TIDMRIO
RNS Number : 6316Q
Rio Tinto PLC
22 February 2023
Rio Tinto delivers underlying EBITDA of $26.3 billion and total
dividends of 492 US cents per share
22 February 2023
Rio Tinto Chief Executive Jakob Stausholm said: "We are building
a stronger Rio Tinto and delivering against our four objectives.
Our operational performance has improved, as evidenced by a number
of second half records being set at our Pilbara iron ore mine and
rail system. We are also investing for the future, doubling our
stake in the Oyu Tolgoi copper-gold project in Mongolia through the
acquisition of Turquoise Hill Resources, progressing the Rincon
Lithium Project in Argentina and reaching milestone agreements that
underpin the long-term success of our Pilbara iron ore
business.
"We continue to focus on making lasting change to strengthen our
workplace culture and to building better relationships with
Indigenous peoples, communities and other partners. At all times we
will seek to find better ways, in line with our purpose. We clearly
have more to do but I am encouraged by the progress we are
making.
"Despite challenging market conditions, we remain resilient
because of the quality of our assets, our great people and the
strength of our balance sheet. That is why we delivered strong
financial results with underlying EBITDA of $26.3 billion, free
cash flow of $9.0 billion and underlying earnings of $13.3 billion,
after taxes and government royalties of $8.4 billion. This enables
us to continue to invest in strengthening the business while also
paying a total dividend of $8.0 billion, a 60% payout, in line with
our policy.
"The uplift in our operational performance, strengthening of
external relationships and investment in the long-term strength of
the business ensure we will be able to continue to pay attractive
dividends and invest in sustaining and growing our portfolio, while
contributing to society's drive to net zero."
Change Change
At year end 2022 2021 2020 vs 2021 vs 2020
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Net cash generated from operating
activities (36)
(US$ millions) 16,134 25,345 15,875 % 2 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Purchases of property, plant and equipment (9)
and intangible assets (US$ millions) 6,750 7,384 6,189 % 9 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(49) (4)
Free cash flow(1) (US$ millions) 9,010 17,664 9,407 % %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(13)
Consolidated sales revenue (US$ millions) 55,554 63,495 44,611 % 25 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(30)
Underlying EBITDA(1) (US$ millions) 26,272 37,720 23,902 % 10 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Profit after tax attributable to owners
of Rio Tinto (net earnings) (US$ (41)
millions) 12,420 21,094 9,769 % 27 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Underlying earnings per share (EPS)(1) (38)
(US cents) 819.6 1,321.1 769.6 % 6 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(38)
Ordinary dividend per share (US cents) 492.0 793.0 464.0 % 6 %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(100) (100)
Special dividend per share (US cents) - 247.0 93.0 % %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(53) (12)
Total dividend per share (US cents) 492.0 1,040.0 557.0 % %
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Net (debt)/cash(1) (US$ millions) (4,188) 1,576 (664)
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
Underlying return on capital employed
(ROCE)(1) 25% 44% 27%
------------------------------------------ ---------- ---------------------- ---------- ------------ ------------
(1) This financial performance indicator is a non-IFRS (as
defined below) alternative performance measure (APM). It is used
internally by management to assess the performance of the business
and is therefore considered relevant to readers of this document.
It is presented here to give more clarity around the underlying
business performance of the Group's operations. APMs are reconciled
to directly comparable IFRS financial measures on pages 69 to 78 .
Our financial results are prepared in accordance with IFRS - see
page 35 for further information. Footnotes are set out in full on
page 17 .
-- We are committed to having a safe work environment,
preventing catastrophic events and reducing injuries. We had a
fourth year in a row of zero fatalities and our all-injury
frequency rate has remained stable at 0.40. We continue to
implement our safety maturity model which, as our blueprint for
safety, describes the systems and behaviours we apply to create a
strong safety culture.
Solid financial results in 2022, set against a context of record
prices in 2021
-- $16.1 billion net cash generated from operating activities,
36% lower than 2021. This included items of a non-recurring nature
which were not representative of the underlying strength of the
performance of the business, which, in aggregate, reduced operating
cash flow by around $2 billion. See page 5 for more detail. Free
cash flow(1) of $9.0 billion included capital expenditure of $6.8
billion, which decreased 9% as we commissioned our current
programme of Pilbara replacement projects, notably Gudai-Darri.
-- $12.4 billion of net earnings, 41% lower than 2021, reflected
the movement in commodity prices, the impact of higher energy and
raw materials prices on our operations, and higher rates of
inflation on our operating costs and closure liabilities. Effective
tax rate on net earnings of 30.9% compared with 27.7% in 2021, with
the increase being primarily due to the $0.8 billion write down of
deferred tax assets in the US.
-- $26.3 billion underlying EBITDA(1) was 30% below 2021, with
an underlying EBITDA margin(1) of 45%.
-- $13.3 billion underlying earnings(1) (underlying EPS(1) of
819.6 US cents) were 38% below 2021.
-- $4.2 billion of net debt(1) at year end, compared with net
cash(1) of $1.6 billion at the start of the year, primarily
reflected the free cash flow(1) of $9.0 billion, offset by $11.7
billion of cash returns to shareholders and $3.8 billion for the
acquisitions of Turquoise Hill Resources (TRQ)(2) and Rincon
Lithium Project.
-- $8.0 billion full-year dividend, equivalent to 492 US cents
per share. This represents 60% of underlying earnings, in line with
our shareholder returns policy.
Delivering on our strategy
-- We have put climate change and the low-carbon transition at
the heart of our strategy. We are decarbonising our assets; helping
our customers decarbonise by developing new products and
technologies; and growing in materials enabling the energy
transition. We will deliver our strategy through four clear
objectives, which guide how we operate. Progressing our strategy
and four objectives will ensure that we provide the materials the
world needs while maximising shareholder returns and strengthening
our position as a partner of choice for our customers and other key
stakeholders.
-- We continue our work on social licence to restore trust and
rebuild relationships, particularly with Indigenous peoples, with
an absolute determination to achieve impeccable ESG
credentials:
We are implementing all recommendations from the comprehensive
external review of our workplace culture publi shed in February to
ensure that everyone at Rio Tinto has a safe, respectful and
inclusive workplace. Some immediate actions include training 91% of
more than 7,000 leaders in 2022 in the foundations of building
psychological safety, exceeding our target of 80%.
We increased our gender diversity by 1.4 percentage points to
22.9%, but fell short of our target to raise female representation
by two percentage points. The increases were distributed across all
levels of the organisation with female senior leaders increasing
from 27.4% to 28.3%. We have also increased the number of
Indigenous leaders in our workforce to 46 (November 2020: 6),
through internal promotion and recruitment.
In October, we published our second Communities & Social
Performance (CSP) progress report on actions addressing the 2020
Board Review of Cultural Heritage Management. It includes direct
feedback from the Pilbara Traditional Owners and details the
actions the company has taken to rebuild relationships with
Indigenous peoples and external stakeholders . We are moving to a
model of co-management of Country in our Pilbara iron ore business,
and we are updating agreements with Indigenous peoples. In May, we
signed a Heads of Agreement with the Puutu Kunti Kurrama and
Pinikura (PKKP) people which will guide the co-management of Puutu
Kunti Kurrama and Pinikura country where mining takes place. In
November, we agreed with the PKKP Aboriginal Corporation to create
the Juukan Gorge Legacy Foundation as part of a remedy agreement
relating to the destruction of the rock shelters at Juukan Gorge in
May 2020. We also signed an updated agreement with Yindjibarndi
Aboriginal Corporation in Western Australia in November and signed
the first agr eement with the Pekuakamiulnuatsh First Nation in
Quebec in December.
-- To achieve our objective of becoming the best operator, we
continue to roll out the Safe Production System (SPS). We achieved
our SPS deployment target for 2022 with 30 deployments across 16
sites, which resulted in improved performance at those sites.
Roll-outs are ongoing to continuously improve safety, strengthen
employee engagement and sustainably lift operational performance
across our global portfolio.
-- We made significant progress with our objective to excel in
development with the following key milestones in the year:
we delivered first ore from Gudai-Darri, our first greenfield
iron ore mine in the Pilbara in more than a decade. The ramp-up
continues to progress as planned, with the 43 million tonne per
year capacity expected to be reached on a sustained basis during
2023.
we agreed to enter a joint venture with China Baowu Steel Group
Co. Ltd with respect to the Western Range iron ore project in the
Pilbara, investing $2 billion ($1.3 billion Rio Tinto share(3) ) to
develop the 25 million tonne per year capacity project. We have
received all primary environmental and Australian Government
approvals, while Chinese regulatory approvals continue to progress
as planned. The joint venture is anticipated to commence in March,
once the operational elements of the JV are in place. Rio Tinto
commenced early works site mobilisation and awarded major
contracts.
we agreed , together with Wright Prospecting Pty Ltd, to
modernise the joint venture covering the Rhodes Ridge project in
the East Pilbara. The participants have commenced an Order of
Magnitude study which will consider development of an operation
before the end of the decade with initial plant capacity of up to
40 million tonnes annually, subject to receipt of relevant
approvals.
we fired 19 drawbells in 2022 from the Hugo North copper-gold
underground mine at Oyu Tolgoi in Mongolia. Drawbell progression
accelerated as a result of improvement initiatives, bringing
projected first sustainable production from Panel 0 forward to the
first quarter of 2023. This followed the comprehensive agreement
announced on 25 January 2022, which reset the relationship between
partners and resulted in the start of underground operations.
we c omplete d the purchase of non-controlling interests in TRQ
for $3.1 billion(2) , simplifying ownership of the Oyu Tolgoi mine,
significantly strengthening our copper portfolio and demonstrating
our long-term commitment to the project and to Mongolia.
following completion of the $825 million Rincon acquisition, the
Board approved $194 million to develop a small starter
battery-grade lithium carbonate plant with a capacity of 3,000
tonnes per year. The investment includes early works to support a
full-scale operation. Construction activities progressed on phase
one camp facilities with rooms for 250 persons completed. Airstrip
permits were received and contractors mobilised. First saleable
production is expected in the first half of 2024.
we increased our exploration and evaluation spend by 24% to $897
million in 2022, as we ramped up our activities in Guinea,
Argentina and Australia.
Progress towards our Scope 1 and 2 emissions targets
Mt CO(2) e 2022 2021 2018*
------------------ ---- ---- -----
Scope 1 emissions 22.8 22.8 23.7
------------------ ---- ---- -----
Scope 2 emissions 7.5 8.2 8.9
------------------ ---- ---- -----
Total 30.3 31.0 32.5
------------------ ---- ---- -----
*Adjusted 2018 baseline due to divestments and acquisitions.
Actual emissions in 2018 were 33.7Mt CO(2) e. Figures are more
precise than the rounded numbers shown.
-- Our Scope 1 and 2 emissions targets of 15% reductions by 2025
and 50% by 2030 are aligned with 1.5degC - the stretch goal of the
Paris Agreement - and are really challenging. In contrast to many
of our peers, about 80% of our emissions are driven by processing
and producing metals and minerals which are high temperature,
hard-to-abate activities. The remaining 20% are from our mining
operations. The low-carbon transition is complex: developing new
technologies and implementing major projects to decarbonise our
business will take time.
-- In 2022, our Scope 1 and 2 emissions were 30.3Mt CO(2) e
(31.0Mt in 2021), a reduction of 7% below our 2018 baseline. This
is primarily the result of switching to renewable power at
Kennecott and Escondida in prior years, as well as lower than
planned production from the Kitimat and Boyne aluminium smelters in
2022. We did not advance the actual implementation of our abatement
projects as fast as we would have liked last year, so our capital
expenditure on decarbonisation projects was $94 million, lower than
we anticipated when we set our targets. Challenges have included
late delivery of equipment, resourcing constraints impacting study
progress, construction and commissioning delays and project
readiness.
-- In response, we established six abatement programmes, with
dedicated people, to focus on the decarbonisation challenges that
cut across our product groups: repowering our Pacific Aluminium
Operations, renewables, aluminium anodes (ELYSIS(TM) ), alumina
process heat, minerals processing and diesel transition. We are
building capability and gaining a deeper understanding of our
decarbonisation challenge (both constraints and opportunities), and
our related operational expenditure increased to approximately $140
million in 2022. As a result, we are better placed to deliver the
complex and large-scale structural changes to our energy system
needed to achieve our 2030 target.
-- Given the long lead times for some of these projects, we
established one additional programme to increase our investments in
Nature-based Solutions projects and now expect these to make a more
significant contribution to our targets. If done well, these
projects can play a substantial role in addressing carbon emissions
and biodiversity loss, while also providing benefits to local
communities. Our people working on these '6+1' abatement
programmes, along with our substantial investments in technology,
will drive the innovation and transformation needed to accelerate
our low carbon transition and ensure the long-term resilience of
our business.
-- Our 2022 Climate Change Report is available on our website,
riotinto.com.
Resilient cash flow from operations
Year ended Year ended
31 December 31 December
2022 2021
US$m US$m
-------------------------------------------------- ---------------------------- -----------------------------
Net cash generated from operating activities 16,134 25,345
-------------------------------------------------- ---------------------------- -----------------------------
Purchases of property, plant and equipment and
intangible assets (6,750) (7,384)
-------------------------------------------------- ---------------------------- -----------------------------
Sales of property, plant and equipment - 61
-------------------------------------------------- ---------------------------- -----------------------------
Lease principal payments (374) (358)
-------------------------------------------------- ---------------------------- -----------------------------
Free cash flow(1) 9,010 17,664
-------------------------------------------------- ---------------------------- -----------------------------
Disposals 80 4
-------------------------------------------------- ---------------------------- -----------------------------
Cash receipt from sale of Cortez royalty 525 -
-------------------------------------------------- ---------------------------- -----------------------------
Dividends paid to equity shareholders (11,727) (15,357)
-------------------------------------------------- ---------------------------- -----------------------------
Acquisitions relating to Rincon and McEwen Copper (850) -
-------------------------------------------------- ---------------------------- -----------------------------
Purchase of the minority interest in Turquoise
Hill Resources Ltd(2) (2,961) -
-------------------------------------------------- ---------------------------- -----------------------------
Other 159 (71)
-------------------------------------------------- ---------------------------- -----------------------------
(Decrease)/Increase in net (debt)/cash(1) (5,764) 2,240
-------------------------------------------------- ---------------------------- -----------------------------
Footnotes are set out in full on page 17 .
-- $16.1 billion in net cash generated from operating
activities, 36% lower than 2021, was primarily driven by price
movements for our major commodities and a $0.5 billion rise in
working capital, primarily due to elevated prices for raw materials
in aluminium inventory. We also incurred some items of a
non-recurring nature which were not representative of the
underlying strength of the performance of the business. These
comprised; higher tax payments (relative to profit) in 2022 as a
result of a $1.1 billion (A$1.5 billion) final payment to the
Australian Taxation Office (ATO) in respect of 2021 profits; $0.4
billion (A$0.6 billion) settlement with the ATO in respect of 12
historical years; and $0.4 billion of cash losses from currency
hedges on our external dividends. At the end of 2022, we had no
material outstanding tax payable on Australian profits.
-- We made some significant investments in growth with the $0.8
billion acquisition of Rincon and the $3.0 billion(2) purchase of
non-controlling interests in TRQ (including transaction costs),
giving us a 66% shareholding in the Oyu Tolgoi copper-gold mine,
our largest growth project. Our capital expenditure of $6.8 billion
encompassed $0.6 billion of growth capital, $2.2 billion of
replacement capital, $3.9 billion of sustaining capital and $0.1
billion of decarbonisation spend. We funded our capital expenditure
from operating activities and expect to continue funding our
capital programme from internal sources, except for the Oyu Tolgoi
underground development, which is project-financed.
-- $11.7 billion of dividends paid in 2022, being the 2021 final
ordinary and special dividends paid in April 2022 ($7.6 billion)
and the 2022 interim ordinary dividend paid in September ($4.1
billion), including foreign exchange impacts.
