Annual Financial Report

RNS Number : 2907C

Rio Tinto PLC

14 March 2014

 



2013 Annual report and Strategic report, 2013 Form 20-F and 2014 Annual General Meetings

14 March 2014

Rio Tinto has today posted the following documents on its website at: www.riotinto.com/agm2014

·      2013 Annual report

·      2013 Strategic report

·      2014 Notices of annual general meetings

Rio Tinto plc will hold its 2014 annual general meeting in London on 15 April 2014 and Rio Tinto Limited will hold its annual general meeting in Melbourne on 8 May 2014.

Rio Tinto plc has submitted the 2013 Annual report, 2013 Strategic report and Rio Tinto plc 2014 Notice of annual general meeting to the UK Listing Authority and they will be available shortly for public inspection on the National Storage Mechanism (NSM): www.hemscott.com/nsm.do

Rio Tinto will file its 2013 Annual report on Form 20-F with the United States Securities and Exchange Commission today.  American Depositary Receipt holders will shortly be able to view Rio Tinto's 2013 Annual report, Rio Tinto plc's 2014 Notice of annual general meeting and the 2013 Annual report on Form 20-F on the Rio Tinto website at: http://www.riotinto.com/financialreports2013

Rio Tinto has also today posted its 2013 sustainable development report on its website at: www.riotinto.com/sustainabledevelopment2013

Hard copies of these documents can be obtained free of charge on request from the company secretaries, whose contact details are as follows:

The Company Secretary Rio Tinto plc 2 Eastbourne Terrace London W2 6LG United Kingdom

The Joint Company Secretary Rio Tinto Limited 120 Collins Street Melbourne, 3000 Australia

In accordance with the requirements of Rules 4.1 & 6.3.5 of the UK Listing Authority's Disclosure and Transparency Rules, a description of the principal risks and uncertainties affecting the Group and a responsibility statement are set out in appendix 1 to this announcement.

Contacts

[e-mail]

www.riotinto.com

  Follow @RioTinto on Twitter

Media Relations, EMEA/Americas Illtud Harri T [phone] M [phone] David Outhwaite T [phone] M [phone] Investor Relations, London Mark Shannon T [phone] M [phone] David Ovington T [phone] M [phone] Grant Donald T [phone] M [phone]

Media Relations, Australia/Asia David Luff T [phone] M [phone] Bruce Tobin T [phone] M [phone] Investor Relations, Australia Christopher Maitland T [phone] M [phone] Rachel Storrs T [phone] M [phone] Galina Rogova T [phone] M [phone]

Appendix 1

Risk factors

Rio Tinto's business units and functions assess the potential economic and non-economic consequences of their respective risks using the framework defined by the Group's Risk policy and standard. Principal risks and uncertainties are identified when the Risk Management Committee, business unit or function determines that the potential consequences are material at a Group level or where the risk is connected and may trigger a succession of events that, in aggregate, become material to the Group. Once identified, each principal risk or uncertainty is reviewed by the relevant internal experts and by the Risk Management Committee.

The following describes all currently-known principal risks and uncertainties that could materially affect Rio Tinto. There may be additional risks unknown to Rio Tinto and other risks, currently believed to be immaterial, which could turn out to be material. The risk factors outlined do not include the management detail on how each is managed and mitigated, which is discussed in more detail on page 66 of the Group's 2013 Annual report.

Risks may materialise individually, simultaneously or in combination and could significantly affect the Group's:

-  short, medium and long-term business and prospects;

-  earnings, cash flow and financial position;

-  overall financial results and product demand;

-  current asset values;

-  future asset values and growth potential;

-  safety record and the long, medium and short-term health of its employees;

-  environmental effects; or

-  Group or business unit reputation.

The principal risks and uncertainties should be considered in connection with any forward-looking statements in this document and the cautionary statement on the inside front cover.

