Annual Financial Report

RNS Number : 7440G

Rio Tinto PLC

06 March 2015

 



2014 Annual report and Strategic report, 2015 annual general meetings and 2014 Annual report on Form 20-F

6 March 2015

Rio Tinto has today posted the following documents on its website at: www.riotinto.com/results-and-reports and www.riotinto.com/agm2015

•           2014 Annual report

•           2014 Strategic report

•           2015 Notices of annual general meetings

Rio Tinto plc will hold its 2015 annual general meeting in London on 16 April 2015 and Rio Tinto Limited will hold its annual general meeting in Perth on 7 May 2015.

Rio Tinto Limited has released the 2014 Annual report, 2014 Strategic report and its 2015 Notice of annual general meeting to the ASX and they will be available shortly on the ASX's Market Announcements Platform.

Likewise, Rio Tinto plc will submit the 2014 Annual report, 2014 Strategic report and Rio Tinto plc 2015 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.morningstar.co.uk/uk/NSM.

These documents are expected to be sent to shareholders on 13 March 2015 in accordance with their communication elections.

Rio Tinto will also file its 2014 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 2014 Annual report, Rio Tinto plc's 2015 Notice of annual general meeting and the 2014 Annual report on Form 20-F on the Rio Tinto website at: www.riotinto.com/agm2015

Rio Tinto has also today posted its 2014 Sustainable development report on its website at: www.riotinto.com/sd2014

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

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

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

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] David Luff T + 44 20 7781 1177 M + 44 7780 226 422 Investor Relations, EMEA/Americas John Smelt T [phone] M [phone] David Ovington T [phone] M [phone] Grant Donald T [phone] M [phone]

Media Relations, Australia/Asia Ben Mitchell T [phone] M [phone] Bruce Tobin T [phone] M [phone] Matthew Klar T [phone] M [phone] Investor Relations, Australia/Asia Rachel Storrs T [phone] M [phone] Galina Rogova T [phone] M [phone]

Rio Tinto plc 2 Eastbourne Terrace London W2 6LG United Kingdom T [phone] Registered in England No. 719885	Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia T [phone] Registered in Australia ABN 96 004 458 404

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 those that the Risk Management Committee, business unit or function determine to have potential material consequences at a Group level. They also include factors that 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.

Pages 15 to 17 describe the currently-known principal risks and uncertainties that could materially affect Rio Tinto or its ability to meet its strategic objectives. There may be additional risks unknown to Rio Tinto and other risks, currently not believed to be material, which could turn out to be material. The risk factors outlined do not include the management detail on how each is managed and mitigated, or the controls established to decrease the likelihood or impact of these risks occurring. This is discussed in more detail on page 62.

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

-   short, medium and long-termbusiness and prospects;

-   earnings,cash flow and financial position;

-   overallfinancial results and product demand;

-   currentasset values;

-   future asset values and growthpotential;

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

-   environmental and social impact on neighbouring communities;

