accordance with the DTR of the UK FCA;
-- the preparation of Interim Financial Statements in accordance
with IAS 34 as adopted for use in the UK. As disclosed in note 1,
the annual financial statements of the group are prepared in
accordance with UK-adopted international accounting standards;
and
-- assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so, in the preparation of
the Interim Financial Statements.
The Directors of Rio Tinto Limited are responsible for:
-- the preparation of Interim Financial Statements, including
the Directors' Declaration, that give a true and fair view in
accordance with International Accounting Standard 34 Interim
Financial Reporting as adopted for use in the UK and the Australian
Corporations Act 2001 as amended by the Australian Securities and
Investments Commission Order dated 16 July 2021
-- such internal control as the Directors of Rio Tinto Limited
determine is necessary to enable the preparation of the Interim
Financial Statements, including the Directors' Declaration, that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditors' Responsibilities for the Review of the Interim
Financial Statements
KPMG UK's responsibility is to express to Rio Tinto plc a
conclusion on the Interim Financial Statements based on its review.
KPMG UK's conclusion, including its conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusions section of
this report.
KPMG Australia's responsibility is to express a conclusion on
the Interim Financial Statements, including the Directors'
Declaration, based on its review. ASRE 2410 requires KPMG Australia
to conclude whether we have become aware of any matter that makes
us believe that the Interim Financial Statements, including the
Directors' Declaration, do not comply with the Corporations Act
2001 as amended by the Australian Securities and Investments
Commission Order dated 16 July 2021, including giving a true and
fair view of the Group's financial position as at 30 June 2023 and
its performance for the six months ended on that date, and
complying with International Accounting Standard 34 Interim
Financial Reporting as adopted for use in the UK and the
Corporations Regulations 2001.
A review of Interim Financial Statements consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information that accompanies the
Interim Financial Statements and is contained in the Interim Report
and consider whether it contains any apparent misstatements or
material inconsistencies with the information in the Interim
Financial Statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) or
Australian Auditing Standards and consequently does not enable us
to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, neither
KPMG UK or KPMG Australia expresses an audit opinion.
The purpose of our review work and to whom we owe our
responsibilities
KPMG UK's report is made solely to Rio Tinto plc in accordance
with the terms of KPMG UK's engagement to assist Rio Tinto plc in
meeting the requirements of the DTR of the UK FCA. Our review work
has been undertaken so that we might state to Rio Tinto plc those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than Rio Tinto plc
for our review work, for this report, or for the conclusions we
have reached.
KPMG Australia's report is made solely to Rio Tinto Limited's
members, as a body, in accordance with the Australian Corporations
Act 2001 as amended by the Australian Securities and Investments
Commission Order dated 16 July 2021. Our review work has been
undertaken so that we might state to the members of Rio Tinto
Limited those matters we are required to state to them in this
report, and the further matters we are required to state to them in
accordance with the terms agreed with Rio Tinto Limited, and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than Rio Tinto
Limited's members, as a body, for our review work, for this report,
or for the conclusion we have reached.
Jonathan Downer Trevor Hart
for and on behalf of KPMG LLP Partner
Chartered Accountants Perth
London 26 July 2023
26 July 2023
KPMG
26 July 2023
Lead Auditor's Independence Declaration under Section 307C of
the Australian Corporations Act 2001
To the Directors of Rio Tinto Limited
I declare that, to the best of my knowledge and belief, in
relation to the review of Rio Tinto Limited for the six months
ended 30 June 2023 there have been:
a) no contraventions of the auditor independence requirements as
set out in the Australian Corporations Act 2001 in relation to the
review; and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Rio Tinto Limited and the
entities it controlled as at or during the six-months ended 30 June
2023.
KPMG
Trevor Hart
Partner
Perth
26 July 2023
KPMG, an Australian partnership and a member firm of the KPMG
global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by
guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of
the KPMG global organisation.
KPMG Australia's liability is limited by a scheme approved under
Professional Standards Legislation.