-- The above movements, together with disposals including the
$525 million of cash received from the sale of the gross production
royalty at the Cortez Complex in Nevada, USA (Cortez royalty),
resulted in net cash(1) decreasing by $5.8 billion in 2022, and
gave rise to net debt(1) of $4.2 billion at 31 December 2022.
Guidance
-- In 2023, we expect our share of capital investment (refer to
APMs on page 75 and 76) to be around $8.0 billion (previously $8.0
to $9.0 billion), including growth capital of around $2.0 billion,
depending on the ramp-up of spend at Simandou. In 2024 and 2025,
this rises to $9.0 to $10.0 billion per year, including the
ambition to invest 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.
Around 40% of our share of capital investment is denominated in
Australian dollars. Guidance includes around $1.5 billion over the
next three years on decarbonisation projects, mainly relating to
Pilbara renewables: this will accelerate thereafter, bringing our
best estimate to around $7.5 billion, in aggregate, out to 2030.
This remains subject to Traditional Owner and other stakeholder
engagement, regulatory approvals and technology developments.
-- Effective tax rate on underlying earnings is expected to be
around 30% in 2023.
Unit costs 2022 Actuals 2023 Guidance
------------------------------------------------ --------------------------- ---------------------------
Pilbara iron ore unit cash costs, free on board
(FOB) basis - US$ per wet metric tonne(4) 21.3 21.0-22.5
------------------------------------------------ --------------------------- ---------------------------
Australian dollar exchange rate 0.69 0.70
------------------------------------------------ --------------------------- ---------------------------
Copper C1 unit costs (includes Kennecott, Oyu
Tolgoi and Escondida) - US cents per lb 163 160-180
------------------------------------------------ --------------------------- ---------------------------
Production (Rio Tinto share, unless otherwise
stated) 2022 Actuals 2023 Guidance
---------------------------------------------- ------------ -------------
Pilbara iron ore (shipments, 100% basis) (Mt) 322 320 to 335
Bauxite (Mt) 55 54 to 57
Alumina (Mt) 7.5 7.7 to 8.0
Aluminium (Mt) 3.0 3.1 to 3.3
Mined copper (kt) 521 650 to 710(5)
Refined copper (kt) 209 180 to 210
Diamonds (M carats) 4.7 3.0 to 3.8
Titanium dioxide slag (Mt) 1.2 1.1 to 1.4
IOC(6) iron ore pellets and concentrate (Mt) 10.3 10.5 to 11.5
Boric oxide equivalent (Mt) 0.5 0.5
---------------------------------------------- ------------ -------------
Footnotes set out in full on page 17 .
-- Production and unit cost guidance is consistent with our
Fourth Quarter Operations Review released on 17 January 2023.
-- Iron ore shipments and bauxite production guidance remain
subject to weather and market conditions. Pilbara shipments
guidance remains subject to progressing the ramp-up from new mines
and management of cultural heritage.
Underlying EBITDA and underlying earnings by product group
Underlying Underlying
EBITDA earnings
------------------------------ ------------------------------
2022 2021 Change 2022 2021 Change
Year ended 31 December US$m US$m % US$m US$m%
----------------------------- -------------- -------------- --------- -------------- -------------- -----------
(33) (35)
Iron Ore 18,612 27,592 % 11,182 17,323 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(16) (40)
Aluminium 3,672 4,382 % 1,472 2,468 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(40) (67)
Copper 2,376 3,969 % 521 1,579 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(7) (4)
Minerals 2,419 2,603 % 849 888 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(30) (37)
Reportable segment total 27,079 38,546 % 14,024 22,258 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(43) 305
Other operations (16) (28) % (340) (84) %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(43)
Inter-segment transactions 24 42 % 26 19 37 %
Central pension costs,
share-based
payments, insurance and 243 181
derivatives 377 110 % 374 133 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
Restructuring, project and
one-off 116
costs (173) (80) % (87) (51) 71 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
Other central costs (766) (613) 25 % (651) (585) 11 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
Central exploration and (2) (3)
evaluation (253) (257) % (209) (215) %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(245)
Net interest 138 (95) %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
(30) (38)
Total 26,272 37,720 % 13,275 21,380 %
----------------------------- -------------- -------------- --------- -------------- -------------- ------------
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
69 to 78 .
Central and other costs
Pre-tax central pension costs, share-based payments, insurance
and derivatives were a $377 million credit compared with a $110
million credit in 2021, reflecting gains on derivatives recognised
in 2022 of $132 million, compared to derivative losses recognised
in 2021 of $97 million, along with lower central pension costs.
On a pre-tax basis, restructuring, project and one-off central
costs were 116% higher than 2021 mainly associated with corporate
projects, in particular workstreams surrounding Everyday
Respect.
Other central costs of $766 million were 25% higher than in
2021, reflecting the Group's investment in the rollout of SPS
across the Group, our enhanced capability to progress our ESG and
CSP objectives and investment in technology, R&D and associated
partnerships.
Net interest increased $233 million to a credit of $138 million
due to higher interest rates, an increase in cash balances through
the year and the absence of losses on early redemption of bonds
recorded in 2021.
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 seven commodities. This is reflected in our pre-tax central
spend of $253 million in 2022. The bulk of this exploration
expenditure was focused on copper projects in Australia, Colombia,
Namibia, Peru, the United States and Zambia; diamonds in Angola;
and heavy mineral sands projects in Australia and South Africa.
Exploration is ongoing for nickel in Canada and Finland and in
lithium across all regions, with opportunities emerging in the
United States and Africa. Mine-lease exploration continued at Rio
Tinto managed businesses, including Pilbara Iron in Australia,
Diavik in Canada and Cape York bauxite operations in Australia.
Commentary on financial results
To provide additional insight into the performance of our
business, we report underlying EBITDA and underlying earnings. The
principal factors explaining the movements in underlying EBITDA are
set out in this table.
US$m
---------------------------------------------- ------------------
2021 underlying EBITDA 37,720
---------------------------------------------- ------------------
Prices (8,101)
---------------------------------------------- ------------------
Exchange rates 801
---------------------------------------------- ------------------
Volumes and mix 606
---------------------------------------------- ------------------
General inflation (1,478)
---------------------------------------------- ------------------
Energy (1,169)
---------------------------------------------- ------------------
Operating cash unit costs (2,202)
---------------------------------------------- ------------------
Higher exploration and evaluation expenditure (171)
Non-cash costs/other 266
---------------------------------------------- ------------------
2022 underlying EBITDA 26,272
---------------------------------------------- ------------------
Solid financial results impacted by significant movements in
commodity prices
We saw significant movement in pricing for our commodities,
amidst growing recession fears and a decline in consumer
confidence.
Movements in commodity prices resulted in a $8,101 million
decline in underlying EBITDA overall compared with 2021. This was
primarily from lower iron ore prices ($9,155 million) and lower
London Metal Exchange (LME) copper prices and a negative
provisional pricing impact ($733 million). This was partly offset
by a price uplift for our Aluminium business ($886 million), driven
by a first-half rise in LME prices, improved product premiums and
higher alumina pricing, which fell away sharply in the second half.
We have included a table of prices and exchange rates on page 79
.
The monthly average Platts index for 62% iron fines converted to
a Free on Board (FOB) basis was 25% lower on average compared with
2021.
The average LME price for copper was 6% lower, while the average
LME aluminium price was 9% higher, compared with 2021. The gold
price was flat compared with 2021.
The midwest premium duty paid for aluminium in the US averaged
$655 per tonne, 12% higher than in 2021.
Weaker local currencies during 2022
Compared with 2021, on average, the US dollar strengthened by 8%
against the Australian dollar and by 4% against the Canadian
dollar. Currency movements increased underlying EBITDA by $801
million relative to 2021.
Improvement in sales volumes and mix
Higher sales volumes and changes in product mix across the
portfolio increased underlying EBITDA by $606 million compared to
2021. T his was mostly attributable to increased iron ore sales
from the ramp-up of Gudai-Darri along with higher portside sales in
China, and favourable value-added product premiums for our
Aluminium business.
Impact of rising inflation and significantly higher energy
prices
Average movements in energy prices compared with 2021 reduced
underlying EBITDA by $1,169 million, mainly due to higher diesel
prices for our trucks, trains and ships. In addition, rising
general price inflation across our global operations resulted in a
$1,478 million reduction in underlying EBITDA, including $0.2
billion for the impact of higher than expected inflation on closure
provisions (for closed or fully impaired sites and environmental
liabilities).
Disciplined focus on costs offset some of the market-linked
increases
We remained focused on cost control throughout the year, in
particular maintaining discipline on fixed costs. However, a rise
in our operating cash unit costs reduced underlying EBITDA by
$2,202 million (on a unit cost basis) compared with 2021. This
mainly reflected cyclical cost pressures from higher market-linked
prices for raw materials, in particular in our Aluminium business.
We also experienced fixed cost inefficiencies from lower volumes at
our Pacific alumina refineries and at the Boyne aluminium smelter
due to production disruptions. In addition, we increased resourcing
in our iron ore business to support the ramp-up at Gudai-Darri and
targeted investment in pit health and asset maintenance across the
Pilbara.
Increasing our global exploration and evaluation activity
We increased our exploration and evaluation expenditure by $171
million, or 24%, to $897 million. This was mainly attributable to
increased activity at the Simandou iron ore project in Guinea and
the Rincon Lithium Project in Argentina.
Non-cash costs/other
Movements in non-cash costs, one-off and other items increased
underlying EBITDA by $266 million compared with 2021. This mainly
reflected the acquisition of the remaining 40% of Diavik in
November 2021 (+$163 million), lower incremental COVID-19 costs
(+$123 million), gain on asset sale at Kennecott (+$133 million)
and lower charges to the income statement on updates to closure
cost estimates relating to closed and legacy sites (+$166 million).
This was partially offset by reduced capacity at the Kitimat
aluminium smelter (-$329 million) as ramp-up activities progressed
in 2022 following the strike which commenced in July 2021.
Net earnings
The principal factors explaining the movements in underlying
earnings and net earnings are set out below.
US$m
------------------------------------------------------------------ ------------------
2021 net earnings 21,094
------------------------------------------------------------------ ------------------
Total changes in underlying EBITDA (11,448)
------------------------------------------------------------------ ------------------
Increase in depreciation and amortisation (pre-tax) in underlying
earnings (319)
------------------------------------------------------------------ ------------------
Increase in interest and finance items (pre-tax) in underlying
earnings (1,112)
------------------------------------------------------------------ ------------------
Decrease in tax on underlying earnings 3,949
------------------------------------------------------------------ ------------------
Decrease in underlying earnings attributable to outside interests 825
------------------------------------------------------------------ ------------------
Total changes in underlying earnings (8,105)
------------------------------------------------------------------ ------------------
Changes in exclusions from underlying earnings:
------------------------------------------------------------------ ------------------
Write-off of Federal deferred tax assets in the United States (820)
------------------------------------------------------------------ ------------------
Movement in exchange differences and gains/losses on derivatives (683)
------------------------------------------------------------------ ------------------
Gain recognised by Kitimat relating to LNG Canada's project (230)
------------------------------------------------------------------ ------------------
Loss on disposal of interest in subsidiary (105)
------------------------------------------------------------------ ------------------
Movement in impairment charges net of reversals 145
------------------------------------------------------------------ ------------------
Movement in closure estimates (non-operating and fully impaired
sites) 793
------------------------------------------------------------------ ------------------
Gain on sale of Cortez royalty 331
------------------------------------------------------------------ ------------------
2022 net earnings 12,420
------------------------------------------------------------------ ------------------
Depreciation and amortisation, net interest and finance items,
tax and non-controlling interests
The depreciation and amortisation charge was $319 million higher
than 2021, mainly due to an increase in capitalised closure costs
in 2021 at a number of our Aluminium sites. Our capital base was
also higher in Iron Ore, Copper and Minerals as a result of our
investment activities. This was partially offset by a stronger US
dollar against the Australian dollar.
Interest and finance items (pre-tax) were higher mainly as a
result of a $1,101 million increase in amortisation of discount on
provisions, as higher inflation had an impact on the Group's
closure and restoration/environmental liabilities. The amortisation
charge of $1,517 million (2021: $415 million) incorporates an
estimate of inflation at the start of each six-month reporting
period. At the end of each half year we update the underlying cash
flows for the latest estimate of experienced inflation for the
current financial year and record 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. These income statement amounts
are included within underlying earnings except for the
re-measurement of provisions for legacy sites that were never
operated by Rio Tinto.
The 2022 effective corporate income tax rate on pre-tax
earnings, excluding equity accounted units, was 30.9%, compared
with 27.7% in 2021. The effective tax rate on pre-tax earnings in
Australia was 31.7% in 2022, compared with 30.7% in 2021. We r
eached agreement with the Australian Taxation Office (ATO) on all
tax matters in dispute. As part of this agreement, in August we
paid the ATO additional tax of A$613 million for the period from
2010 to 2021. Over this 12-year period, we paid nearly A$80 billion
in tax and royalties in Australia.
Items excluded from underlying earnings
The Inflation Reduction Act of 2022 in the United States may
give rise to investment credits on some of our existing projects,
with longer dated projects potentially becoming more favourable.
However, it also includes a new Corporate Alternative Minimum Tax
regime, which has led to the Group reviewing the carrying value of
US Federal deferred tax balances. The resulting $820 million write
down of Federal deferred tax assets has been excluded from
underlying earnings on the grounds of materiality.
In 2022, we recognised an exchange and derivative loss of $137
million. This includes losses of $373 million on revaluation of
certain derivatives which do not qualify for hedge accounting.
These include currency hedges relating to our external dividends,
and exchange losses of $262 million on US dollar debt in non-US
dollar functional currency Group companies, partly offset by $478
million of exchange gains on intragroup balances. These losses
compared with a 2021 gain of $546 million, giving rise to an
unfavourable year-on-year movement of $683 million. 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.
During 2022, LNG Canada elected to terminate their option to
purchase additional land at Kitimat, Canada. This resulted in a
$106 million gain which includes the release of deferred income and
receipt of a cancellation fee payment. During 2021, we recognised a
$336 million gain on recognition of a new wharf at Kitimat that was
built and paid for by LNG Canada. These gains have been excluded
from underlying earnings consistent with prior years, as they are
part of a series of material transactions unrelated to the core
business.
Impairment charges, net of reversals, decreased by $145 million
compared with 2021. In 2022, we impaired the remaining full value
of the Boyne Smelter in Queensland, Australia, as a result of
reduced capacity and the high cost of energy from the coal-fired
power station impacting economic performance. In 2022, we also
completed the sale of the Roughrider uranium undeveloped project in
Saskatchewan, Canada, which resulted in a reversal of previous
impairments.
There is a detailed explanation of the impairment process on
pages 50 to 51 .
In 2022, we recognised $178 million in closure costs
representing adjustments to the closure estimates relating to
legacy sites where the disturbance preceded ownership by Rio Tinto,
including inflationary increases to provisions for these sites in
excess of the unwind of discount. This was $793 million lower than
2021 closure charges, which related to Energy Resources of
Australia (ERA), Gove refinery and Diavik closure provision
increases, and further increases at a number of the Group's legacy
sites where the disturbance preceded our ownership.
In 2022, we completed the $525 million sale of a gold royalty
which was retained following the disposal of the Cortez mine in
2008. The carrying value of the royalty at 31 December 2021 was $88
million, resulting in a post-tax gain of $331 million. This has
been excluded from underlying earnings on the grounds of
materiality.
Profit
Net earnings and underlying earnings refer to amounts
attributable to the owners of Rio Tinto. The net profit
attributable to the owners of Rio Tinto in 2022 was $12.4 billion
(2021: $21.1 billion). We recorded a profit after tax in 2022 of
$13.1 billion (2021: $22.6 billion) of which a profit of $0.7
billion (2021: $1.5 billion) was attributable to non-controlling
interests.