-   social licenceto operate; or

-   Group or businessunit 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 fluctuating world economic conditions. The Group's 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.
Past strong demand for the Group's products in China could be affected by future developments in that country	The Group is highly exposed to the Chinese market. China's demand for any of the Group's products, and iron ore in particular, could be substantially affected by: -  an economic slowdown in China; -  financial or banking market conditions impacting investment; -  an accelerated shift from infrastructure-led to service-oriented growth; or -  a material change in energy policy. Any or all of these may adversely affect the Group's profitability and cash position.
Rio Tinto is exposed to fluctuations in exchange rates	The vast 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 not to hedge 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 operates across a large number of jurisdictions, resulting in exposure to a broad spectrum of economies, political and legal frameworks and societal norms. Each jurisdiction poses unique complexities and challenges that in turn impose risks on the value chain, from new business development through to closure and rehabilitation, and on asset carrying values. These can include: -  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 levels in Group businesses; -  changes in taxation rates, regimes or international tax agreements; -  currency and foreign investment restrictions; -  limitations to power, water, energy and infrastructure access; and -  general increases in regulation and compliance requirements. Jurisdiction-specific behaviour or circumstance may also present uncertainties to our operating environment: unclear land title and rights to land and resources (including Indigenous title); political and administrative change, policy reform, and changes in law or government regulation; an inherent culture of bribery and corruption; violent criminal or sectarian tensions. Any such jurisdictional instability or legislative uncertainty that impacts the Group's operations may result in increased costs, curtail or negatively impact existing operations and/or 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 any of the 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. In numerous jurisdictions, there is increasing regulation of greenhouse gas emissions, tighter emission reduction targets and progressive introduction of carbon pricing mechanisms. These may raise worldwide energy, production and transport costs over the medium to long term, which may 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 social licence to operate, business viability 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 for world-class orebodies. The Group may also not be able to source or maintain adequate 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 and the mineral resources from which future cash flows should come.
Rio Tinto may fail to successfully execute divestments and acquisitions	Potential acquisitions may not succeed and the Group may not be able to successfully divest assets it wishes to sell, resulting in unforeseen pressure on the Group's cash position or 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 were 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.
Large outsourcing programmes may result in exposure to third- party failure, or loss of intellectual property	The Group is implementing business transformation programmes to increase efficiency. These include outsourcing and off- shoring elements of important business support delivery as well as increasing procurement of goods and services from emerging market suppliers. The Group may be exposed to business continuity failure impacting financial performance, loss of intellectual property or data, data privacy violations and/or reputational damage as a result of third-party failure or actions.
Financial risks
Factor	Nature
The Group's reported results could be adversely affected by the impairment of assets including 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 foreign currency exchange rates, operating and development cost projections, and the 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 will negatively impact the Group's profitability during the relevant period.
Discount rates used in determining provisions and asset valuations may change, causing changes to provisions, asset carrying values and capital allocation	Discount rates are utilised to determine provisions for costs of known future obligations (such as close-down and remediation) as well as valuing assets for impairment testing and capital allocation purposes. Discount rates may vary over time as underlying assumptions change. These assumptions include observable long term government bond yields, market risk premiums, and other situational changes (such as change in political stability in a particular jurisdiction). Changes to the discount rate may impact the size of provisions recognised, lead to changes in the carrying value of assets, or alter the capital allocated to various projects.
The Group's liquidity and cash flow expectations may not be realised, inhibiting planned expenditure	Both the Group's ability to fund planned expenditure such as capital growth, mergers and acquisitions, innovation and other objectives or obligations as well as the ability to weather a major economic downturn could be compromised by inadequate access to sufficient liquidity, including external financing sources such as bank financing or capital markets.
Failure to reduce costs may result in reduced margins	Failure to reduce 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 ore reserves and the need for them to be restated. In addition, volatility in commodity prices can result in substantial adjustments in the Group's recognition of ore reserves.
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 and labour disputes may arise even in circumstances where the Group's employees are not represented by labour unions
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 services, 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 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. Controlling partners may take action contrary to the Group's interests or policies, resulting in adverse impact to the Group's operations, financial performance, legal liability or reputation.
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 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 and deliver product to market. Limitations, delayed development, bottlenecks or interruptions in 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. 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, systems failure or a breach of operating standards, and could result in a significant environmental, health or safety incident. 5. Sustained pandemic The Group has exploration, development projects and operations in numerous countries and is reliant on effective global shipping/transportation movements to deliver product to markets. The sustained outbreak of a pandemic may result in health exposure to our workforce as well as the temporary closure of a site or access to shipping/transportation movements, adversely impacting financial performance. 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, or increases in the cost of, 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 currentdirectors, whose names and function are listed on pages 49 to 51 of the Group's 2014 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 9 January 2015, 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 givea 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.

 

END

 

 

ACSPKADBOBKKCNK