Rio Tinto financial information by business unit
Segmental Underlying Depreciation Underlying
revenue(c) EBITDA(c) and amortisation earnings(c)
======================== ======================= ======================= ==========================
Rio
Tinto
interest 2023 2022 2023 2022 2023 2022 2023 2022
Six months ended 30 June % US$m US$m US$m US$m US$m US$m US$m US$m
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Adjusted(a) Adjusted(a) Adjusted(a) Restated(a)(b)
============ ============ =========== ==============
Iron Ore
Pilbara (d) 14,705 15,517 9,541 10,119 1,036 1,013 5,712 6,239
Dampier Salt 68.4 192 161 54 9 10 10 22 -
Evaluation
projects/other (e) 1,356 1,698 59 268 - - (50) 234
Intra-segment (e) (653) (766) 138 (1) - - 103 -
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Total Iron Ore Segment 15,600 16,610 9,792 10,395 1,046 1,023 5,787 6,473
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Aluminium
Bauxite 1,091 1,219 279 337 189 180 18 80
Alumina 1,406 1,716 36 415 105 96 (70) 227
Primary Metal 3,457 4,246 779 1,714 349 348 315 1,002
Pacific Aluminium 1,303 1,705 111 463 69 60 55 317
Intra-segment and other (1,456) (1,724) 12 12 1 1 1 -
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Integrated operations 5,801 7,162 1,217 2,941 713 685 319 1,626
Other product group
items 462 634 10 26 - - 6 19
======================== ============== ========== ============ ========= ============ ---------- ----------- ========== ==============
Product group operations 6,263 7,796 1,227 2,967 713 685 325 1,645
Evaluation
projects/other - - (87) (101) - - (65) (75)
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Total Aluminium Segment 6,263 7,796 1,140 2,866 713 685 260 1,570
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Copper
Kennecott 100.0 832 983 139 442 213 298 (93) 68
Escondida 30.0 1,427 1,401 863 966 173 171 411 490
Oyu Tolgoi (f) 826 805 320 313 146 88 55 142
Product group operations 3,085 3,189 1,322 1,721 532 557 373 700
Evaluation
projects/other(a) 402 358 (240) (187) 3 2 (175) (129)
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Total Copper Segment 3,487 3,547 1,082 1,534 535 559 198 571
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Minerals
Iron Ore Company of
Canada 58.7 1,221 1,480 399 775 101 99 120 268
Rio Tinto Iron &
Titanium (g) 1,011 1,090 287 337 101 113 118 142
Rio Tinto Borates 100.0 401 359 102 57 30 25 56 21
Diamonds (h) 250 465 70 193 17 17 44 91
------------------------ -------------- ---------- ------------ --------- ------------ ---------- ----------- ---------- --------------
Product group operations 2,883 3,394 858 1,362 249 254 338 522
Evaluation
projects/other 6 9 (169) (103) - - (159) (99)
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Total Minerals Segment 2,889 3,403 689 1,259 249 254 179 423
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Reportable segments
total 28,239 31,356 12,703 16,054 2,543 2,521 6,424 9,037
Simandou iron ore
project (i) - - (318) (54) - - (114) (33)
Other operations (j) 97 107 (77) (71) 137 133 (173) (165)
Inter-segment
transactions (154) (149) (17) (1) (18) -
Central pension costs,
share-based
payments, insurance and
derivatives 167 265 147 237
Restructuring, project
and
one-off costs (84) (86) (60) (61)
Central costs (512) (397) 43 47 (453) (363)
Central exploration and
evaluation (134) (113) (114) (95)
Net interest 81 105
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Underlying
EBITDA/earnings 11,728 15,597 5,720 8,662
Items excluded from
underlying
EBITDA/earnings 141 87 (603) 281
Reconciliation to Group
income statement
Share of equity
accounted
unit sales and
intra-subsidiary/equity
accounted unit sales (1,515) (1,539)
Impairment charges (1,175) -
Depreciation and
amortisation
in subsidiaries
excluding
capitalised
depreciation (2,405) (2,405)
Depreciation and
amortisation
in equity accounted
units (238) (242) (238) (242)
Taxation and finance
items
in equity accounted
units (373) (363)
Finance items (748) (359)
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Consolidated sales
revenue/profit
before
taxation/depreciation
and amortisation/net
earnings 26,667 29,775 6,930 12,315 2,485 2,459 5,117 8,943
======================== ============== ========== ============ ========= ============ ========== =========== ========== ==============
Rio Tinto financial information by business unit (continued)
Capital expenditure(k)
for the six
months ended 30 Operating assets(l)
June as at
======================================================
Rio
Tinto 30 June 31 December
interest 2023 2022 2023 2022
% US$m US$m US$m US$m
=============== ============== ========================== ========================== =========================== ============================
Adjusted(a) Restated(a)(b)
========================== ============================
Iron Ore
Pilbara (d) 1,085 1,459 17,770 17,785
Dampier Salt 68.4 9 13 160 153
Evaluation
projects/other (e) - - 636 835
Intra-segment (e) - - (117) (220)