Net earnings and underlying earnings
The differences between underlying earnings and net earnings are
set out in this table (all numbers are after tax and exclude
non-controlling interests).
Year ended Year ended
31 December 31 December
2022 2021
US$m US$m
----------------------------------------------------- ---------------------------- ---------------------------
Underlying earnings 13,275 21,380
----------------------------------------------------- ---------------------------- ---------------------------
Items excluded from underlying earnings
----------------------------------------------------- ---------------------------- ---------------------------
Impairment charges net of reversals (52) (197)
----------------------------------------------------- ---------------------------- ---------------------------
Gains recognised by Kitimat relating to LNG Canada's
project 106 336
----------------------------------------------------- ---------------------------- ---------------------------
Loss on disposal of interest in subsidiary (105) -
----------------------------------------------------- ---------------------------- ---------------------------
Foreign exchange and derivative gains on net
debt and intragroup balances and derivatives
not qualifying for hedge accounting (137) 546
----------------------------------------------------- ---------------------------- ---------------------------
Change in closure estimates (non-operating and
fully impaired sites) (178) (971)
Gain on sale of Cortez royalty 331 -
----------------------------------------------------- ---------------------------- ---------------------------
Write-off of Federal deferred tax assets in the
United States (820) -
Net earnings 12,420 21,094
----------------------------------------------------- ---------------------------- ---------------------------
On pages 72 to 73 there is a detailed reconciliation from
underlying earnings to net earnings, including pre-tax amounts and
additional explanatory notes. The differences between profit after
tax and underlying EBITDA are set out in the table on page 47 .
Balance sheet
Net cash(1) reduced by $5.8 billion in 2022, resulting in a net
debt(1) position of $4.2 billion at 31 December 2022. This
reflected $11.7 billion returned to shareholders in the year, $3.0
billion (2) acquisition of the remaining non-controlling interest
of TRQ and $0.8 billion acquisition of the Rincon Lithium Project,
partially offset by $9.0 billion of free cash flow and the $0.5
billion received from the sale of the Cortez royalty.
Our net gearing ratio(1) (net debt/ (cash) to total capital) was
7% at 31 December 2022 (31 December 2021: (3)%), see page 78 .
Our total financing liabilities excluding net debt derivatives
at 31 December 2022 (see page 77 ) were $12.3 billion (31 December
2021: $13.5 billion) and the weighted average maturity was around
11 years. At 31 December 2022, approximately 77% of these
liabilities were at floating interest rates (85% excluding leases).
The maximum amount within non-current borrowings maturing in any
one calendar year is $1.5 billion, which matures in 2024.
We had $8.8 billion in cash and cash equivalents plus other
short-term cash investments at 31 December 2022 (31 December 2021:
$15.2 billion).
Provision for closure costs
At 31 December 2022, provisions for close-down and restoration
costs and environmental clean-up obligations were $15.8 billion (31
December 2021: $14.5 billion). The principal movements during the
year were the result of a remeasurement of underlying cash flows,
including the effect of inflation. This was recorded as an increase
to mining properties for current operating sites ($0.5 billion) and
as a charge to profit for legacy sites ($0.5 billion). Also
contributing to the increase in the provision was amortisation of
discount ($1.5 billion) which includes the effect of higher
inflation in the year. These increases were partly offset by
utilisation of the provision through spend (-$0.6 billion) and a
weaker Australian dollar, Canadian dollar and South African rand
against the US dollar (-$0.7 billion).
Of the $15.8 billion in provisions, $11.6 billion relates to
operating sites and $4.2 billion is for legacy sites. Remaining
lives of operations and infrastructure range from one to over 50
years with an average for all sites, weighted by present closure
obligation, of around 15 years (2021: 16 years).
The provisions are based on risk-adjusted real cash flows using
a real-rate discount rate of 1.5% to reflect obligations at the
present value of cash flows on 31 December 2022 terms .
In 2023, we expect to utilise around $0.8 billion of the
provisions as we advance our closure activities at Argyle, ERA,
Gove alumina refinery and legacy sites.
Our shareholder returns policy
The Board is committed to maintaining an appropriate balance
between cash returns to shareholders and investment in the
business, with the intention of maximising long-term shareholder
value.
At the end of each financial period, the Board determines an
appropriate total level of ordinary dividend per share. This takes
into account the results for the financial year, the outlook for
our major commodities, the Board's view of the long-term growth
prospects of the business and the company's objective of
maintaining a strong balance sheet. The intention is that the
balance between the interim and final dividend be weighted to the
final dividend.
The Board expects total cash returns to shareholders over the
longer term to be in a range of 40% to 60% of underlying earnings
in aggregate through the cycle. Acknowledging the cyclical nature
of the industry, it is the Board's intention to supplement the
ordinary dividend with additional returns to shareholders in
periods of strong earnings and cash generation.
60% payout ratio on the ordinary dividend
2022 2021
US$bn US$bn
----------------------------------------------------------- --------------- ---------------
Ordinary dividend
----------------------------------------------------------- --------------- ---------------
Interim 4.3 6.1
----------------------------------------------------------- --------------- ---------------
Final 3.7 6.7
----------------------------------------------------------- --------------- ---------------
Full-year ordinary dividend 8.0 12.8
----------------------------------------------------------- --------------- ---------------
Payout ratio on ordinary dividend 60% 60%
----------------------------------------------------------- --------------- ---------------
Additional returns
----------------------------------------------------------- --------------- ---------------
Special dividend announced in July 2021, paid in September
2021 n/a 3.0
----------------------------------------------------------- --------------- ---------------
Special dividend announced in February 2022, paid
in April 2022 n/a 1.0
----------------------------------------------------------- --------------- ---------------
Total cash returns to shareholders declared* 8.0 16.8
----------------------------------------------------------- --------------- ---------------
Combined total as % of underlying earnings 60% 79%
----------------------------------------------------------- --------------- ---------------
* 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 2022 final dividend has been
converted at exchange rates applicable on 21 February 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 2022 2021
------------------------------------- --------------- ---------------
Rio Tinto Group
------------------------------------- --------------- ---------------
Interim (US cents) 267.00 376.00
------------------------------------- --------------- ---------------
Final (US cents) 225.00 417.00
------------------------------------- --------------- ---------------
Full-year (US cents) 492.00 793.00
Rio Tinto plc
------------------------------------- --------------- ---------------
Interim (UK pence) 221.63 270.84
------------------------------------- --------------- ---------------
Final (UK pence) 185.35 306.72
------------------------------------- --------------- ---------------
Full-year (UK pence) 406.98 577.56
Rio Tinto Limited
------------------------------------- --------------- ---------------
Interim (Australian cents) 383.70 509.42
------------------------------------- --------------- ---------------
Final (Australian cents) 326.49 577.04
------------------------------------- --------------- ---------------
Full-year (Australian cents) 710.19 1,086.46
------------------------------------- --------------- ---------------
Special dividend per share declared 2022 2021
------------------------------------ ----- ------
Rio Tinto Group
------------------------------------ ----- ------
Interim (US cents) n/a 185.00
------------------------------------ ----- ------
Final (US cents) n/a 62.00
------------------------------------ ----- ------
Full-year (US cents) n/a 247.00
------------------------------------ ----- ------
Rio Tinto plc
------------------------------------ ----- ------
Interim (UK pence) n/a 133.26
------------------------------------ ----- ------
Final (UK pence) n/a 45.60
------------------------------------ ----- ------
Full-year (UK pence) n/a 178.86
------------------------------------ ----- ------
Rio Tinto Limited
------------------------------------ ----- ------
Interim (Australian cents) n/a 250.64
------------------------------------ ----- ------
Final (Australian cents) n/a 85.80
------------------------------------ ----- ------
Full-year (Australian cents) n/a 336.44
------------------------------------ ----- ------
The 2022 final 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 20 April 2023, we will pay the 2022 final ordinary dividend
to holders of ordinary shares and holders of ADRs on the register
at the close of business on 10 March 2023 (record date). The
ex-dividend date is 9 March 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 28 March 2023.
We will operate our Dividend Reinvestment Plans for the 2022
final 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 28 March 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 remaining
Approved projects cost to be
(Rio Tinto 100% (100% unless spent from
owned unless otherwise 1 January
otherwise stated) stated) 2023 Status/Milestones
--------------------------------- ------------- ---------------- --------------------------------------
Completed in 2022
--------------------------------- ------------- ---------------- --------------------------------------
Investment in Gudai-Darri, $3.1bn $0.2bn We delivered first ore in
a new production hub June 2022. Production from
in the Pilbara region the mine ramped up in the
of Western Australia. second half of the year and
The investment incorporates we expect Gudai-Darri to
a processing plant reach its nameplate capacity
and infrastructure of 43 million tonne per year
including a 166-kilometre on a sustained basis during
rail line connecting 2023. The mine has an expected
the mine to our existing life of more than 40 years.
network.
--------------------------------- ------------- ---------------- --------------------------------------
Investment in the Robe $1.0bn $0.1bn In the third quarter of 2022,
River Joint Venture (Rio Tinto (Rio Tinto Mesa A rectification works
(West Angelas C and share) share) were successfully completed,
D and Mesa B, C and with the plant operating
H at Robe Valley) in at design rates. Final train
the Pilbara to sustain load out tie-in works at
production capacity. Mesa J were also completed,
with first ore achieved.
--------------------------------- ------------- ---------------- --------------------------------------
Investment in a second $0.8bn - The new 16-kilometre tunnel
tunnel at the 1000MW produced its first megawatt
Kemano hydropower facility of electricity in July 2022
at Kitimat, British after construction was completed
Columbia, Canada, which in May 2022.
will ensure the long-term
reliability of the
power supply to the
Kitimat smelter.
--------------------------------- ------------- ---------------- --------------------------------------
Ongoing
--------------------------------- ------------- ---------------- --------------------------------------
Iron Ore
--------------------------------- ------------- ---------------- --------------------------------------
Investment in the Western $1.3bn $1.1bn Announced in September 2022,
Range iron ore project, (Rio Tinto (Rio Tinto the mine will have a production
a joint venture between share)(3) share) capacity of 25 million tonnes
Rio Tinto (54%) and per year. The project includes
China Baowu Steel Group construction of a primary
Co. Ltd (46%) in the crusher and an 18-kilometre
Pilbara to sustain conveyor connection to the
production of the Pilbara Paraburdoo processing plant.
Blend from Rio Tinto's Early works construction
existing Paraburdoo commenced in 2022 and major
hub. contracts have been awarded
by Rio Tinto. First production
is anticipated in 2025.
--------------------------------- ------------- ---------------- --------------------------------------
Copper
--------------------------------- ------------- ---------------- --------------------------------------
Phase two of the south $1.5bn $1.1bn Approved in December 2019,
wall pushback to extend the investment will further
mine life at Kennecott extend strip waste rock mining
by a further six years. and support additional infrastructure
A $108 million investment development. This will allow
in underground characterisation mining to continue into a
studies is ongoing, new area of the orebody between
with $55 million in 2026 and 2032.
development capital
approved to commence
underground mining.
--------------------------------- ------------- ---------------- --------------------------------------
Development of the $7.06bn(8) $1.6bn The project was originally
Oyu Tolgoi underground approved in May 2016 for
copper/gold mine in $5.3 billion, with an additional
Mongolia (Rio Tinto $1.45 billion approved by
66%), which is expected the Rio Tinto Board in December
to produce (from the 2020, following completion
open pit and underground) of the Definitive Estimate.
an average of 500,000 By the end of 2022, a total
tonnes(7) of copper of 19 drawbells had been
per year from 2028 fired. Progression accelerated
to 2036 and an average as a result of improvement
of 350,000 tonnes(7) initiatives implemented by
of copper per year the Oyu Tolgoi teams, bringing
for a further five projected first sustainable
years, compared with production from Panel 0 forward
130,000 tonnes in 2022 to the first quarter of 2023.
(open pit). This followed the comprehensive
agreement between the Oyu
Tolgoi partners announced
in January 2022.
--------------------------------- ------------- ---------------- --------------------------------------
Minerals
--------------------------------- ------------- ---------------- --------------------------------------
Development of the $0.5bn $0.4bn Approved in April 2019 to
Zulti South project underpin RBM's supply of
at Richards Bay Minerals zircon and ilmenite over
(RBM) in South Africa the life of the mine. The
(Rio Tinto 74%). project remains on full suspension.
--------------------------------- ------------- ---------------- --------------------------------------
Development of the $2.4bn $2.4bn The Board committed the funding
greenfield Jadar lithium-borates in July 2021, subject to
project in Serbia. receiving all relevant approvals,
The development will permits and licences. We
include an underground are focused on consultation
mine with associated with all stakeholders to
infrastructure and explore all options following
equipment, including the Government of Serbia's
electric haul trucks, cancellation of the Spatial
as well as a beneficiation Plan in January 2022.
chemical processing
plant.
--------------------------------- ------------- ---------------- --------------------------------------
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 has commenced
345 and 360 million tonnes per year. early works construction, other
Meeting this range, and the planned key projects to be delivered over
product mix, will require the approval the next five years include Hope
and delivery of the next tranche Downs 1 Sustaining (Hope Downs 2
of replacement mines. and Bedded Hilltop), West Angelas
Sustaining, Greater Nammuldi Sustaining
and Brockman 4 Sustaining (Brockman
Syncline 1). We continue to work
closely with local communities,
Traditional Owners and government
to progress approvals for the new
mining projects.
--------------------------------------------- --------------------------------------------
Iron Ore: Rhodes Ridge
--------------------------------------------- --------------------------------------------
In October, Rio Tinto (50%) and The participants have commenced
Wright Prospecting Pty Ltd (50%) an Order of Magnitude study, conducted
agreed to modernise the joint venture by Rio Tinto, which will consider
covering the Rhodes Ridge project the development of an operation
in the Eastern Pilbara, providing before the end of the decade with
a pathway for development utilising initial plant capacity of up to
Rio Tinto's rail, port and power 40 million tonnes annually, subject
infrastructure. Rhodes Ridge contains to the receipt of relevant approvals.
5.8 billion tonnes of high-grade We expect to complete the Rhodes
Mineral Resources at an average Ridge Order of Magnitude study in
grade of 62.3% Fe. The project's 2023.
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.(9) A resource-drilling
programme is currently underway
to support future project studies.
--------------------------------------------- --------------------------------------------
Iron Ore: Simandou
--------------------------------------------- --------------------------------------------
The Simandou iron ore project in Negotiations towards the co-development
Guinea(10) contains one of the world's of project infrastructure progressed
largest known undeveloped high-grade further with the December signing
low-impurity iron ore deposits, of a non-binding term sheet between
demand for which is increasing as our Simfer joint venture, Baowu,
steelmakers look to reduce carbon Winning Consortium Simandou (WCS)
emissions. Simandou is set to diversify and the Government of Guinea(11)
our strong iron ore portfolio, complementing . The term sheet further establishes
our high-grade Iron Ore Company the co-development principles following
of Canada products and supporting the incorporation of La Compagnie
the long-term attractiveness of du TransGuinéen on 27 July
our Pilbara Blend(TM) offering. 2022, and is a pivotal next step
towards securing the shareholder
agreement, cost estimates and regulatory
authority approvals necessary to
progress the co-development of rail
and port facilities.
--------------------------------------------- --------------------------------------------
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 small starter, operation to be expensed through
battery-grade lithium carbonate exploration and evaluation expenditure.
plant with a capacity of 3,000 tonnes Construction activities progressed
per year is underway. on phase one camp facilities with
rooms for 250 persons completed.
Airstrip permits were received and
contractors mobilised. First saleable
production from the small starter
plant is expected in the first half
of 2024.
--------------------------------------------- --------------------------------------------
Copper: Resolution
--------------------------------------------- --------------------------------------------
The Resolution Copper project is The US Forest Service continued
a proposed underground copper mine work to progress the Final Environmental
in the Copper Triangle, in Arizona, Impact Statement and complete actions
United States. It has the potential necessary for the land exchange.
to supply up to 25% of US copper We continued to advance partnership
demand. discussions with several federally
recognised Native American Tribes
who are part of the formal consultation
process.