External risks

Factor		Nature
Commodity prices and global demand for the Group's products are expected to remain uncertain		Commodity prices and demand are volatile and strongly influenced by world economic conditions. The Group's normal policy is to sell its products at prices that reflect the value of our products in the market and not to enter into price hedging arrangements. Recent volatility in commodity prices and demand may continue, which could adversely affect the Group's earnings, cash flow and mineral reserves. The basis on which the Group prices iron ore in Asia is evolving and to the extent this results in prices or pricing mechanisms that are less favourable to the Group, its earnings and cash flow could be adversely affected. Furthermore, iron ore prices are typically determined on a landed in China basis, and increases in the freight market would adversely impact Group earnings.
Past strong demand for the Group's products in China could be affected by future developments in that country		The Group is heavily reliant on the Chinese market. A micro-economic slowdown, sudden economic disruption (whether caused by sharp curtailment of bank credit or otherwise) or the significant shift from infrastructure-led to consumer spending-focused growth could substantially decrease China's demands for the Group's commodities, adversely affecting the Group's profitability and cash position.
Rio Tinto is exposed to fluctuations in exchange rates		The great majority of the Group's sales are denominated in US dollars, which is also the currency used for holding surplus cash, financing operations, and presenting external and internal results. Although many costs are incurred in US dollars, a significant portion are incurred in or influenced by the local currencies of the countries where the Group operates, principally the Australian dollar and Canadian dollar. The Group's normal policy is to avoid hedging of foreign exchange rates and so the Group may be adversely affected by appreciation in the value of other currencies against the US dollar, or to prolonged periods of exchange rate volatility. Currency fluctuations may negatively impact the Group's profitability and dividend payments as well as rating agency metrics and asset carrying values.
Political, legal and commercial changes in the places where the Group operates		The Group has operations in jurisdictions where governments and communities are seeking a greater share of mineral wealth. Some operations are conducted under specific agreements with respective governments and associated acts of relevant legislative bodies. In several countries, land title and rights to land and resources (including Indigenous title) may be unclear. Political and administrative change, policy reform, and changes in law or government regulation can result in expropriation or nationalisation of the Group's rights or assets. In some jurisdictions, commercial instability can arise from a culture of bribery and corruption. In its operations and development projects, Rio Tinto is exposed to: -  difficulty in obtaining agreements, leases or permits for new activities; -  renegotiation, unilateral variation or nullification of existing agreements, leases and permits; -  changes in government ownership of operations; -  significant restoration and environmental clean-up costs; -  currency and foreign investment restrictions; -  changes in taxation rates, regimes or international tax agreements; -  limitations to power, water, energy and infrastructure access; and -  general increases in regulation, including compliance costs. Political instability and uncertainty or government changes to terms applicable to the Group's operations may result in increased costs for the Group, may curtail or negatively impact existing operations and prevent the Group from making future investments.
Community disputes in the countries and territories in which the Group operates		Some of the Group's current and potential operations are located in or near communities that may regard these operations as being detrimental to them. Community expectations are typically complex with the potential for multiple inconsistent stakeholder views that may be difficult to resolve. Stakeholder opinion and community acceptance can be subject to many influences, for example, related industries, operations of other groups, or local, regional or national events in other places where we operate. These disputes can disrupt our operations and may increase our costs, thereby potentially impacting our revenue and profitability. In the extreme, our operations may be a focus for civil unrest or criminal activity, which can impact our operational and financial performance, as well as our reputation.
Increased regulation of greenhouse gas emissions could adversely affect the Group's cost of operations		Rio Tinto's operations are energy-intensive and depend on fossil fuels. Worldwide, there is increasing regulation of greenhouse gas emissions, tighter emission reduction targets and progressive introduction of carbon pricing mechanisms. These are likely to raise significantly worldwide energy, production and transport costs over the medium to long term, which will increase the Group's cost base and potentially negatively impact the Group's profitability.
Regulations, standards and stakeholder expectations regarding health, safety, environment and community evolve over time and unforeseen changes could have an adverse effect on the Group's business and reputation		The resources sector is subject to extensive health, safety and environmental laws, regulations and standards alongside community and stakeholder expectations. Evolving regulation, standards and stakeholder expectations could result in increased costs, regulatory action, litigation or, in extreme cases, threaten the viability of an operation.