=============== ============== ========================== ========================== =========================== ============================
Total Iron Ore
Segment 1,094 1,472 18,449 18,553
=============== ============== ========================== ========================== =========================== ============================
Aluminium
Bauxite 79 57 2,455 2,458
Alumina 151 164 1,293 2,400
Primary Metal 314 358 9,618 9,343
Pacific
Aluminium 53 46 302 159
Intra-segment
and other - - 700 629
Total Aluminium
Segment 597 625 14,368 14,989
=============== ============== ========================== ========================== =========================== ============================
Copper
Kennecott 100.0 327 246 2,195 2,027
Escondida 30.0 - - 2,726 2,792
Oyu Tolgoi (f) 585 484 14,293 13,479
Product group
operations 912 730 19,214 18,298
Evaluation
projects/other 5 - 224 165
=============== ============== ========================== ========================== =========================== ============================
Total Copper
Segment 917 730 19,438 18,463
=============== ============== ========================== ========================== =========================== ============================
Minerals
Iron Ore
Company of
Canada 58.7 120 126 1,217 1,147
Rio Tinto Iron
& Titanium (g) 107 106 3,342 3,351
Rio Tinto
Borates 100.0 25 13 513 496
Diamonds (h) 37 22 37 (84)
--------------- -------------- -------------------------- -------------------------- --------------------------- ----------------------------
Product group
operations 289 267 5,109 4,910
Evaluation
projects/other 15 1 878 874
=============== ============== ========================== ========================== =========================== ============================
Total Minerals
Segment 304 268 5,987 5,784
=============== ============== ========================== ========================== =========================== ============================
Reportable
segments total 2,912 3,095 58,242 57,789
Simandou iron
ore project (i) - - 128 (22)
Other
operations (j) 32 9 (1,703) (1,850)
Inter-segment
transactions (6) 12
Other items 49 41 (686) (1,107)
Total 2,993 3,145 55,975 54,822
--------------- -------------- -------------------------- -------------------------- --------------------------- ----------------------------
Add back:
Proceeds from
disposal of
property,
plant and
equipment 8 1
--------------- -------------- -------------------------- -------------------------- --------------------------- ----------------------------
Total purchases
of property,
plant &
equipment and
intangibles as
per cash
flow statement 3,001 3,146
=============== ============== ========================== ========================== =========================== ============================
Add: Net debt (4,350) (4,188)
Equity
attributable
to
owners of Rio
Tinto 51,625 50,634
=============== ============== ========================== ========================== =========================== ============================
Notes to financial information by business unit
Business units are classified according to the Group's
management structure.
(a) The financial information by business unit has been adjusted
to reflect a change in management responsibility for the Simandou
iron ore project from Copper to the Chief Technical Officer. As a
result, we have moved Simandou outside of reportable segments and
accordingly adjusted prior period comparatives.
(b) Underlying earnings for the six months ended 30 June 2022
and operating assets as at 31 December 2022 have been restated for
the impact of narrow-scope amendments to IAS 12, refer to note 2
for details.
(c) Segmental revenue, underlying EBITDA and capital expenditure
are defined and calculated in note 3 from pages 44 to 47 .
Underlying earnings is defined and calculated within the
alternative performance measures section on pages 72 to 81 .
(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) Segmental revenue, underlying EBITDA, underlying earnings
and operating assets within Evaluation projects/other include
activities relating to the shipment and blending of Pilbara and
Iron Ore Company of Canada (IOC) iron ore inventories held at
portside in China and sold to domestic customers. Transactions
between Pilbara and our portside trading business are eliminated
through the Iron Ore "intra-segment" line and transactions between
IOC and the portside trading business are eliminated through
"inter-segment transactions".
(f) Until 16 December 2022, our interest in Oyu Tolgoi was held
indirectly through our 50.8% investment in Turquoise Hill Resources
Ltd (TRQ), where TRQ's principal asset was its 66% investment in
Oyu Tolgoi LLC, which owned the Oyu Tolgoi copper-gold mine.
Following the purchase of TRQ we now directly hold a 66% investment
in Oyu Tolgoi LLC.
(g) Includes our interests in Rio Tinto Iron and Titanium Quebec
Operations (100%), QIT Madagascar Minerals (QMM, 80%) and Richards
Bay Minerals (attributable interest of 74%).
(h) Includes our interests in Argyle (100%) residual operations
which relates to the sale of previously mined inventory and
Diavik.