--------------------------------------------- --------------------------------------------
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 our host Traditional Owners, the
Australia. In 2021, we reported Martu and Nyangumarta groups. Planned
our first Indicated Mineral Resource. drilling, fieldwork and study activities
The pathway is expected to take continued, strengthening the development
longer than originally anticipated pathway ahead of applications for
and remains subject to regulatory regulatory and other required approvals.
and other required 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.
--------------------------------------------- --------------------------------------------
Footnotes
1. This financial performance indicator is a non-IFRS (as
defined below) alternative performance measure (APM). It is used
internally by management to assess the performance of the business
and is therefore considered relevant to readers of this document.
It is presented here to give more clarity around the underlying
business performance of the Group's operations. APMs are reconciled
to directly comparable International Financial Reporting Standards
(IFRS) financial measures on pages 69 to 78 . Our financial results
are prepared in accordance with IFRS - see page 35 for further
information.
2. Total consideration of $3,139 million for the minority
interest in TRQ excludes transaction costs of $74 million. In 2022,
we paid $2,928 million to shareholders and $33 million of
transaction costs. In 2023, we expect to pay the remaining $41
million of transaction costs and approximately $211 million to
dissenting shareholders, depending on the outcome and timing of
dissent proceedings.
3. Rio Tinto share includes 100% of funding costs for Paraburdoo plant upgrades.
4. Pilbara unit cash costs exclude COVID-19 costs (2022: $0.4 per tonne. 2021: $0.5 per tonne).
5. Oyu Tolgoi production for 2022 remains on a 33.52% Rio Tinto
share basis. Subsequent to Rio Tinto's acquisition of Turquoise
Hill Resources which completed on 16 December, 2023 mined copper
guidance now includes Oyu Tolgoi on a 100% consolidated basis and
continues to reflect our 30% share of Escondida.
6. Iron Ore Company of Canada continues to be reported as Rio Tinto share.
7. The 500ktpa target (stated as recovered metal) for the Oyu
Tolgoi underground and open pit mines is underpinned 21% by Proved
Ore Reserves and 79% by Probable Ore Reserves for the years 2028 to
2036. The 350ktpa production target for the following five years is
underpinned 22% by Proved Ore Reserves and 78% by Probable Ore
Reserves. These production targets have been scheduled from current
mine designs by Competent Persons in accordance with the
requirements of the Australasian Code for Reporting of Exploration
Results, Minerals Resources and Ore Reserves, 2012 Edition (the
JORC code).
8. A cost and schedule reforecast was performed in June 2022 and
estimates that $7.06 billion is required to complete the Hugo North
1 project (an increase of $0.3 billion beyond the 2020 Definitive
Estimate). The 2022 Reforecast excludes impacts of COVID-19
restrictions arising after June 2022. The 2022 reforecast remains
subject to Oyu Tolgoi Board approval.
9. The Mineral Resource estimates for the Rhodes Ridge Joint
Venture (JV) were reported in our 2020 Annual Report released to
the Australian Securities Exchange (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.
10. 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%). This structure has been in place since 2017.
11. This followed notification to Rio Tinto and the Government
of Guinea of Baowu's earlier entry into a term sheet agreement with
WCS in respect of an investment into WCS mine (blocks 1 and 2) and
infrastructure vehicle - an agreement welcomed by Rio Tinto.
11.
Review of operations
Iron Ore
Year ended 31 December 2022 2021 Change
--------------------------------------------- --------------- --------------- -----------
Pilbara production (million tonnes - 100%) 324.1 319.7 1 %
--------------------------------------------- --------------- --------------- -----------
Pilbara shipments (million tonnes - 100%) 321.6 321.6 - %
--------------------------------------------- --------------- --------------- -----------
Salt production (million tonnes - Rio Tinto
share)(1) 5.8 5.8 (2) %
--------------------------------------------- --------------- --------------- -----------
Segmental revenue (US$ millions) 30,906 39,582 (22) %
--------------------------------------------- --------------- --------------- -----------
Average realised price (US$ per dry metric
tonne, FOB basis) 106.1 143.8 (26) %
--------------------------------------------- --------------- --------------- -----------
Underlying EBITDA (US$ millions) 18,612 27,592 (33) %
--------------------------------------------- --------------- --------------- -----------
Pilbara underlying FOB EBITDA margin(2) 68% 76%
--------------------------------------------- --------------- --------------- -----------
Underlying earnings (US$ millions) 11,182 17,323 (35) %
--------------------------------------------- --------------- --------------- -----------
Net cash generated from operating activities
(US$ millions) 14,005 19,177 (27) %
--------------------------------------------- --------------- --------------- -----------
Capital expenditure (US$ millions)(3) (2,940) (3,947) (26) %
--------------------------------------------- --------------- --------------- -----------
Free cash flow (US$ millions) 11,033 15,172 (27) %
--------------------------------------------- --------------- --------------- -----------
Underlying return on capital employed(4) 62% 100%
--------------------------------------------- --------------- --------------- -----------
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 reported within Copper.
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. 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 excluding net interest divided by average
capital employed.
Financial performance
We achieved a number of operational records across the mine and
rail system in the second half of 2022, due to operational
improvements and the ramp-up of Gudai-Darri. In the year, we safely
commissioned our Pilbara projects, despite challenging conditions
with COVID-19, labour and supply chain disruptions. The focus now
moves to the next tranche of mines starting with Western Range.
Underlying EBITDA of $18.6 billion was 33% lower than 2021, due
to lower prices ($8.8 billion), following the 25% drop in the
monthly average Platts index for 62% iron fines adjusted to an FOB
basis. Higher sales volumes were achieved from our portside
operations in China, which improved underlying EBITDA by $0.6
billion. We also increased resourcing to support the ramp-up at
Gudai-Darri and targeted investment in pit health and asset
maintenance across the Pilbara.
This additional investment, together with rising input prices,
including diesel price escalation and labour, resulted in 2022
Pilbara unit cash costs of $21.3 per tonne (excluding COVID-19
costs of $0.4 per tonne). This compared with $18.6 per tonne in
2021 (excluding COVID-19 costs of $0.5 per tonne).
Our Pilbara operations delivered an underlying FOB EBITDA margin
of 68%, compared with 76% in 2021, largely due to the change in the
iron ore price.
We price the majority of our iron ore sales (77%) by reference
to the average index price, for the month of shipment. In 2022, 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 72% of sales including freight
and 28% on an FOB basis.
We achieved an average iron ore price of $97.6 per wet metric
tonne on an FOB basis (2021: $132.3 per wet metric tonne) across
our product suite. This equates to $106.1 per dry metric tonne,
assuming 8% moisture (2021: $143.8 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 (2021:
$146.9 per dry metric tonne). The 3% lower realised price compared
to the Platts index was due to lower average grades, partially
offset by higher premiums for lump products.
Segmental revenue for our Pilbara operations included freight
revenue of $2.2 billion (2021: $2.7 billion).
Net cash generated from operating activities of $14.0 billion
was $5.2 billion lower than 2021, with lower pricing partly offset
by a monetisation of working capital. Free cash flow of $11.0
billion was $4.1 billion lower than 2021 due to the factors above,
partially offset by a $1.0 billion reduction in capital expenditure
to $2.9 billion following completion of brownfield mine replacement
tie-in projects.
Review of operations
Pilbara operations produced 324.1 million tonnes (Rio Tinto
share 272.9 million tonnes), 1% higher than 2021. Shipments of
321.6 million tonnes (Rio Tinto share 270.8 million tonnes), in
line with 2021, included 35.5 million tonnes of lower grade SP10
products, 11% of shipments, on a 100% basis (2021: 11% of
shipments).
Performance improvements continued across the system and we
achieved a number of operational records in the second half across
the mine and rail system. System inventories at the end of December
were healthy, including strong blasted stocks, mine stocks and port
stocks.
Our iron ore portside sales in China were 24.3 million tonnes in
2022 (14.0 million tonnes in 2021). At the end of the December,
inventory levels were 7.8 million tonnes, including 5.5 million
tonnes of Pilbara product. In 2022, approximately 80% of our
portside sales were either screened or blended in Chinese
ports.
Aluminium
Year ended 31 December 2022 2021 Change
------------------------------------------------------- -------------- -------------- -----------
Bauxite production ('000 tonnes - Rio Tinto
share) 54,618 54,326 1 %
------------------------------------------------------- -------------- -------------- -----------
Alumina production ('000 tonnes - Rio Tinto
share) 7,544 7,894 (4) %
------------------------------------------------------- -------------- -------------- -----------
Aluminium production ('000 tonnes - Rio Tinto
share) 3,009 3,151 (4) %
------------------------------------------------------- -------------- -------------- -----------
Segmental revenue (US$ millions) 14,109 12,695 11 %
------------------------------------------------------- -------------- -------------- -----------
Average realised aluminium price (US$ per tonne) 3,330 2,899 15 %
Underlying EBITDA (US$ millions) 3,672 4,382 (16) %
------------------------------------------------------- -------------- -------------- -----------
Underlying EBITDA margin (integrated operations) 29% 38%
------------------------------------------------------- -------------- -------------- -----------
Underlying earnings (US$ millions) 1,472 2,468 (40) %
------------------------------------------------------- -------------- -------------- -----------
Net cash generated from operating activities
(US$ millions) 3,055 3,606 (15) %
------------------------------------------------------- -------------- -------------- -----------
Capital expenditure - excluding EAUs (US$ millions)(1) (1,377) (1,300) 6 %
------------------------------------------------------- -------------- -------------- -----------
Free cash flow (US$ millions) 1,652 2,272 (27) %
------------------------------------------------------- -------------- -------------- -----------
Underlying return on capital employed(2) 10% 16%
------------------------------------------------------- -------------- -------------- -----------
1. 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).
2. Underlying return on capital employed (ROCE) is defined as
underlying earnings excluding net interest divided by average
capital employed.
Financial performance
Strong pricing in the first half fell away sharply in the
second, which, together with rising energy and raw materials costs,
led to a significant margin squeeze on our Aluminium business and a
16% decrease in underlying EBITDA for the year as a whole.
Underlying EBITDA margin fell nine percentage points, but remained
robust for the year at 29%.
Underlying EBITDA of $3.7 billion benefited from higher product
premiums for primary metal in addition to the stronger pricing
environment for primary metal and alumina in the first half.
However, this was offset by higher coal prices and costs for key
materials such as caustic soda, coke, pitch and anodes, leading to
an increase in cash costs for alumina and primary metal.
We achieved an average realised aluminium price of $3,330 per
tonne, 15% higher than 2021 ($2,899 per tonne).
Average realised aluminium prices comprise the LME price, a
market premium and a value-added product (VAP) premium. The cash
LME price averaged $2,703 per tonne, 9% higher than 2021, while in
our key US market, the Midwest premium duty paid, which is 57% of
our volumes (2021: 55%), increased by 12% to $655 per tonne (2021:
$584 per tonne). Our VAP sales were stable at 50% of the primary
metal we sold (2021: 50%) and generated product premiums averaging
$431 per tonne of VAP sold (2021: $230 per tonne).
Our conversion of underlying EBITDA to cash remained relatively
strong, with net cash generated from operating activities of $3.1
billion and free cash flow of $1.7 billion.
Review of operations
Bauxite production of 54.6 million tonnes was 1% higher than
2021, despite equipment reliability issues at Weipa and Gove in
Australia.
We shipped 38.0 million tonnes of bauxite to third parties in
2022, 1% higher than 2021. In 2022, segmental revenue for bauxite
increased 9% to $2.4 billion ; this includes freight revenue of
$635 million (2021: $462 million).
Alumina production of 7.5 million tonnes was 4% lower than 2021.
The refineries in the Pacific (Yarwun and Queensland Alumina
Limited) were impacted by a range of challenges in 2022, including
unplanned outages and equipment reliability issues. COVID-19
absenteeism impacted production in early 2022 but eased in the
second half. Production at the Vaudreuil refinery in Quebec
remained stable.
As the result of Queensland Alumina Limited's (QAL) activation
of a step-in process following sanction measures by the Australian
Government, we have taken on 100% of capacity for as long as the
step-in continues. We are using Rusal's 20% share of capacity under
the tolling arrangement with QAL. This additional output is
excluded from our production results as QAL remains 80% owned by
Rio Tinto and 20% owned by Rusal.
Aluminium production of 3.0 million tonnes was 4% lower than
2021, due to reduced output at our Kitimat smelter in British
Columbia, Canada and Boyne smelter in Queensland, Australia. The
rate of pot restarts at Kitimat picked up in the fourth quarter and
Boyne smelter cell recovery efforts continued on plan. Recovery at
both smelters is progressing, with full ramp-up expected to be
completed during the course of 2023. All of our other aluminium
smelters continued to demonstrate stable performance.
Copper
Year ended 31 December 2022 2021 Change
---------------------------------------------------- --------------- -------------- ------------
Mined copper production ('000 tonnes - Rio
Tinto share) 521.1 493.5 6 %
---------------------------------------------------- --------------- -------------- ------------
Refined copper production ('000 tonnes - Rio
Tinto share) 209.2 201.9 4 %
---------------------------------------------------- --------------- -------------- ------------
Segmental revenue (US$ millions) 6,699 7,827 (14) %
---------------------------------------------------- --------------- -------------- ------------
Average realised copper price (US cents per
pound)(1) 403 424 (5) %
---------------------------------------------------- --------------- -------------- ------------
Underlying EBITDA (US$ millions) 2,376 3,969 (40) %
---------------------------------------------------- --------------- -------------- ------------
Underlying EBITDA margin (product group operations) 49% 59%
---------------------------------------------------- --------------- -------------- ------------
Underlying earnings (US$ millions) 521 1,579 (67) %
---------------------------------------------------- --------------- -------------- ------------
Net cash generated from operating activities
(US$ millions)(2) 1,374 2,634 (48) %
---------------------------------------------------- --------------- -------------- ------------
Capital expenditure - excluding EAUs(3) (US$
millions) (1,622) (1,328) 22 %
---------------------------------------------------- --------------- -------------- ------------
(120)
Free cash flow (US$ millions) (265) 1,295 %
---------------------------------------------------- --------------- -------------- ------------
Underlying return on capital employed (product
group operations)(4) 6% 14%
---------------------------------------------------- --------------- -------------- ------------
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 $175 million (2021: $246
million benefit).
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
Underlying EBITDA was down 40% to $2.4 billion, with $0.7
billion of the reduction a result of lower copper prices,
particularly in the second half of the year. An anticipated
decrease in by-product sales volumes (particularly lower gold in
concentrate at Oyu Tolgoi), rising cash costs, higher energy prices
and an increase in exploration and evaluation expenditure also
impacted EBITDA in 2022. Underlying EBITDA margin remained strong
at 49%.
Our copper unit costs, at 163 cents per pound, increased by 81
cents, largely driven by the decline in by-product credits,
together with rising input and higher labour costs, following the
implementation of new labour laws in Mongolia and a new five-year
collective bargaining agreement at Kennecott.
We generated $1.4 billion in net cash from operating activities,
a 48% decrease on 2021, from the same drivers as underlying EBITDA,
together with a smaller increase in working capital compared to
2021.
Negative free cash flow of $0.3 billion reflected the
significant investment of $2.0 billion in our projects, an increase
of 26% on 2021. This mainly related to the ongoing development of
the Oyu Tolgoi underground project, underground growth projects at
Kennecott and the Simandou iron ore project in Guinea.
Review of operations
Mined copper production, at 521 thousand tonnes, was 6% higher
than 2021 due to higher grades at Kennecott and Escondida, partly
offset by lower grades and recoveries at Oyu Tolgoi as a result of
planned mine sequencing.
The 4% increase in refined copper production to 209 thousand
tonnes mainly reflected a furnace failure in 2021 at Kennecott
which resulted in the smelter being offline for the majority of the
fourth quarter of 2021. Unplanned maintenance was required in the
fourth quarter of 2022 in our anode furnaces, leading to extended
downtime and continued poor anode production.