Strategic risks

Factor		Nature
The Group's exploration and development of new projects might be unsuccessful		Rio Tinto identifies new orebodies and mining properties through its exploration programme, and develops or expands other operations as a means of generating shareholder value. Exploration is not always successful and there is a high degree of competition to develop world-class orebodies. The Group may also not be able to source or maintain adequate project financing, or may be unable to find willing and suitable joint venture partners to share the cost of developing large projects. Furthermore, project execution may not proceed as planned and project budgets and schedules may prove inaccurate, all of which may negatively impact the Group's profitability.
Rio Tinto may fail to successfully execute divestments and acquisitions		The Group may not be able to successfully divest non-core assets resulting in unforeseen pressure on its cash position. In addition, potential acquisitions may not succeed, reducing the Group's ability to expand operations as a means of generating shareholder value. All business combinations or acquisitions entail a number of risks including the cost of effectively integrating acquisitions to realise synergies, significant write-offs or restructuring charges, and unanticipated costs and liabilities. The Group may also be liable for the past acts, omissions or liabilities it has acquired that are unforeseen or greater than anticipated. The Group may also face liabilities for divested entities if the buyer fails to honour all commitments or the Group agrees to retain certain liabilities.

Financial risks

Factor		Nature
The Group's reported results could be adversely affected by the impairment of assets and goodwill		The Group may be required to record impairment charges as a result of adverse developments in the recoverable values of its assets (including goodwill). Significant assumptions in the determination of recoverable value include, but are not limited to: pricing of the Group's commodities and products, reserves and resources, infrastructure availability, discount and exchange rates, operating and development cost projections, and timing of expenditure and revenues related to major projects. In addition, the occurrence of unexpected events, or events beyond the Group's control that adversely impact its business, may have an impact on the assumptions underlying the recoverable value of its assets. The foregoing items are not exhaustive and impairments may be caused by factors currently unknown to the Group. To the extent that the recoverable value of an asset is impaired, such impairment may negatively impact the Group's profitability during the relevant period.
The Group's liquidity and cash flow expectations may not be realised, inhibiting planned expenditure		The Group's ability to fund planned expenditure such as capital growth, mergers and acquisitions, innovation and other obligations may be hindered if its cash position proves inadequate. Our ability to weather a major economic shock could be compromised by insufficient cash reserves, a reduction in the value of existing cash reserves, or restricted access to these and other sources of cash, including bank financing or international capital markets.
Failure to reduce costs both in operations and projects may result in reduced margins and threaten the viability of our capital projects		Input costs in the resources sector can increase at a disproportionate rate, adversely affecting the economics of current operations and increasing the cost of our capital expansion projects. Many of these input costs are linked to commodity prices and, in the case of capital expansion projects, the time lag between incurring project costs and receiving revenue can result in additional exposure to commodity markets. Failure to reduce these costs may have an adverse impact on our operating margins and the viability of our capital expansion projects.