(i) Simfer Jersey Limited, a company incorporated in Jersey, in
which the Group has a 53% interest, has an 85% interest in Simfer
S.A., the company that manages the Simandou project in Guinea. The
Group therefore has a 45.05% indirect interest in Simfer S.A. These
entities are consolidated as subsidiaries and together referred to
as the Simandou iron ore project.
Notes to financial information by business unit (continued)
(j) Other operations include our 100% interest in the Gove
alumina refinery (under rehabilitation), Rio Tinto Marine, and the
remaining legacy liabilities of Rio Tinto Coal Australia. These
include provisions for onerous contracts, in relation to rail
infrastructure capacity, partly offset by financial assets and
receivables relating to contingent royalties and disposal
proceeds.
(k) 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 as
derived from the Group cash flow statement. The details provided
include 100% of subsidiaries' capital expenditure and Rio Tinto's
share of the capital expenditure of joint operations but exclude
equity accounted units. We have adjusted the comparatives for this
change in definition.
(l) Operating assets of the Group represents equity attributable
to Rio Tinto adjusted for net debt. Operating assets of
subsidiaries, joint operations and the Group's share relating to
equity accounted units are made up of net assets adjusted for net
debt and post-retirement assets and liabilities, net of tax.
Operating assets are stated after the deduction of non-controlling
interests; these are calculated by reference to the net assets of
the relevant companies (i.e., inclusive of such companies' debt and
amounts due to or from Rio Tinto Group companies).
Alternative performance measures
The Group presents certain alternative performance measures
(APMs) which are reconciled to directly comparable IFRS financial
measures below. These APMs are used by management to assess the
performance of the business and provide additional information,
which investors may find useful. APMs are presented in order to
give further insight into the underlying business performance of
the Group's operations.
APMs are not consistently defined and calculated by all
companies, including those in the Group's industry. Accordingly,
these measures used by the Group may not be comparable with
similarly titled measures and disclosures made by other companies.
Consequently, these APMs should not be regarded as a substitute for
the IFRS measures and should be considered supplementary to those
measures.
The following tables present the Group's key financial measures
not defined according to IFRS and a reconciliation between those
APMs and their nearest respective IFRS measures.
APMs derived from the income statement
The following income statement measures are used by the Group to
provide greater understanding of the underlying business
performance of its operations and to enhance comparability of
reporting periods. They indicate the underlying commercial and
operating performance of our assets including revenue generation,
productivity and cost management.
Segmental revenue
Segmental revenue includes consolidated sales revenue plus the
equivalent sales revenue of equity accounted units in proportion to
our equity interest (after adjusting for sales to/from
subsidiaries). The reconciliation can be found in note 3.
Underlying EBITDA
Underlying EBITDA represents profit before taxation, net finance
items, depreciation and amortisation adjusted to exclude the EBITDA
impact of items that do not reflect the underlying performance of
our reportable segments. The reconciliation of profit after tax to
underlying EBITDA can be found in the segmental information note on
page 46 .
Alternative performance measures (continued)
Underlying EBITDA margin
Underlying EBITDA margin is defined as Group underlying EBITDA
divided by the aggregate of consolidated sales revenue and our
share of equity account unit sales after eliminations.
2023 2022
Six months ended 30 June US$m US$m
----------------------------------------------------------------- --------- ---------
Underlying EBITDA 11,728 15,597
================================================================= ========= =========
Consolidated sales revenue 26,667 29,775
Share of equity accounted unit sales and inter-subsidiary/equity
accounted unit sales eliminations 1,515 1,539
----------------------------------------------------------------- --------- ---------
28,182 31,314
----------------------------------------------------------------- --------- ---------
Underlying EBITDA margin 42 % 50 %
----------------------------------------------------------------- --------- ---------
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is
defined as Pilbara underlying EBITDA divided by Pilbara segmental
revenue, excluding freight revenue.
2023 2022
Six months ended 30 June US$m US$m
--------------------------------------------- --------- ---------
Pilbara
Underlying EBITDA 9,541 10,119
--------------------------------------------- --------- ---------
Pilbara segmental revenue 14,705 15,517
Less: Freight revenue (913) (1,110)
--------------------------------------------- --------- ---------
Pilbara segmental revenue, excluding freight
revenue 13,792 14,407
--------------------------------------------- --------- ---------
Pilbara underlying FOB EBITDA margin 69 % 70 %
--------------------------------------------- --------- ---------
Underlying EBITDA margin from Aluminium integrated
operations
Underlying EBITDA margin from integrated operations is defined
as underlying EBITDA divided by segmental revenue.