Oyu Tolgoi underground project
A comprehensive agreement was reached with the Government of
Mongolia on 25 January 2022, resetting the relationship between the
partners, increasing the value the project delivers for Mongolia,
and allowing underground operations to commence.
In 2022, Rio Tinto and the Government of Mongolia remained
focused on supporting Oyu Tolgoi to reach the sustainable
production milestone, and continuing progress on the remaining
measures contained in Mongolian Parliamentary Resolution 103.
At the end of 2022, a total of 19 drawbells had been fired.
Drawbell progression accelerated as a result of improvement
initiatives implemented by the Oyu Tolgoi teams, bringing projected
first sustainable production from Panel 0 forward to the first
quarter of 2023 (previously first half of 2023).
At the end of December, shafts 3 and 4 sinking had reached 378
metres and 507 metres below ground level respectively. Operational
safety sinking pauses have caused some delays against the 2022
reforecast(1) to shaft sinking. Final depths required for shafts 3
and 4 are 1,148 and 1,149 metres below ground level respectively.
Construction of conveyor-to-surface works continued with civil
scope of works completed and other contractors mobilised to
site.
Study work for Panels 1 and 2, which are required to support the
ramp-up to 95,000 tonnes of ore per day, remains on track to be
completed in the first half of 2023. It will incorporate any
ventilation impacts due to the shaft 3 and 4 delays as a result of
COVID-19 restrictions and reprioritisation of the mobilised
workforce over the course of 2022.
On 16 December, we completed the acquisition of Turquoise Hill
Resources Ltd (TRQ) for consideration of approximately $3.1
billion(2) , simplifying ownership of the Oyu Tolgoi mine,
significantly strengthening our copper portfolio, and demonstrating
our long-term commitment to the project and Mongolia. We now hold a
66% direct interest with the remaining 34% owned by the Government
of Mongolia through Erdenes Oyu Tolgoi. This is allowing us to
focus fully on strengthening our relationship with the Government
of Mongolia and moving the project forward with a simpler and more
efficient ownership and governance structure.
1. A cost and schedule reforecast was performed in June 2022 and
estimates that $7.06 billion is required to complete the Hugo North
1 project (an increase of $0.3 billion beyond the 2020 Definitive
Estimate). The 2022 Reforecast excludes impacts of COVID-19
restrictions arising after June 2022. The 2022 reforecast remains
subject to Oyu Tolgoi Board approval.
2. Total consideration of $3,139 million for the minority
interest in TRQ excludes transaction costs of $74 million. In 2022,
we paid $2,928 million to shareholders and $33 million of
transaction costs. In 2023, we expect to pay the remaining $41
million of transaction costs and approximately $211 million to
dissenting shareholders, depending on the outcome and timing of
dissent proceedings .
Minerals
Year ended 31 December 2022 2021 Change
---------------------------------------------------- --------------- --------------- --------
Iron ore pellets and concentrates production(1)
(million tonnes - Rio Tinto share) 10.3 9.7 6 %
---------------------------------------------------- --------------- --------------- --------
Titanium dioxide slag production ('000 tonnes
- Rio Tinto share) 1,200 1,014 18 %
---------------------------------------------------- --------------- --------------- --------
Borates production ('000 tonnes - Rio Tinto
share) 532 488 9 %
---------------------------------------------------- --------------- --------------- --------
Diamonds production ('000 carats - Rio Tinto
share)(2) 4,651 3,847 21 %
---------------------------------------------------- --------------- --------------- --------
Segmental revenue (US$ millions) 6,754 6,481 4 %
---------------------------------------------------- --------------- --------------- --------
Underlying EBITDA (US$ millions) 2,419 2,603 (7) %
---------------------------------------------------- --------------- --------------- --------
Underlying EBITDA margin (product group operations) 40% 43%
---------------------------------------------------- --------------- --------------- --------
Underlying earnings (US$ millions) 849 888 (4) %
---------------------------------------------------- --------------- --------------- --------
Net cash generated from operating activities
(US$ millions) 1,522 1,433 6 %
---------------------------------------------------- --------------- --------------- --------
Capital expenditure (US$ millions)(3) (679) (644) 5 %
---------------------------------------------------- --------------- --------------- --------
Free cash flow (US$ millions) 814 762 7 %
---------------------------------------------------- --------------- --------------- --------
Underlying return on capital employed (product
group operations)(4) 22% 21%
---------------------------------------------------- --------------- --------------- --------
1. Iron Ore Company of Canada (IOC) continues to be reported within Minerals.
2. On 17 November 2021, Rio Tinto's interest in Diavik increased
from 60% to 100%. Production and financials reflect this from 1
November 2021.
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
In 2022, we benefited from strong market conditions for titanium
dioxide pigment and borates, partially offset by a weaker market
for iron ore pellets and concentrate, albeit off record levels. We
also saw higher diamond prices compared with 2021, following a
pandemic-related build up of demand and low inventory levels.
Underlying EBITDA of $2.4 billion was 7% lower than 2021,
primarily due to inflationary pressures, energy price increases and
Rincon evaluation costs. This was partially offset by prices and
higher EBITDA in relation to the increased ownership in Diavik.
Net cash generated from operating activities of $1.5 billion was
6% higher than 2021, while free cash flow of $0.8 billion was 7%
higher, reflecting a higher EBITDA cash conversion supported by
lower dividends paid to holders of non-controlling interests at
Iron Ore Company of Canada.
Review of operations
Production of iron ore pellets and concentrate at IOC was 6%
higher than 2021 due to the successful deployment of the Safe
Production System (SPS) at the concentrator, which was completed in
the year. Record performance metrics were achieved in the year,
including monthly records for concentrate production and total
material moved in the second quarter. Planning for SPS deployment
at the pellet plant commenced in December.
Titanium dioxide production of 1.2 million tonnes was 18% higher
than 2021 due to community disruptions at Richards Bay Minerals
(RBM) in South Africa in 2021, and continued improved performance
of operations at Rio Tinto Iron and Titanium Quebec Operations,
Canada. Nationwide loadshedding of electrical power caused
production constraints at RBM in late 2022.
Borates production was 9% higher than 2021, with strong
production rates, higher grades and improved equipment
reliability.
Our share of carats recovered was 21% higher than 2021, from our
increased share of production since taking 100% ownership of Diavik
in November 2021, partly offset by lower carats recovered due to
lower grades.
Price and exchange rate sensitivities
The following sensitivities give the estimated effect on
underlying EBITDA, assuming that each price or exchange rate moved
in isolation. The relationship between currencies and commodity
prices is a complex one; movements in exchange rates can affect
movements in commodity prices and vice versa. The exchange rate
sensitivities quoted here include the effect on operating costs of
movements in exchange rates, but do not include the effect of the
revaluation of foreign currency working capital. Please use them
with care.
US$ million
impact on
full-year 2022
underlying
Average published EBITDA
price/exchange of a 10% change
rate for in prices/exchange
2022 rates
------------------------------------------ --------------------------------- -----------------------------------
Aluminium - US$ per tonne 2,703 1,076
------------------------------------------ --------------------------------- -----------------------------------
Copper - US cents per pound 398 505
------------------------------------------ --------------------------------- -----------------------------------
Gold - US$ per troy ounce 1,800 68
------------------------------------------ --------------------------------- -----------------------------------
Iron ore realised price (FOB basis) - US$
per dry metric tonne 106.1 2,608
------------------------------------------ --------------------------------- -----------------------------------
Australian dollar against the US dollar 0.69 629
------------------------------------------ --------------------------------- -----------------------------------
Canadian dollar against the US dollar 0.77 339
------------------------------------------ --------------------------------- -----------------------------------
Oil (Brent) - US per barrel 100 220
------------------------------------------ --------------------------------- -----------------------------------
The impact of a $100 per tonne change in each of the input costs
below is expected to have the following impact on our Canadian(1)
aluminium smelting unit cash cost(2) of $1,678 per tonne in 2022
($1,373 per tonne in 2021):
US$/t
------------------------------ --------------------
Alumina (FOB) 191
------------------------------ --------------------
Green petroleum coke (FOB) 23
------------------------------ --------------------
Calcined petroleum coke (FOB) 36
------------------------------ --------------------
Coal tar pitch (FOB) 8
------------------------------ --------------------
1. Canadian smelters include all fully-owned smelters in Canada
(Alma, AP60, Arvida, Grande-Baie, Kitimat and Laterrière), as well
as our share of the Becancour and Alouette smelters.
2. The smelting unit cash cost refers to all costs which have
been incurred before casting, excluding depreciation but including
corporate allocations and with alumina at market price, to produce
one metric tonne of primary aluminium.
2.
Condensed consolidated financial statements for the
year ended 31 December 2022
Contents:
Condensed consolidated financial statements Page number
Group income statement 27
Group statement of comprehensive income 28
Group cash flow statement 29
Group balance sheet 31
Group statement of changes in equity 32
Selected explanatory notes to the condensed consolidated financial
statements
1 Status of financial information 35
Basis of preparation and changes in accounting
2 policies 35
3 Segmental information 45
4 Segmental information - additional information 49
5 Impairment charges net of reversal 50
6 Taxation 52
7 Acquisitions and disposals 53
8 Cash and cash equivalents 55
9 Provisions including post-retirement benefits 55
10 Financial instruments 57
11 Commitments and Contingencies 60
12 Purchase of Turquoise Hill Resources Ltd 63
13 Events after the balance sheet date 64
Additional voluntary disclosure for the shareholders
Rio Tinto financial information by business unit 65
Alternative performance measures 69
Metal prices and exchange rates 79
Group income statement
2022 2021
Year ended 31 December Note US$m US$m
Consolidated operations
Consolidated sales revenue 3,4 55,554 63,495
Net operating costs (excluding items disclosed
separately) (34,770) (32,690)
Impairment reversals/(charges net of reversals) 5 150 (269)
Loss on disposal of interest in subsidiary 5 (105) -
Exploration and evaluation expenditure (net
of profit relating to interests in undeveloped
projects) (896) (719)
------------------------------------------------ ---- ------------------- ---------------------
Operating profit 19,933 29,817
Share of profit after tax of equity accounted
units 777 1,042
Impairment of investments in equity accounted
units 5 (202) -
------------------------------------------------ ---- ------------------- ---------------------
Profit before finance items and taxation 20,508 30,859
Finance items
Net exchange gains on external and intragroup
net (debt)/cash balances 253 802
Net losses on derivatives not qualifying for
hedge accounting (424) (231)
Finance income 179 64
Finance costs (335) (243)
Amortisation of discount on provisions 9 (1,519) (418)
------------------------------------------------ ---- ------------------- ---------------------
(1,846) (26)
------------------------------------------------ ---- ------------------- ---------------------
Profit before taxation 18,662 30,833
Taxation 6 (5,586) (8,258)
Profit after tax for the year 13,076 22,575
- attributable to owners of Rio Tinto (net
earnings) 12,420 21,094
- attributable to non-controlling interests 656 1,481
------------------------------------------------ ---- ------------------- ---------------------
Basic earnings per share 766.8c 1,303.4c
Diluted earnings per share 762.1c 1,295.0c
------------------------------------------------ ---- ------------------- ---------------------
The notes on pages 35 to 64 are an integral part of these
condensed consolidated financial statements.
Group statement of comprehensive income
2022 2021
Year ended 31 December Note US$m US$m
-------------------------------------------------------- ----- ---------------------- ----------------------
Profit after tax for the year 13,076 22,575
Other comprehensive (loss)/income
Items that will not be reclassified to the
income statement:
Re-measurement gains on pension and post-retirement
healthcare plans 578 1,026
Changes in the fair value of equity investments
held at fair value through other comprehensive
income (FVOCI) - 5
Tax relating to these components of other comprehensive
income (123) (305)
Share of other comprehensive income of equity
accounted units, net of tax 5 12
460 738
Items that have been/may be subsequently reclassified
to the income statement:
Currency translation adjustment(a) (2,371) (1,843)
Currency translation on subsidiary disposed 105 -
of, transferred to the income statement
Fair value movements:
- Cash flow hedge losses (167) (211)
- Cash flow hedge losses transferred to the
income statement 106 14
Net change in costs of hedging reserve 4 (18)
Tax relating to these components of other comprehensive
loss 21 62
Share of other comprehensive losses of equity
accounted units, net of tax (27) (12)
--------------------------------------------------------------- ---------------------- ----------------------
(2,329) (2,008)
-------------------------------------------------------------- ---------------------- ----------------------
Total other comprehensive (loss)/income for
the year, net of tax (1,869) (1,270)
--------------------------------------------------------------- ---------------------- ----------------------
Total comprehensive income for the year 11,207 21,305
--------------------------------------------------------------- ---------------------- ----------------------
- attributable to owners of Rio Tinto 10,705 19,896
- attributable to non-controlling interests 502 1,409
--------------------------------------------------------------- ---------------------- ----------------------
(a) Excludes a currency translation charge of US$240 million
(2021: charge of US$211 million) arising on Rio Tinto Limited's
share capital for the year ended 31 December 2022, which is
recognised in the Group statement of changes in equity on page 32
.
(a)
Group cash flow statement
2022 2021
Year ended 31 December Note US$m US$m
------------------------------------------------------ ---- --------------------- --------------------
Cash flows from consolidated operations(a) 23,158 33,936
Dividends from equity accounted units 879 1,431
------------------------------------------------------ ---- --------------------- --------------------
Cash flows from operations 24,037 35,367
Net interest paid (573) (438)
Dividends paid to holders of non-controlling
interests in subsidiaries (421) (1,090)
Tax paid (6,909) (8,494)
------------------------------------------------------ ---- --------------------- --------------------
Net cash generated from operating activities 16,134 25,345
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (6,750) (7,384)
Sales of property, plant and equipment and
intangible assets - 61
Acquisitions of subsidiaries, joint ventures
and associates 7 (850) -
Disposals of subsidiaries, joint ventures,
unincorporated joint operations and associates 7 80 4
Purchases of financial assets (55) (45)
Sales of financial assets(b)(c) 892 114
Net (funding of)/receipts from equity accounted
units (75) 6
Other investing cash flows(d) 51 85
------------------------------------------------------ ---- --------------------- --------------------
Net cash used in investing activities (6,707) (7,159)
Cash flows before financing activities 9,427 18,186
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (11,727) (15,357)
Proceeds from additional borrowings(e) 321 1,488
Repayment of borrowings and associated derivatives(e) (790) (1,707)
Lease principal payments (374) (358)
Proceeds from issue of equity to non-controlling
interests 86 66
Purchase of non-controlling interest(f) 12 (2,961) -
Other financing cash flows (28) 6
------------------------------------------------------ ---- --------------------- --------------------
Net cash used in financing activities (15,473) (15,862)
Effects of exchange rates on cash and cash
equivalents 15 100
------------------------------------------------------ ---- --------------------- --------------------
Net (decrease)/increase in cash and cash equivalents (6,031) 2,424
------------------------------------------------------ ---- --------------------- --------------------
Opening cash and cash equivalents less overdrafts 12,805 10,381
------------------------------------------------------ ---- --------------------- --------------------
Closing cash and cash equivalents less overdrafts 8 6,774 12,805
------------------------------------------------------ ---- --------------------- --------------------
(a) Cash flows from consolidated operations
------------------------------------------------------ ---- --------------------- --------------------
Profit after tax for the year 13,076 22,575
Adjustments for:
- Taxation 6 5,586 8,258
- Finance items 1,846 26
- Share of profit after tax of equity accounted
units (777) (1,042)
- Loss on disposal of interest in subsidiary 5 105 -
- Impairment charges of investments in equity
accounted units after tax 5 202 -
- Impairment reversal/(charges net of reversals) 5 (150) 269
- Depreciation and amortisation 5,010 4,697
- Provisions (including exchange differences
on provisions) 9 1,006 1,903
- Pension settlement - (291)
Utilisation of other provisions 9 (176) (128)
Utilisation of provisions for close-down and
restoration 9 (609) (541)
Utilisation of provisions for post-retirement
benefits and other employment costs 9 (254) (231)
Change in inventories (1,185) (1,397)
Change in receivables and other assets(g) 20 (367)
Change in trade and other payables 700 685
Other items(h) (1,242) (480)
------------------------------------------------------ ---- --------------------- --------------------
23,158 33,936
------------------------------------------------------ ---- --------------------- --------------------
Group cash flow statement (continued)
(b) In 2022, we received net proceeds of US$352 million (2021:
US$107 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) Sale of financial assets includes US$525 million of cash
received from the sale of our gross production royalty from the
Cortez Complex in Nevada, USA, (the "Cortez royalty") comprising a
gold mine joint venture operated by Barrick Gold Corporation
("Barrick") and Newmont Corporation and the Fourmile project owned
and operated by Barrick.