Operational risks

Factor		Nature
Estimates of ore reserves are based on uncertain assumptions that, if changed, could result in the need to restate ore reserves		There are numerous uncertainties inherent in estimating ore reserves, including subjective judgments and determinations that are based on available geological, technical, contract and economic information. Previously valid assumptions may change significantly with new information, which may result in changes to the economic viability of some reserves and the need for them to be restated.
Labour disputes could lead to lost production and/or increased costs		Some of the Group's employees, including employees in non-managed operations, are represented by labour unions under various collective labour agreements. The Group may not be able to renegotiate agreements satisfactorily when they expire and may face difficult negotiations, higher wage demands or industrial action. In addition, labour agreements may not prevent a strike or work stoppage.
Some of the Group's technologies are unproven and failures could adversely impact costs and/or productivity		The Group has invested in and implemented new technologies both in information systems and in operational initiatives, some of which are unproven and their eventual viability cannot be assessed with certainty. The actual benefits of these technologies may differ materially from expectations.
The Group may be exposed to major failures in the supply chain for specialist equipment and materials		Rio Tinto operates within a complex supply chain depending on suppliers of materials, services, equipment, and infrastructure, and on providers of logistics. Supply chain failures, or significantly increased costs within the supply chain, for whatever reason, could have an adverse effect on the Group's business.
Joint ventures, strategic partnerships or non-managed operations may not be successful and may not comply with the Group's standards		The Group participates in several joint venture and partnership arrangements, and it may enter into others, all of which necessarily involve risk. Whether or not the Group holds majority interests or maintains operational control in its joint ventures, its partners may: -  have economic or business interests or goals that are inconsistent with, or opposed to, those of the Group; -  exercise veto rights to block actions that the Group believes are in its or the joint venture's best interests; or -  be unable or unwilling to fulfil their obligations under the joint venture or other agreements, such as contributing capital to expansion or maintenance projects. Where these joint ventures are controlled and managed by others, the Group may provide expertise and advice but has limited control over compliance with its standards and objectives, such that partners may take action contrary to the Group's interests or policies with respect to its investment.
The Group's operations are vulnerable to a range of interruptions, not all of which are covered fully by insurance		1. Natural disasters and events Mining, smelting, refining and infrastructure installations are vulnerable to natural events including earthquakes, subsidence, drought, flood, fire, storm and the possible effects of climate change. 2. Sustained operational difficulties Operating difficulties are many and various, ranging from geological variations that could result in significant ground or containment failure to breakdown of key capital equipment. Reliable roads, rail networks, ports, power generation and transmission, and water supplies are required to access and conduct our operations. Limitations, or interruptions in transport infrastructure, including as a result of third parties gaining access to our integrated facilities, could impede our ability to deliver products. 3. Information technology and cyber security The Group relies heavily on information technology and process control systems to support our business. In common with most large global companies, the Group has experienced cyber attacks and is faced with ongoing threats to the confidentiality, integrity and availability of such systems. Whilst no material losses related to cyber security breaches have been discovered, given the increasing sophistication and evolving nature of this threat, we cannot rule out the possibility of them occurring in the future. An extended failure of critical system components, caused by accidental or malicious actions, including those resulting from a cyber security attack, could result in a significant environmental, health or safety incident, commercial loss or interruption to operations. 4. Major operational failure The Group's operations involve chemicals and other substances stored under high temperature and pressure, with the potential for fire, explosion or other loss of control of the process, leading to a release of hazardous materials. This could occur by accident or a breach of operating standards, and could result in a significant environmental, health or safety incident. The Group's insurance does not cover every potential loss associated with its operations and adequate coverage at reasonable rates is not always obtainable. In addition, insurance provision may not fully cover its liability or the consequences of any business interruption. Any occurrence not fully covered by insurance could have an adverse effect on the Group's business.
The Group depends on the continued services of key personnel		The Group's ability to maintain its competitive position is dependent on the services of a wide range of highly-skilled and experienced personnel available in the locations where they are needed. Failure to recruit and retain key staff, and the inability to deploy staff worldwide, where they are most needed, could affect the Group's business. Similar constraints may be felt by the Group's key consultants, contractors and suppliers, thereby impacting the Group's operations, expansion plans or business more generally.
The Group's costs of close-down, reclamation, and rehabilitation could be higher than expected		Close-down and reclamation works to return operating sites to the community can be extensive and costly. Estimated costs are provided for, and updated annually, over the life of each operation but the provisions might prove to be inadequate due to changes in legislation, standards and the emergence of new reclamation techniques. In addition, the expected timing of expenditure could change significantly due to changes in the business environment that might vary the life of an operation.

Responsibility statements

Each of the current directors, whose names and function are listed on pages 53 to 54 of the Group's 2013 Annual report in the Governance section confirm that, to the best of their knowledge:

·  the Rio Tinto Group financial statements and notes, which have been prepared in accordance with IFRS as adopted by the EU, the Corporations Act 2001 as amended by the Australian Securities and Investments Commission Order dated 22 December 2010 (as amended on 17 February 2012), the Companies Act 2006 and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and loss of the Group;

·  the Rio Tinto plc financial statements and notes, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice give a true and fair view of the assets, liabilities, financial position and profit of the company; and

·  the Overview and Performance sections of the Annual report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Appendix 2

Additional related party transaction disclosure

In connection with the Group's agreement to sell its interest in the Northparkes copper mine to China Molybdenum Co., Ltd. (CMOC), on 29 July 2013, further details of which are set out on page 42 of the Group's 2013 Annual report, Rio Tinto also agreed a break fee of $5 million payable to CMOC in the event that either of the other Northparkes joint venture partners exercised their pre-emption rights. As the sale of the Group's interest in Northparkes to CMOC completed on 1 December 2013, the break fee did not become payable. Under the UK Listing Authority listing rules, CMOC is deemed to be a related party of Rio Tinto plc.

 

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