2023 2022
Six months ended 30 June US$m US$m
---------------------------------------------------- --------- ---------
Aluminium
Underlying EBITDA - integrated operations 1,217 2,941
---------------------------------------------------- --------- ---------
Segmental revenue - integrated operations 5,801 7,162
---------------------------------------------------- --------- ---------
Underlying EBITDA margin from integrated operations 21 % 41 %
---------------------------------------------------- --------- ---------
Alternative performance measures (continued)
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined
as underlying EBITDA divided by segmental revenue.
2023 2022
Six months ended 30 June US$m US$m
---------------------------------------------------- --------- ---------
Copper
Underlying EBITDA - product group operations 1,322 1,721
---------------------------------------------------- --------- ---------
Segmental revenue - product group operations 3,085 3,189
---------------------------------------------------- --------- ---------
Underlying EBITDA margin - product group operations 43 % 54 %
---------------------------------------------------- --------- ---------
2023 2022
Six months ended 30 June US$m US$m
---------------------------------------------------- --------- ---------
Minerals
Underlying EBITDA - product group operations 858 1,362
---------------------------------------------------- --------- ---------
Segmental revenue - product group operations 2,883 3,394
---------------------------------------------------- --------- ---------
Underlying EBITDA margin - product group operations 30 % 40 %
---------------------------------------------------- --------- ---------
Underlying earnings
Underlying earnings represents net earnings attributable to the
owners of Rio Tinto, adjusted to exclude items that 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
materiality:
- Net gains/(losses) on disposal of interests in subsidiaries.
- 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.
- Adjustments to closure provisions where the adjustment is
associated to an impairment charge, for legacy sites where the
disturbance or environmental contamination relates to the
pre-acquisition period.
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.
Alternative performance measures (continued)
Earnings and exclusions relating to equity accounted units are
stated after tax and included in the column "Pre-tax".
Reconciliation of net earnings to underlying earnings
Non-controlling Net Net amount
Pre-tax Taxation interests amount 2022
2023 2023 2023 2023 US$m
Six months ended 30 June US$m US$m US$m US$m Restated(a)
Net earnings 6,930 (1,983) 170 5,117 8,943
========================= ================ ================= ================= ================ =================
Items excluded from
underlying
earnings
Impairment charges(b) 1,175 (347) - 828 -
Foreign exchange and
derivative
(gains)/losses:
- Foreign exchange gains
on external
net debt and intragroup
balances(c) (104) 5 1 (98) (368)
- (Gains)/losses on
currency and
interest rate
derivatives not
qualifying
for hedge accounting(d) (42) 16 2 (24) 154
- Gains on embedded
commodity derivatives
not qualifying for
hedge accounting(e) (101) 26 (1) (76) (1)
Change in closure
estimates (non-operating
and fully impaired
sites)(f) (29) 2 - (27) 41
Gain recognised by
Kitimat relating
to LNG Canada's
project(g) - - - - (107)
Total excluded from
underlying earnings 899 (298) 2 603 (281)
========================= ================ ================= ================= ================ =================
Underlying earnings 7,829 (2,281) 172 5,720 8,662
========================= ================ ================= ================= ================ =================
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
(b) Refer to note 5.
(c) Exchange gains on external net debt and intragroup balances
included post-tax foreign exchange losses on net debt of US$6
million offset by post-tax gains of US$104 million on intragroup
balances, primarily as a result of the Australian dollar weakening
against the US dollar. During the six months ended 30 June 2022,
exchange gains on external net debt and intragroup balances
included post-tax foreign exchange gains on intragroup balances of
US$508 million partially offset by post-tax losses of US$140
million on external net debt/cash, primarily as a result of a
weakening Australian dollar against the US dollar during the
period.
(d) 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.
(e) 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.
Alternative performance measures (continued)
(f) For the six months ended 30 June 2023, a post-tax credit of
US$27 million arose from the change in discount rate applied to
provisions for close-down, restoration and environmental
liabilities at legacy sites where the environmental damage preceded
ownership by Rio Tinto, from 1.5% to 2%. In the six months ended 30
June 2022, a post-tax charge of US$41 million arose from
inflationary increases, to provisions for such liabilities, in
excess of discount amortisation.
(g) During the first half of 2022, LNG Canada elected to
terminate their option to purchase additional land and facilities
for expansion of their operations at Kitimat, Canada. The resulting
gain was excluded from underlying earnings consistent with prior
periods as it was part of a series of transactions that together
were material.
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying
earnings divided by the weighted average number of shares
outstanding during the period.