(d) In 2022 other investing cash flows includes inflows relating
to payments from a trust fund controlled by the Government of
Australia to Energy Resources Australia ('ERA') for closure
activity that has been completed. At 31 December 2022 the total
amount held in the trust fund was US$329 million (31 December 2021:
US$388 million). In 2021 other investing cash flows included a net
settlement upon completion of a transaction increasing the Group's
60% share in the Diavik Diamond Mine to sole ownership.
(e) In 2021, we issued US$1.25 billion 30-years fixed rate
SEC-registered debt securities with a coupon of 2.75%. The funds
were received net of issuance fees and discount. We also completed
a US$1.2 billion (nominal value) bond buy-back programme. There
were no issuances in 2022.
(f) On 16 December 2022 we acquired the remaining 49% share of
Turquoise Hill Resources for expected consideration of US$3.2
billion inclusive of transaction fees. At 31 December 2022 US$2,961
million had been paid.
(g) In 2021, the Mongolian Tax Authority required payment by Oyu
Tolgoi of US$356 million in relation to disputed tax matters. Oyu
Tolgoi continues to dispute the matters and has classified amounts
subject to international arbitration as prepayments pending
resolution.
(h) Other items includes the deduction of the US$432 million
relating to the gain recognised on sale of the Cortez royalty shown
in "Sale of financial assets" and the recognition of realised
losses of US$459 million on currency forwards not designated as
hedges (2021: realised losses US$131 million). In 2021 other items
also included US$336 million relating to a gain on recognition of a
new wharf at Kitimat, Canada with no associated cash flow.
(h)
Group balance sheet
2022 2021
Note US$m US$m
-------------------------------------------- ---- --------------------- ------------------------
Non-current assets
Goodwill 826 879
Intangible assets 5 3,645 2,832
Property, plant and equipment 64,734 64,927
Investments in equity accounted units 3,298 3,504
Inventories 203 196
Deferred tax assets 2,766 3,375
Receivables and other assets 1,893 2,194
Tax recoverable - 29
Other financial assets 406 528
-------------------------------------------- ---- --------------------- ------------------------
77,771 78,464
Current assets
Inventories 6,213 5,436
Receivables and other assets 3,478 3,574
Tax recoverable 347 72
Other financial assets 2,160 2,543
Cash and cash equivalents 8 6,775 12,807
-------------------------------------------- ---- --------------------- ------------------------
18,973 24,432
Total assets 96,744 102,896
-------------------------------------------- ---- --------------------- ------------------------
Current liabilities
Borrowings (923) (812)
Leases (292) (324)
Other financial liabilities (69) (245)
Trade and other payables (8,047) (7,733)
Tax payable (223) (1,407)
Close-down and restoration provisions (1,142) (1,023)
Provisions for post-retirement benefits and
other employment costs (353) (383)
Other provisions (554) (700)
-------------------------------------------- ---- --------------------- ------------------------
(11,603) (12,627)
Non-current liabilities
Borrowings (10,148) (11,356)
Leases (908) (1,039)
Other financial liabilities (904) (393)
Trade and other payables (604) (798)
Tax payable (36) (660)
Deferred tax liabilities (3,601) (3,503)
Close-down and restoration provisions 9 (14,617) (13,519)
Provisions for post-retirement benefits and
other employment costs 9 (1,305) (2,109)
Other provisions 9 (744) (302)
-------------------------------------------- ---- --------------------- ------------------------
(32,867) (33,679)
Total liabilities (44,470) (46,306)
-------------------------------------------- ---- --------------------- ------------------------
Net assets 52,274 56,590
-------------------------------------------- ---- --------------------- ------------------------
Capital and reserves
Share capital(a)
- Rio Tinto plc 207 207
- Rio Tinto Limited 3,330 3,570
Share premium account 4,322 4,320
Other reserves 7,805 9,998
Retained earnings 34,511 33,337
-------------------------------------------- ---- --------------------- ------------------------
Equity attributable to owners of Rio Tinto 50,175 51,432
Attributable to non-controlling interests 12 2,099 5,158
-------------------------------------------- ---- --------------------- ------------------------
Total equity 52,274 56,590
-------------------------------------------- ---- --------------------- ------------------------
Group balance sheet (continued)
(a) At 31 December 2022, Rio Tinto plc had 1,249.7 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$28.20 (31 December 2021: US$29.47).
Group statement of changes in equity
Attributable to owners of Rio
Tinto
-------------------------------------------------------------------------------
Share
Share premium Other Retained Non-controlling Total
Year ended 31 capital account reserves earnings Total interests equity
December 2022 US$m US$m US$m US$m US$m US$m US$m
Opening balance 3,777 4,320 9,998 33,337 51,432 5,158 56,590
Change in
accounting
policy
(refer to note
2) - - - (17) (17) - (17)
---------------- ------------- ---------------- -------------- -------------- -------------- ------------------ --------------
Revised opening
balance 3,777 4,320 9,998 33,320 51,415 5,158 56,573
Total
comprehensive
income
for the year - - (2,165) 12,870 10,705 502 11,207
Currency
translation
arising
on Rio Tinto
Limited's share
capital (240) - - - (240) - (240)
Dividends(a) - - - (11,716) (11,716) (421) (12,137)
Own shares
purchased from
Rio Tinto
shareholders to
satisfy share
awards to
employees(b) - - (84) (16) (100) - (100)
Change in equity
interest
held by Rio
Tinto (refer
to note 12) - - - 701 701 (3,907) (3,206)
Treasury shares
reissued
and other
movements - 2 - - 2 - 2
Equity issued to
holders
of
non-controlling
interests
(note 12) - - - (711) (711) 797 86
Employee share
awards charged
to the income
statement - - 56 63 119 - 119
Transfers and
other movements - - - - - (30) (30)
Closing balance 3,537 4,322 7,805 34,511 50,175 2,099 52,274
Attributable to owners of Rio
Tinto
---------------- -------------------------------------------------------------------------------
Share
Share premium Other Retained Non-controlling Total
Year ended 31 capital account reserves earnings Total interests equity
December 2021 US$m US$m US$m US$m US$m US$m US$m
---------------- ------------- ---------------- -------------- -------------- -------------- ------------------ --------------
Opening balance 3,988 4,314 11,960 26,792 47,054 4,849 51,903
Total
comprehensive
income
for the year - - (1,916) 21,812 19,896 1,409 21,305
Currency
translation
arising
on Rio Tinto
Limited's share
capital (211) - - - (211) - (211)
Dividends(a) - - - (15,385) (15,385) (1,090) (16,475)
Own shares
purchased from
Rio Tinto
shareholders to
satisfy share
awards to
employees(b) - - (95) (18) (113) - (113)
Change in equity
interest
held by Rio
Tinto - - - 76 76 (76) -
Treasury shares
reissued
and other
movements - 6 - - 6 - 6
Equity issued to
holders
of
non-controlling
interests - - - - - 66 66
Employee share
awards charged
to the income
statement - - 49 60 109 - 109
Closing balance 3,777 4,320 9,998 33,337 51,432 5,158 56,590
---------------- ------------- ---------------- -------------- -------------- -------------- ------------------ --------------
Group statement of changes in equity (continued)
(a) Dividends per share announced or paid during the period are
summarised below:
2022 2021
For year ended 31 December US$m US$m
Dividends per share: Ordinary - paid during the
year 684.0c 685.0c
Dividends per share: Special - paid during the
year 62.0c 278.0c
Ordinary dividends per share: announced with the
results for the year 225.0c 417.0c
Special dividends per share: announced with the
results for the year - 62.0c
------------------------------------------------- ------ ------
(b) Net of contributions received from employees for share
awards.
Selected explanatory notes to the condensed consolidated
financial statements
1. Status of financial information
The full year financial information contained in this
announcement, which does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006, has been derived
from the statutory accounts for the year ended 31 December 2022.
These statutory accounts have been audited, were approved by the
Board on 22 February 2023, and will be filed with the Registrar of
Companies in the United Kingdom and the Australian Securities and
Investments Commission in due course. Statutory accounts for the
year ended 31 December 2021 have been filed with the Registrar of
Companies.
Unless stated otherwise, financial information for the years
ended 31 December 2022 and 31 December 2021 has been extracted from
the full financial statements for that year prepared under the
historical cost convention, as modified by the revaluation of
certain derivative contracts, the impact of fair value hedge
accounting on the hedged items and the accounting for
post-retirement assets and obligations.
The Auditors' reports on the full financial statements for the
years ended 31 December 2022 and 31 December 2021 were both
unqualified and, in relation to Rio Tinto plc, did not contain a
statement 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 United Kingdom
Companies Act 2006, and in relation to Rio Tinto Limited, contained
a statement that the financial report is in accordance with the
Corporations Act 2001 as amended by the ASIC Order dated 16 July
2021.
1. Basis of preparation and changes in accounting policies
The condensed consolidated financial statements included in this
report have been prepared on a going concern basis in accordance
with the Companies Act 2006 applicable to companies reporting under
International Financial Reporting Standards and in accordance with
applicable UK law, applicable Australian law as amended by the
Australian Securities and Investments Commission Order dated 16
July 2021, Article 4 of the European Union IAS regulation and also
with:
- International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB) and interpretations
issued from time to time by the IFRS Interpretations Committee
(IFRS IC) which are mandatory at 31 December 2022.
The above accounting standards and interpretations are
collectively referred to as "IFRS" in this report. While the
financial information included in this report has been prepared in
accordance with IFRS the report does not contain all the
information required to comply with IFRS. The Group will publish
full financial statements that comply with IFRS on 22 February
2023.
The Group has not early adopted any amendments, standards or
interpretations that have been issued but are not yet
mandatory.
The Group's financial statements have been prepared on the basis
of accounting policies consistent with those applied in the
financial statements for the year ended 31 December 2021, except
for the accounting requirements set out below, effective as at 1
January 2022, which did not have a significant impact on the
Group's financial statements.
2. Basis of preparation and changes in accounting policies
(continued)
Proceeds before Intended Use (Amendments to IAS 16 "Property,
Plant and Equipment")
We adopted Proceeds before Intended Use (Amendments to IAS 16
"Property, Plant and Equipment") at 1 January 2022. The amendment
prohibits the deduction, from the cost of major project
construction work in progress, of proceeds (net of additional
processing costs) from selling items before the related item of
property, plant and equipment is available for use. Under the
amendment, proceeds from selling items before the related item of
property, plant and equipment is available for use are recognised
within "Consolidated sales revenue" in the income statement along
with the costs of producing those items within "Net operating costs
(excluding items disclosed separately)". We apportion development
expenditure in the period to derive the cost associated with
pre-production revenue, based on the tonnes produced in the period
as a percentage of the total expected production (estimated total
ore reserve). During 2021 we completed a review of the impact of
these amendments and concluded that adjustments to retained
earnings as at 1 January 2020, and restatement of the 2020 and 2021
Group Income Statement and Balance Sheet upon adoption of the
amendments, were insignificant and as a result no restatements were
made to comparative periods. During the year ended 31 December 2022
we recognised in the income statement pre-production revenue of
US$511 million and related costs of US$30 million in relation to
Gudai Darri and Oyu Tolgoi.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37 "Provisions, Contingent Liabilities and Contingent
Assets")
We adopted Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37 "Provisions, Contingent Liabilities and
Contingent Assets") at 1 January 2022. The amendments specify that
the costs an entity includes in determining whether a contract is
onerous are made up of all directly related costs, including both
incremental amounts and an allocation of other directly related
expenditure. Previously, we made provision for onerous contracts
when the assets dedicated to the contract were fully impaired or
the contract became stranded as a result of a business decision.
From 2022, we record a provision if a contract is found to be
loss-making on a stand-alone basis following allocation of all
directly related costs as required by the amendments to IAS 37.
We have applied the amendments without revision to comparative
amounts. We have increased other provisions and reduced our
retained earnings as at 1 January 2022 by US$17 million .
New standards issued but not yet effective
We have not early adopted any new accounting standards or
amendments that have been issued but are not yet effective.
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes, mandatory in
2023 and endorsed by the UK)
The Group will adopt, from January 2023 (the transition date),
the narrow-scope amendments to IAS 12, which introduce an exclusion
to the initial recognition exemption application for transactions
that give rise to equal and offsetting taxable and deductible
temporary differences.
2. Basis of preparation and changes in accounting policies
(continued)
Our existing accounting policy states that "where the
recognition of an asset and liability from a single transaction
gives rise to equal and offsetting temporary differences, Rio Tinto
applies the initial recognition exemption allowed by IAS 12, and
consequently recognises neither a deferred tax asset nor a deferred
tax liability in respect of these temporary differences". Under the
amendments, deferred tax assets and liabilities are required to be
recognised in respect of such temporary differences from the
transition date, with restatement of comparatives for 2022 and
2021.
The most significant impact of implementing these amendments is
expected to be 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 will be recognised as at 1 January 2021, being
the beginning of the earliest comparative period presented in 2023
financial statements, with the cumulative effect recognised as an
adjustment to retained earnings or other components of equity at
that date. For other transactions the amendments apply only to
those taking place on or after 1 January 2021.
The impact of restatement as at 31 December 2022 is that the
Group will recognise additional gross deferred tax liabilities of
US$922 million and gross deferred tax assets of US$1.4 billion in
relation to close-down and restoration obligations and related
capitalised closure costs. The Group will also recognise 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.
After the required offsetting within the same tax jurisdiction,
these adjustments result in the Group recognising additional net
deferred tax assets of US$30 million and a reduction in net
deferred tax liabilities of US$437 million with the resulting
cumulative impact increasing retained earnings (inclusive of income
statement adjustments described below) by US$459 million. As at 1
January 2021 and 31 December 2021, the restatement of gross and net
deferred tax balances does not differ materially from the impact as
at 31 December 2022.
The impact of restatement on net earnings for the year ended
2022 is a net charge of US$28 million comprising a US$84 million
credit (2021:US$22 million) related to depreciation of closure and
right of use assets, and settlement of closure and lease
liabilities, offset by a US$112 million charge (2021: nil ) related
to the derecognition of deferred tax assets as a result of the
recently enacted Corporate Alternative Minimum Tax regime in the
USA (refer to Note 6).
There will be no impact on tax cash flows or amounts recognised
on the balance sheet as tax recoverable or payable as a result of
implementing these amendments.
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance
Contracts (mandatory in 2023 and endorsed by the UK)
The standard provides consistent principles for all aspects of
accounting for insurance contracts. We are finalising our
assessment and have not identified a material impact to date,
particularly in areas of judgment related to reinsurance contracts
with EAUs and in substance self-insurance arrangements.
2. Basis of preparation and changes in accounting policies
(continued)
Other amendments
The assessment is ongoing in relation to other amendments, but
no material impact has been identified to date. These are listed
below:
- Amendments to IAS 1 Presentation of Financial Statements:
disclosure of accounting policies (mandatory in 2023 and endorsed
by the UK);
- Amendments to IAS 8 Accounting policies, changes in accounting
estimates and errors: definition of accounting estimates (mandatory
in 2023 and endorsed by the UK)
- Amendments to IAS 1 Presentation of Financial Statements:
classification of liabilities (mandatory in 2024 and not yet
endorsed by the UK).