2022
Six months ended 30 June 2023 Restated(a)
--------------------------------------------- ------- ------------
Net earnings (US$ million) 5,117 8,943
Weighted average number of shares (millions) 1,621.0 1,619.3
--------------------------------------------- ------- ------------
Basic earnings per ordinary share (cents) 315.7 552.3
Items excluded from underlying earnings per
share (cents)(b) 37.2 (17.4)
--------------------------------------------- ------- ------------
Basic underlying earnings per ordinary share
(cents) 352.9 534.9
--------------------------------------------- ------- ------------
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
(b) Calculation of items excluded from underlying
earnings per share 2023 2022
Expense/(income) excluded from underlying earnings
(refer to page 75 ) 603 (281)
Weighted average number of shares (millions) 1,621.0 1,619.3
--------------------------------------------------- ------- -------
Items excluded from underlying earnings per
share (cents) 37.2 (17.4)
--------------------------------------------------- ------- -------
We have provided basic underlying earnings per share as this
allows the comparability of underlying financial performance
adjusted to exclude items, that do not reflect the underlying
performance of the Group's operations.
Alternative performance measures (continued)
Interest cover
Interest cover is a financial metric used when managing our
risk. It represents the number of times finance income and finance
costs (including amounts capitalised) are covered by profit before
taxation before finance income, finance costs, share of profit
after tax of equity accounted units and items excluded from
underlying earnings, plus dividends from equity accounted
units.
2023 2022
Six months ended 30 June US$m US$m
------------------------------------------------ ----------------------------- -----------------------------
Profit before taxation 6,930 12,315
Add back
Finance income (245) (17)
Finance costs 536 55
Share of profit after tax of equity accounted
units (431) (468)
Items excluded from underlying earnings 899 (271)
Add: Dividends from equity accounted units 287 633
------------------------------------------------ ----------------------------- -----------------------------
Calculated earnings 7,976 12,247
Finance income 245 17
Finance costs (536) (55)
Add: Amounts capitalised (120) (208)
------------------------------------------------ ----------------------------- -----------------------------
Total net finance costs before capitalisation (411) (246)
Interest cover 19 50
------------------------------------------------ ----------------------------- -----------------------------
Payout ratio
The payout ratio is used by us to guide the dividend policy we
implemented in 2016, under which we have sought to return 40-60% of
underlying earnings, on average through the cycle to shareholders
as dividends. It is calculated as total equity dividends per share
to owners of Rio Tinto declared in respect of the financial year
divided by underlying earnings per share (as defined above).
Dividends declared usually include an interim dividend paid in the
year, and a final dividend paid after the end of the year. Any
special dividends declared in respect of the financial year are
also included.
2023 2022
Six months ended 30 June (cents) (cents)
----------------------------------------------------- ---------- ---------
Interim dividend declared per share 177.0 267.0
Underlying earnings per share (comparative restated,
refer to note 2) 352.9 534.9
----------------------------------------------------- ---------- ---------
Payout ratio 50 % 50 %
===================================================== ========== ---------
Alternative performance measures (continued)
APMs derived from cash flow statement
Capital expenditure
Capital expenditure includes the net sustaining and development
expenditure on property, plant and equipment and on intangible
assets. This is equivalent to "Purchases of property, plant and
equipment and intangible assets" in the cash flow statement less
"Sales of property, plant and equipment and intangible assets".
This measure is used to support management's objective of
effective and efficient capital allocation as we need to invest in
existing assets in order to maintain and improve productive
capacity, and in new assets to grow the business.
Rio Tinto share of capital investment
Rio Tinto's share of capital investment represents our economic
investment in capital projects. This measure was introduced in 2022
to better represent the Group's share of funding for capital
projects which are jointly funded with other shareholders, and
which may differ from the consolidated basis included in the
Capital expenditure APM. This better reflects our approach to
capital allocation.
The measure is based upon the Capital expenditure APM, adjusted
to deduct equity or shareholder loan financing provided to
partially owned subsidiaries by non-controlling interests in
respect of major capital projects in the period. In circumstances
where the funding to be provided by non-controlling interests is
not received in the same period as the underlying capital
investment, this adjustment is applied in the period in which the
underlying capital investment is made, not when the funding is
received. Where funding which would otherwise be provided directly
by shareholders is replaced with project financing, an adjustment
is also made to deduct the share of project financing attributable
to the non-controlling interest.This adjustment is not made in
cases where Rio Tinto has unilaterally guaranteed this project
financing. Lastly, funding contributed by the Group to Equity
Accounted Units for its share of investment in their major capital
projects is added to the measure. No adjustment is made to the
Capital expenditure APM where capital expenditure is funded from
the operating cash flows of the subsidiary or Equity Accounted
Unit.