Going concern
Management has prepared detailed cash flow forecasts for the
next 12 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 full-year
financial information.
Impact of climate change on the Group
Strategy and approach to climate change
Over a year ago, we put the low-carbon transition at the heart
of our new strategy, setting a clear pathway to deliver long-term
value as well as ambitious targets to decarbonise our business. In
2022, our shareholders supported our Climate Action Plan in a
non-binding advisory vote on the Group's ambitions, emissions
targets and actions to achieve them.
Our Scope 1 and 2 emissions reduction targets of 15% by 2025,
50% by 2030 (both relative to our 2018 equity baseline) and the aim
to achieve net zero emissions by 2050 are aligned with 1.5degC -
the stretch goal of the Paris Agreement. We have set up six large
abatement programmes focused on renewables, Pacific aluminium
operations, ELYSIS(TM) technology, process heat, minerals
processing and diesel alternatives. To deliver our climate targets,
we expect to make capital investment of US$7.5 billion in
decarbonisation projects over the period to 2030, including around
US$1.5 billion in the next three years, mainly relating to the
repowering of the Pilbara. Progress towards our Scope 1 and 2
emissions targets is reflected within executive remuneration.
In 2022, we delivered the first 34MW of renewable power at
Gudai-Darri and announced our plan to invest US$600 million in
200MWh of solar power facilities and 200MWh of battery storage in
the Pilbara by 2026 . We agreed to test at least four
battery-powered locomotives, and pilot battery-powered trucks in
the Pilbara in 2024. By 2030, we aim to phase out the purchase of
diesel haulage trucks and locomotives across our operations. At the
Queensland Alumina refinery we are working to develop an energy
efficient digestion process at an estimated cost of US$240 million.
In 2022, we continued to work with the Queensland Government and
energy providers to design a renewable energy solution for Boyne
Smelter. Similarly, in 2022, Tomago Aluminium Company released an
expression of interest to work towards a green repowering solution
for the Tomago smelter.
2. Basis of preparation and changes in accounting policies
(continued)
In addition, we have signed a 130MW solar power purchase
agreement for Richards Bay Minerals (RBM) in South Africa.We also
intend to decarbonise our shipping fleet and aim to have net zero
vessels in our portfolio by 2030. To achieve this, in 2022 we
successfully completed a trial of fuel blend with biofuels and in
2023-2024 we plan to incorporate nine LNG dual-fuel chartered
vessels into our fleet. Decarbonisation projects are expected to
accelerate beyond 2025, which we expect to include further
decarbonisation of the Pilbara electricity system (estimated at
US$3 billion out of the US$7.5 billion total spend by 2030) and
other abatement projects.
We are also stepping up our focus on Scope 3 goals, which are
explicitly linked to executive remuneration. Over 90% of our Scope
3 emissions are from the downstream processing of iron ore, bauxite
and other products by our customers. We have not set an overall
quantitative Scope 3 emissions target, but instead engage with our
customers to optimise their current operations toward low-emitting,
higher efficiency processes; and foster partnerships with them,
which we believe are more effective ways to advance actions. The
shift toward green steel is underway and we are working on options
to beneficiate our Pilbara ores to be better suited to green steel
technologies and are exploring DRI pathways using sustainable
resources such as hydrogen and biomass.
We expect that our annual incremental operating expenditure on
building new teams and energy efficiency initiatives will be around
US$200 million , in addition to R&D investment.
Our ambition is to increase our growth capital expenditure to
around US$2 billion in 2023 and up to US$3 billion per year in 2024
-2025 to capture new growth opportunities with a focus on materials
that are expected to see strong demand growth from the low carbon
transition. This includes investment in future production of
lithium at Rincon, copper at Oyu Tolgoi and Winu and high-grade
iron ore from Simandou. Our budget for central greenfield
exploration remains at approximately US$250 million annually,
mainly focused on copper with a growing battery minerals
programme.
For internal capital allocation purposes for major projects, a
notional carbon price of US$75/t CO(2) e is used to incentivise
investment in low carbon abatement options. The US$75/t CO(2) e
price is derived from our analysis of the carbon mitigation options
across our assets that are needed to achieve our emissions targets.
This is unrelated to the different carbon prices we use in our core
scenarios which are based on our assessment of climate policy
ambition.
The impact of climate change and the execution of our climate
change strategy on our financial statements is discussed below:
Climate change scenarios
Our strategy and approach to climate change are informed by an
analysis of the interplay of global megatrends, explored through
the lens of plausible global scenarios. These set the context for
our industry and underpin our commodity price outlooks, portfolio
and capital allocation choices and how we operate as a business.
There are many plausible scenarios for global energy transition,
all with different impacts on future commodity price outcomes. As
part of our 2022 strategy process, we replaced our three scenarios
described in the 2021 Annual Report and now focus on two core
scenarios. These are used to generate a single central Reference
Case for use in commodity pricing forecasts, valuation models and
reserves and resources determination, as was the case in the prior
year.
2. Basis of preparation and changes in accounting policies
(continued)
These changes in scenarios represent an evolution of our
interpretation and estimations in the current year, not a change in
accounting policy, and as such we have not restated comparative
information. Our two core scenarios are:
- Competitive Leadership scenario, limiting global warming to
approximately 2degC by 2100, reflects a rapidly developing world of
high growth and strong climate action post-2030 with change driven
by policy and competitive innovation. As a result, we expect that
countries achieve their Glasgow Climate Pact commitments. Global
weighted average carbon prices are forecast to rise rapidly at an
average of 8% per year over the next three decades, reaching
US$42/tCO(2) e in 2030, and rising rapidly post-2030 to incentivise
significant mitigation in industrial sectors post-2030.
- Fragmented Leadership scenario, with global warming exceeding
2.5degC by 2100, is characterised by limited progress on policy
reform with volatile low growth. We expect that nations eventually
achieve their 2030 Nationally Determined Contributions as agreed in
Paris in 2015 but fail to progress towards long term carbon goals
agreed at the UN Climate Summit COP26 Glasgow. Global weighted
average carbon prices are forecast to rise slowly, at an average of
2.9% per year over the period to 2050, reaching US$42 in 2030; but
remain too low post-2030 to incentivise significant mitigation in
industrial sectors resulting in flat global emissions
post-2030.
At the UN Climate Summit in late 2022 (COP27), there was broad
recognition that the pace of decarbonisation across the global
economy is too slow to limit warming to 1.5degC and that current
climate policies in many countries are not yet aligned with their
stated ambitions. Consequently, neither of our two core scenarios
is consistent with the expectation of climate policies required to
accelerate the global transition to meet the stretch goal of the
Paris Agreement. Although our operational emissions reduction
targets align with the goals of the Paris Agreement, our two core
scenarios do not. Consequently, we also assess our sensitivity and
test the economic performance of our business against a scenario we
have developed to reflect our view of the global actions required
to meet the stretch goal of the Paris Agreement. We refer to this
Paris-aligned scenario as the Aspirational Leadership scenario.
Importantly none of our three scenarios are considered a
definitive representation for our assessment of the future impact
of climate change on the Group. Scenario modelling has inherent
limitations and by its nature allows a range of possible outcomes
to be considered where it is impossible to predict which outcome is
likely.
The Aspirational Leadership scenario reflects a world of high
growth, significant social change and accelerated climate action.
Global weighted average carbon prices rise rapidly - at an average
of 9.3% per year over the next three decades - reaching $59/tCO2e
in 2030 and incentivise rapid and deep reductions in industrial
emissions post-2030. Despite geopolitical differences, major
economies work together through multilateral frameworks and
proactively work towards limiting temperature change to 1.5degC by
2050. The Aspirational Leadership scenario is a commodity sales
price and carbon tax sensitivity, with all other inputs remaining
equal to our Reference Case; and is built by design to reach
net-zero emissions globally by 2050 and help us better understand
the pathways to meet the Paris Agreement goal, and what this could
mean for our business. It is used for strategy and risk
discussions, including analysis of sensitivity to our view of a
Paris-aligned pathway and comparison of relative economic
performance to our core scenarios.
2. Basis of preparation and changes in accounting policies
(continued)
We do not publish the commodity price forecasts associated with
these scenarios as to do so would weaken our position in commercial
negotiations and might give rise to concerns from other market
participants.
Impacts of climate change pricing scenarios on our portfolio,
low-carbon transition risks and opportunities
Through our strategy process we compare the economic performance
of our portfolio under our two core scenarios and the Aspirational
Leadership scenario and this indicates that overall the economic
performance of our portfolio would be stronger in scenarios with
proactive climate action, particularly in relation to aluminium,
copper and higher-grade iron ore.
We anticipate that all our commodities are needed in the
low-carbon transition, but estimate that the demand varies
significantly between our scenarios. We expect that copper demand
will rise from a 2020 base by 65-150% by 2050 across the three
scenarios to support a rapid rise in renewable generation while
lithium is expected to be a fundamental ingredient in electric
vehicle batteries and grid-firming energy storage solutions. Demand
for aluminium is expected to grow for use in energy-efficient
lightweight vehicles with demand for aluminium semi-fabricated
products more than doubling in the period 2021-50 in Aspirational
Leadership and Competitive Leadership scenarios, with moderate
demand growth in Fragmented Leadership. Our access to
self-generated hydro power is a source of competitive advantage for
our aluminium business in Canada.
We forecast that global iron ore demand will remain strong with
a premium on higher grade ore needed for the production of green
steel, such as that from our IOC products and the planned
investment in Simandou, which increases in our Aspirational
Leadership and Competitive Leadership scenarios. In our
Aspirational Leadership scenario, accelerated switching to green
steel and increasing scrap use reduces the relative value of
low-grade iron ore in the Pilbara.
We will need to carefully monitor and manage transition risks
linked to our operational Scope 1 and 2 emissions and value-chain
Scope 3 emissions. In particular, we expect the decarbonisation of
our assets to benefit from the implementation of new technologies.
The pace of technological development is uncertain, which could
delay or increase the cost of our decarbonisation efforts.
Our Aspirational Leadership scenario predicts the Group's
overall economic performance would fall between the Fragmented
Leadership and Competitive Leadership scenarios. This reflects
higher estimated economic performance for our copper and aluminium
businesses in the Aspirational Leadership scenario, based on their
higher price profiles, offset by higher expected carbon penalties
across our operating jurisdictions, and lower prices for lower
grade iron ore products. Refer below for our assessment of the
accounting implications of forecast commodity pricing in the
Aspirational Leadership scenario.
Physical risk
In 2022, we launched the Physical Resilience Programme across
the Group. During the year we commenced a physical risk and
resilience assessment across prioritised risk areas: the entire
Pilbara iron ore operation and the Saguenay aluminium operations
focused on Lac Saint-Jean. Our ongoing review processes, including
impairment assessments, have not identified any material accounting
impacts to date. For example, in 2022, no write-offs are necessary
in the Pilbara, where certain infrastructure assets, such as
transmission lines, that have reached the end of their natural
lives are being replaced with climate resilient infrastructure.
2. Basis of preparation and changes in accounting policies
(continued)
In addition, we do not foresee the renewal of our contractual
water rights in Canada that have been classified as
indefinite-lived intangible assets to be at risk from climate
change. Further, closure planning considers future climate change
projections at each step of the process to support safe and
appropriate final landform design. In 2023, we will progress a
Group-wide top-down assessment to further understand the risks and
opportunities associated with physical climate change and to
quantify any financial impacts, in addition to the site-specific
bottom-up assessments, which will continue in the foreseeable
future.
Accounting judgments and estimates
Global decarbonisation and the world's energy transition
continues to evolve, with the potential to materially impact our
future financial results as our significant accounting judgments
and key estimates are updated to reflect prevailing circumstances.
In response, carrying values of assets and liabilities could be
materially affected in future periods. Our current strategy and
approach to decarbonise our operations and achieve our scope 1 and
2 emissions targets is considered in our significant judgments and
key estimates reflected in these financial results.
Impacts from executing our climate change strategy - accounting
for capital expenditure and operating costs underpinning our
Climate Action Plan
Given the significant investment we are making to abate our
carbon emissions, we have considered the potential for asset
obsolescence, with a particular focus on our Pilbara operations
where we are prioritising investment in renewables to switch away
from natural gas power generation. No material changes to
accounting estimates to useful economic lives have been necessary
due to the anticipated use of these assets for firming support in
the transition. As the renewable projects progress, it is possible
that such adjustments may be identified in the future. The
renewable assets in the Pilbara are our own built and operated
arrangements and follow normal rules on capitalisation of directly
attributable costs. The solar power purchase agreement for RBM is
accounted for on an accrual basis as energy is produced.
There are no accounting impacts to date from the programme to
develop renewable energy solutions for our Queensland aluminium
assets as the work has not been completed and commercial terms have
not been agreed. Large scale renewable power off-take arrangements
may, in the future, require complex derivative measurement or lease
accounting depending on contractual terms.
No adjustments to useful lives of the existing fleet have been
identified to date as a result of planned fleet electrification in
the Pilbara and the purchase of battery-powered locomotives. The
solutions are still in development or pilot stages and the gradual
fleet replacement is intended to be part of the normal lifecycle
renewal of trucks. Depending on technological development, which is
highly uncertain, this could lead to accelerated depreciation in
the future. Similarly, our target to have net zero vessels in our
portfolio by 2030 has not given rise to accounting adjustments to
date, as the replacement is planned as part of the lifecycle
renewal. The energy efficiency digestion project at Queensland
Alumina refinery does not reduce the economic lives of the
underlying alumina assets but could lower operating costs and
improve margins. The expenditure on our own carbon abatement
projects and technology advancements follows existing accounting
policies on cost capitalisation, research and development
costs.
2. Basis of preparation and changes in accounting policies
(continued)
Use of sensitivities to Paris aligned accounting
The forecast commodity prices (including carbon prices) informed
by a blend of our two scenarios are used pervasively in our
financial processes from budgeting, forecasting, capital allocation
and project evaluation to the determination of ore reserves. In
turn, these prices are used to derive critical accounting estimates
included as inputs to impairment testing, estimation of remaining
economic life for units of production depreciation and discounting
closure and rehabilitation provisions. These prices represent our
best estimate of actual market outcomes based on the range of
future economic conditions regarding matters largely outside our
control, as required by IFRS. As neither of our core scenarios
represents the Group's view of the goals of the Paris Agreement,
our commodity price assumptions used in accounting estimates are
not consistent with the expectation of climate policies required to
accelerate the global transition to meet the goals of the Paris
Agreement. As described above, we use our Aspirational Leadership
scenario to understand the sensitivity of these estimates to Paris
aligned assumptions.
Under the Aspirational Leadership scenario, which is not used in
the preparation of these financial statements, nor for budgeting
purposes, the economic performance of copper and aluminium is
expected to be stronger under supply and demand forward pricing
curves which we believe will be consistent with the Paris
Agreement. It is possible therefore, under the right conditions,
that historical impairments associated with these assets could
reverse. We recognised an impairment of US$202 million during the
year for the Boyne smelter cash-generating unit, triggered by
economic and operating performance of the smelter. When measuring
the recoverable amount for this cash-generating unit we utilised
net present value of cash flows to the end of the existing joint
venture agreements in 2029, which also coincides with the Group's
targeted carbon emission reductions by 2030. The Group continues to
evaluate lower emission power solutions for the smelter that could
extend its life to at least 2040. In such circumstances, the net
present value of forecast future cash flows could support the
reversal of past impairments. Both the recorded outcome and the
sensitivity represent a reduction in emissions that we considered
to be Paris-aligned.
In the Aspirational Leadership scenario the prices for
lower-grade iron ore are supported in the medium term by an assumed
underlying increase in GDP-driven demand. However, in the longer
term we assume the pricing for lower grade iron ore to be weaker
than in our core scenarios. This will depend on the development of
low-emissions steel technology, the pace of which is uncertain, but
is expected to be offset by higher prices for higher-grade iron
ore. This is unlikely to give rise to impairment triggers for 2022
or in the foreseeable future due to the high returns on capital
employed in the Pilbara.