In the current and prior periods the Capital expenditure APM and
Rio Tinto share of capital investment are identical. However, the
capital guidance on page 4 has been provided on this new basis and
a reconciliation of the measure will be published in future periods
when the two measures differ.
Alternative performance measures (continued)
Free cash flow
Free cash flow is defined as net cash generated from operating
activities minus purchases of property, plant and equipment and
intangibles and payments of lease principal, plus proceeds from the
sale of property, plant and equipment and intangible assets.
This measures the net cash returned by the business after the
expenditure of sustaining and development capital. This cash can be
used for shareholder returns, reducing debt and other
investing/financing activities.
2023 2022
Six months ended 30 June US$m US$m
------------------------------------------------ ------- -------
Net cash generated from operating activities 6,975 10,474
Less: Purchase of property, plant and equipment
and intangible assets (3,001) (3,146)
Less: Lease principal payments (213) (183)
Add: Sales of property, plant and equipment
and intangible assets 8 1
------------------------------------------------ ------- -------
Free cash flow 3,769 7,146
------------------------------------------------ ------- -------
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.
Financing liabilities Other assets
----------- -------------------------------------------------------------------- -----------------------------------------------
Cash and
Borrowings Net debt cash equivalents
Six months excluding Lease related including
ended 30 overdrafts(a) liabilities(b) derivatives(c) overdrafts(a) Other investments(d) Net debt
June 2023 US$m US$m US$m US$m US$m US$m
----------- --------------------- ---------------------- --------------------- ---------------------- ----------------------- ------------------
Analysis of
changes
in net debt
Opening
balance (11,070) (1,200) (690) 6,774 1,998 (4,188)
Foreign
exchange
adjustment (48) (1) 45 (59) - (63)
Cash
movements
excluding
exchange
movements (1,586) 213 - 2,459 (801) 285
Other
non-cash
movements (140) (241) (19) - 16 (384)
----------- --------------------- ---------------------- --------------------- ---------------------- ----------------------- ------------------
Closing
balance (12,844) (1,229) (664) 9,174 1,213 (4,350)
----------- --------------------- ---------------------- --------------------- ---------------------- ----------------------- ------------------
(a) Borrowings excluding overdrafts, of US$12,844 million (31
December 2022:US$11,070 million) differs from Borrowings on the
balance sheet as it excludes bank overdrafts of US$5 million (31
December 2022: US$1 million) which has been included in cash and
cash equivalents for the net debt reconciliation.
(b) Other non-cash movements in lease liabilities include the
net impact of additions, modifications and terminations during the
period.
Alternative performance measures (continued)
(c) Included within "Net debt related derivatives" are interest
rate and cross currency interest rate swaps that are in hedge
relationships with the Group's debt.
(d) Other investments comprise highly liquid financial assets
held in managed investment funds classified as held for
trading.
Net gearing ratio
Net gearing ratio is defined as net debt divided by the sum of
net debt and total equity at the end of each period. It
demonstrates the degree to which the Group's operations are funded
by debt versus equity.
30 June 31 December
2023 2022
US$m US$m
--------------------------------------------- -------- -----------
Net debt (4,350) (4,188)
--------------------------------------------- -------- -----------
Net debt (4,350) (4,188)
Total equity (comparative restated, refer to
note 2) (53,357) (52,741)
--------------------------------------------- -------- -----------
Net debt plus total equity (57,707) (56,929)
--------------------------------------------- -------- -----------
Net gearing ratio 8% 7%
--------------------------------------------- -------- -----------
Alternative performance measures (continued)
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as
underlying earnings excluding net interest divided by average
capital employed (operating assets).
Underlying ROCE measures how efficiently we generate profits
from investment in our portfolio of assets.
30 June 30 June 2022
2023 US$m
US$m Restated(a)
----------------------------------------------- -------- ------------
Profit after tax attributable to owners of Rio
Tinto (net earnings) 5,117 8,943
Items added back to derive underlying earnings
(refer to page 75 ) 603 (281)
----------------------------------------------- -------- ------------
Underlying earnings 5,720 8,662
Add/(deduct):
Finance income per the income statement (245) (17)
Finance costs per the income statement 536 55
Tax on finance cost (191) (120)
Non-controlling interest share of net finance
costs (207) (40)
Net interest cost in equity accounted units
(Rio Tinto share) 26 17
----------------------------------------------- -------- ------------
Net interest (81) (105)
----------------------------------------------- -------- ------------
Adjusted underlying earnings 5,639 8,557
----------------------------------------------- -------- ------------
Annualised adjusted underlying earnings 11,278 17,114
----------------------------------------------- -------- ------------
Equity attributable to owners of Rio Tinto -
beginning of the period
(restated, refer to note 2) 50,634 51,930
Net debt/(cash) - beginning of the period 4,188 (1,576)
----------------------------------------------- -------- ------------
Operating assets - beginning of the period 54,822 50,354
----------------------------------------------- -------- ------------
Equity attributable to owners of Rio Tinto -
end of the period
(restated, refer to note 2) 51,625 51,087
Net debt/(cash) - end of the period 4,350 (291)
----------------------------------------------- -------- ------------
Operating assets - end of the period 55,975 50,796
----------------------------------------------- -------- ------------
Average operating assets 55,399 50,575
----------------------------------------------- -------- ------------
Underlying return on capital employed 20 % 34 %
----------------------------------------------- -------- ------------
(a) Comparative information has been restated to reflect the
adoption of narrow scope amendments to IAS12 'Income Taxes', refer
to note 2 for details.
Metal prices and exchange rates
Six months Six months Year to
to 30 June to 30 June Increase/ 31 December
2023 2022 (Decrease) 2022
Metal prices - average for
the period
Copper - US cents/lb 396 442 (10) % 398
Aluminium - US$/tonne 2,329 3,082 (24) % 2,703
- US$/troy
Gold oz 1,932 1,874 3 % 1,800
-------------- ------------- ------------------------ ------------------------ ------------ ---------------------
Six month average
to 30 June At 30 June
----------------------------------------- ------------------------------------------ ---------------
Exchange rates At 31
against the Increase/ Increase/ December
US dollar 2023 2022 (Decrease) 2023 2022 (Decrease) 2022
-------------- ------------- ------------- ----------- ------------- ------------- ------------ ---------------
Pound sterling 1.23 1.30 (5) % 1.26 1.21 4 % 1.21
Australian
dollar 0.68 0.72 (6) % 0.66 0.69 (4) % 0.68
Canadian
dollar 0.74 0.79 (6) % 0.75 0.78 (4) % 0.74
Euro 1.08 1.09 (1) % 1.09 1.05 4 % 1.07
South African (15)
rand 0.055 0.065 % 0.053 0.062 (15) % 0.059
-------------- ------------- ------------- ----------- ------------- ------------- ------------ ---------------
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) and for future total
cash returns to shareholders, are forward-looking statements. The
words "aim", "anticipate", "estimate", "plan", "believes",
"expects", "may", "should", "will", "target", "set to", "continue"
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, particularly in light of the current economic climate
and the significant volatility, uncertainty and disruption arising
in connection with the Ukraine conflict. 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; the impacts of inflation; 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 Ukraine conflict; breaches of Rio Tinto's policies, standard
and procedures, laws or regulations; trade tensions between the
world's major economies; potential further Russian sanctions;
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). 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. Past performance cannot be relied on as a guide to future
performance.
Contacts Please direct all enquiries to
media.enquiries@riotinto.com
Media Relations, UK Media Relations, Australia
Matthew Klar Matt Chambers
M+ 44 7796 630 637 M +61 433 525 739
David Outhwaite Jesse Riseborough
M +44 7787 597 493 M +61 436 653 412
Alyesha Anderson
M +61 434 868 118
Media Relations, Americas Investor Relations, Australia
Simon Letendre Tom Gallop
M +1 514 796 4973 M +61 439 353 948
Malika Cherry Amar Jambaa
M +1 418 592 7293 M +61 472 865 948
Investor Relations, UK
Menno Sanderse
M: +44 7825 195 178
David Ovington
M +44 7920 010 978
Laura Brooks
M +44 7826 942 797
Rio Tinto plc Rio Tinto Limited
6 St James's Square Level 43, 120 Collins Street
London SW1Y 4AD Melbourne 3000
United Kingdom Australia
T +61 3 9283 3333
T +44 20 7781 2000 Registered in Australia
Registered in England ABN 96 004 458 404
No. 719885
riotinto.com
This announcement is authorised for release to the market by Rio
Tinto's Group Company Secretary.
LEI: 213800YOEO5OQ72G2R82
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END
IR UNVVRONUBURR
(END) Dow Jones Newswires
July 26, 2023 02:15 ET (06:15 GMT)
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