We completed the divestments of our coal businesses in 2018 and
no longer mine coal, but retained a contingent royalty from these
divestments. Recent favourable coal prices exceeded contractual
benchmark levels and resulted in the cash royalty receipt of US$36
million during 2022. We also carry royalty receivables of US$209
million on our balance sheet at 31 December 2022, measured at fair
value. The fair value of this balance may be adversely impacted in
the future by a faster pace of transition to a low carbon economy,
but this impact is not expected to be material.
2. Basis of preparation and changes in accounting policies
(continued)
Closure dates and cost of closure are also sensitive to climate
assumptions, but no material changes have been identified in the
year specific to climate change that would require a material
revision to the provisions in 2022. For those commodities with
higher forward price curves under the Aspirational Leadership
scenario, it may be economical to mine lower mineral grades, which
could result in the conversion of additional Mineral Resources to
Ore Reserves and therefore longer dated closure.
Overall, based on the Aspirational Leadership scenario pricing
outcomes, and with all other assumptions remaining consistent with
those applied to our 2022 financial statements, we do not currently
envisage a material adverse impact of the 1.5degC Paris-aligned
sensitivity on asset carrying values, remaining useful life, or
closure and rehabilitation provisions for the Group. It is possible
that other factors may arise in the future, which are not known
today, that may impact this assessment.
Alternative performance measures
The Group presents certain alternative performance measures
(APMs), including underlying earnings, which are reconciled to
directly comparable IFRS financial measures on pages 69 to 78 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$380 million at 31 December 2022
(2021: US$377 million).
Save for the exception described above, the Group's financial
statements prepared in accordance with IFRS are consistent with the
requirements of AAS.
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.
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
and other by-products; exploration activities together
with the Simandou iron ore project, which was the
responsibility of the Copper product group chief executive
during 2022.
================== ===================================================================
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.
================== ===================================================================
The Rio Tinto financial information by business unit provided on
pages 65 to Error! Bookmark not defined. provides additional
voluntary business unit disclosure which the Group considers useful
to the users of the financial statements.
3. Segmental information (continued)
2022 2021
---------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------
(Adjusted)
Year ended Year Segmental Underlying Capital Segmental Underlying Capital
ended 31 revenue(a) EBITDA(b) expenditure(c) revenue(a) EBITDA(b) expenditure(c)
December US$m US$m US$m US$m US$m US$m
================ ===================== ======================= ====================== ===================== ======================= =====================
Iron Ore 30,906 18,612 2,940 39,582 27,592 3,947
Aluminium 14,109 3,672 1,377 12,695 4,382 1,300
Copper 6,699 2,376 1,622 7,827 3,969 1,328
Minerals 6,754 2,419 679 6,481 2,603 644
================ ===================== ======================= ====================== ===================== ======================= =====================
Reportable
segments total 58,468 27,079 6,618 66,585 38,546 7,219
Other Operations 192 (16) 53 251 (28) (13)
Inter-segment
transactions (256) 24 (268) 42
Share of equity
accounted
units(d) (2,850) (3,073)
Central pension
costs,
share-based
payments,
insurance and
derivatives 377 110
Restructuring,
project and
one-off costs (173) (80)
Central costs (766) (613)
Central
exploration and
evaluation
expenditures (253) (257)
Proceeds from
disposal of
property, plant
and equipment - 61
Other items 79 117
================ ===================== ======================= ====================== ===================== ======================= =====================
Consolidated
sales
revenue/Capital
expenditure 55,554 6,750 63,495 7,384
---------------- --------------------- ----------------------- ---------------------- --------------------- ----------------------- ---------------------
Underlying
EBITDA 26,272 37,720
---------------- --------------------- ----------------------- ---------------------- --------------------- ----------------------- ---------------------
(a) 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.
(b) Underlying EBITDA (calculated on page 47 ) is reported to
provide greater understanding of the underlying business
performance of Rio Tinto's operations.
(c) 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. In 2022, we have
excluded capitalised expenditure relating to equity accounted units
and have adjusted prior year comparatives for this change in
definition.
(d) Consolidated sales revenue includes subsidiary sales of
US$50 million (2021: US$44 million; 2020: US$34 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$2,900 million (2021: US$3,117 million; 2020:
US$2,441 million) which are not included in consolidated sales
revenue.
(d)
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 year 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 2022 this category
included the gain recognised by Kitimat relating to LNG Canada's
project and the gain recognised upon sale of the Cortez royalty. In
2021 the category included the changes in closure estimates at
Energy Resources of Australia and Gove Refinery.
2022 2021
Year ended 31 December US$m US$m
Profit after tax for the year 13,076 22,575
Taxation 5,586 8,258
======================================================== ================== ================
Profit before taxation 18,662 30,833
Depreciation and amortisation in subsidiaries excluding
capitalised depreciation(a) 4,871 4,525
Depreciation and amortisation in equity accounted units 470 497
Finance items in subsidiaries 1,846 26
Taxation and finance items in equity accounted units 640 759
(Gains)/Losses on embedded commodity derivatives not
qualifying for hedge accounting (including foreign
exchange) (6) 51
Impairment charges net of reversals(b) 52 269
Gain recognised by Kitimat relating to LNG Canada's
project(c) (116) (336)
Change in closure estimates (non-operating and fully
impaired sites)(d) 180 1,096
Loss on disposal of interests in subsidiary(b) 105 -
Gain on sale of the Cortez Royalty(e) (432) -
Underlying EBITDA 26,272 37,720
-------------------------------------------------------- ------------------ ----------------
3. Segmental information (continued)
(a) Depreciation and amortisation in subsidiaries for the year
ended 31 December 2022 is net of capitalised depreciation of US$139
million (31 December 2021: US$172 million).
(b) Refer to note 5
(c) 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 has been excluded from underlying EBITDA consistent with prior
years as it is part of a series of transactions that together were
material. On 3 December 2021 we gained control over a new wharf at
Kitimat, Canada that was built and paid for by LNG Canada. The gain
on recognition was excluded from underlying EBITDA on the grounds
of individual magnitude and consistency with the associated
impairment charge in 2021, refer to Note 5.
(d) In 2022 the charge relates to re-estimates of underlying
closure cash flows for legacy sites where the environmental damage
preceded ownership by Rio Tinto. On 2 February 2022, Energy
Resources of Australia released preliminary findings from its
reforecast of the total undiscounted cost schedule for the Ranger
rehabilitation project. Information available from this study
resulted in the Group recording an increase to the closure
provision of US$510 million at 31 December 2021. Other increases to
closure estimates charged to the income statement in 2021 relate to
Diavik, Gove refinery, and a number of the Group's legacy sites
where the environmental damage preceded ownership by Rio Tinto. The
adjustments at Energy Resources Australia and Gove refinery were
recognised in the income statement as these are non-operating
sites, and excluded from underlying earnings due to the magnitude
of the individual updates and materiality when aggregated. In 2020
we recognised an increase in the Diavik closure provision based on
preliminary Pre-Feasibility Study findings. On completion of the
study in 2021 a true up was recorded in the income statement and
excluded from underlying EBITDA in line with the treatment of the
initial increase in 2020, which was excluded from underlying EBITDA
as Diavik was fully impaired during the year.
(e) On 2 August 2022, we completed the sale of a gross
production royalty which was retained following the disposal of the
Cortez Complex in 2008. The gain recognised on sale of the royalty
has been excluded from underlying EBITDA on the grounds of
individual magnitude.
4. Segmental information - additional information
Consolidated sales revenue by destination
Year ended 31 December
---------------------------------------------- --------------------------------------------------------------------------
2022 2021 2022 2021
% % US$m US$m
Consolidated sales revenue by destination(a) Adjusted Adjusted
---------------------------------------------- --------------- --------------- ------------------- -------------------
Greater China(b) 54.3 % 59.7 % 30,172 37,878
United States of America 15.9 % 12.6 % 8,823 8,012
Asia (excluding Greater China and
Japan) 7.1 % 6.9 % 3,937 4,415
Japan 7.4 % 7.9 % 4,091 5,012
Europe (excluding UK) 6.5 % 5.2 % 3,618 3,271
Canada 3.1 % 2.6 % 1,743 1,677
Australia 1.9 % 1.8 % 1,047 1,122
UK 0.3 % 0.4 % 182 243
Other countries 3.5 % 2.9 % 1,941 1,865
---------------------------------------------- --------------- --------------- ------------------- -------------------
100.0 100.0
Consolidated sales revenue % % 55,554 63,495
---------------------------------------------- --------------- --------------- ------------------- -------------------
(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';
previously Taiwan was included in Asia (excluding Greater China and
Japan). This change has resulted in a decrease in 2021 revenue
attributable to Asia (excluding Greater China and Japan) of: 2.5%
and US$1,570 million.
Consolidated sales revenue by product
Year ended 31 December Year ended 31 December
2022 2021
----------------------------------------------------------- -----------------------------------------------------
Revenue
from
contracts
Revenue
with Other Consolidated from contracts Other
sales Consolidated
customers revenue(a) revenue with customers revenue(a) sales revenue
2022 2022 2022 2021 2021 2021
Consolidated sales revenue
by product US$m US$m US$m US$m US$m US$m
---------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
Iron ore 33,068 (267) 32,801 42,992 (796) 42,196
Aluminium, alumina and
bauxite 13,955 (165) 13,790 12,336 103 12,439
Copper 3,276 (80) 3,196 3,229 96 3,325
Industrial minerals
(comprising
titanium dioxide slag,
borates and salt) 2,685 (16) 2,669 2,114 3 2,117
Gold 564 9 573 1,075 2 1,077
Diamonds 816 - 816 501 - 501
Other products(b) 1,710 (1) 1,709 1,837 3 1,840
---------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
Consolidated sales revenue 56,074 (520) 55,554 64,084 (589) 63,495
---------------------------- ----------------- ------------------ -------------------- --------------- --------------- -------------------
(a) Consolidated sales revenue includes both revenue from
contracts with customers, accounted for under IFRS 15 and
subsequent movements in provisionally priced receivables, accounted
for under IFRS 9, and included in 'other revenue' above.
(b) "Other products" includes metallic co-products, molybdenum,
silver and other commodities. Individually the revenue from each of
these products is less than 15% of the total Other products
category.
5. Impairment charges net of reversals
Pre-tax Non-controlling Net Pre-tax
amount Taxation interest amount amount
2022 2022 2022 2022 2021
US$m US$m US$m US$m US$m
------------------- ------------------- ------------------ ------------------ ------------------- -------------------
Other operations -
Roughrider 150 - - 150 -
Aluminium - Pacific
Aluminium (202) - - (202) -
Aluminium - Kitimat - - - - (269)
Total impairment
charges net
of reversals (52) - - (52) (269)
------------------- ------------------- ------------------ ------------------ ------------------- -------------------
Allocated as:
Intangible assets 150 -
Property, plant and
equipment - (269)
Investment in (202) -
equity accounted
units ("EAUs")
Total impairment
charges net
of reversals (52) (269)
------------------- ------------------- ------------------ ------------------ ------------------- -------------------
Comprising:
Impairment
reversal/(charges
net of reversals) 150 (269)
Impairment charges (202) -
related
to EAUs (pre-tax)
------------------- ------------------- ------------------ ------------------ ------------------- -------------------
Total impairment
charges net
of reversals in
the financial
information by
business unit
(page 65 ) (52) (269)
Taxation (including
related
to EAUs) - 72
Total impairment
charges net
of reversals in
the income
statement (52) (197)
------------------- ------------------- ------------------ ------------------ ------------------- -------------------
2022
Other operations - Roughrider, Canada
On 17 October 2022, we completed the sale of the Roughrider
uranium undeveloped project located in the Athabasca Basin in
Saskatchewan, Canada for US$150 million (US$80 million in cash and
US$70 million in shares of Uranium Energy Corp.). The project was
fully impaired during the year ended 31 December 2017 due to
significant uncertainty over whether commercially viable quantities
of mineral resources could be identified at a future date. The sale
therefore led to an impairment reversal in the current year. It
also led to a loss on disposal being recognised of US$105 million
arising from the recycling of the currency translation reserve to
the income statement.
5. Impairment charges net of reversals (continued)
Aluminium - Pacific Aluminium, Australia and New Zealand
The operating and economic performance of the Boyne Smelter in
Queensland, Australia was below our expectations in 2022. The plant
operated with reduced capacity and the economic performance
suffered due to the high cost of energy from the coal-fired
Gladstone Power Station. These conditions have been identified as
an impairment trigger. We have calculated a recoverable amount for
the cash-generating unit based on post-tax cash flows, expressed in
real terms and discounted using a post-tax rate of 6.6% over the
period to 2029. This date was chosen as it coincides with both the
remaining term of the Boyne Smelter joint venture agreements and
the Group's Paris-aligned commitment to reduce carbon emissions by
50% by 2030 relative to the 2018 baseline. Despite the recent
implementation of temporary energy price caps by the Australian
Government, this resulted in an impairment charge of US$202
million, representing a full impairment of the carrying value of
the Boyne Smelter investment in equity accounted unit. We are
committed to the repowering of our aluminium smelter in Queensland
with firmed renewable energy by 2030. For this reason, along with
the coal price cap noted above, we have separated the Gladstone
Power Station from the Boyne Smelter cash-generating unit. As a
sensitivity we have considered the impact of a potential repowering
of the smelter using commodity and energy price assumptions from
our Aspirational Leadership scenario, with all other assumptions
being unchanged. This would result in improved cash flows,
including an extension of operations at the Boyne Smelter beyond
current joint venture agreements through to 2040. The potential
value uplift under this sensitivity is not part of our base
valuation as it is dependent upon commercial agreements that are
not currently in place, but could support the reversal of past
impairments. Both the recorded outcome and the sensitivity, as
described in "Impact of climate change on the Group" section in
Note 2, are considered to be Paris-aligned.
2021
Aluminium - Kitimat, Canada
On 3 December 2021, we announced completion of the
newly-constructed wharf at Kitimat. Construction spend was incurred
by LNG Canada and therefore a gain of US$336 million representing
the estimated fair value of the cost of construction was recorded
and the carrying value of the Kitimat cash-generating unit (CGU)
increased accordingly. Output from the smelter was reduced to 25%
as a result of a workforce strike in mid-2021 and ramp-up to full
capacity was expected to extend through into 2022. As a previously
impaired CGU, and therefore carrying limited headroom, these
factors were identified as conditions that could indicate that the
uplifted carrying value may not be supportable and therefore the
CGU was tested for impairment.
Using the fair value less cost of disposal methodology and
discounting real-terms post-tax cash flows at 6.6%, we recognised a
post-tax impairment charge of US$197 million (pre-tax US$269
million) representing the difference between the recoverable amount
(US$3,126 million) and the carrying value (US$3,323 million).
6. Taxation
Prima facie tax reconciliation
2021
2022 US$m
Year ended 31 December US$m Adjusted(i)
-------------------------------------------------------- ------------------------ ------------------------
Profit before taxation(a) 18,662 30,833
Prima facie tax payable at UK rate of 19% (2021:
19%)(b) 3,546 5,858
Higher rate of taxation of 30% on Australian earnings
(2021: 30%) 1,550 2,598
Other tax rates applicable outside the UK and Australia (17) 103
Tax effect of profit from equity accounted units,
related impairments and expenses(a) (109) (198)
Impact of changes in tax rates (11) -
Resource depletion allowances (40) (52)
Recognition of previously unrecognised deferred
tax assets(c) (261) (212)
Write-down of previously recognised deferred tax
assets(d) 820 -
Utilisation of previously unrecognised deferred
tax assets(e) (37) (200)
Unrecognised current year operating losses(f) 212 107
Adjustments in respect of prior periods(g) (222) 40
Other items(h) 155 214
-------------------------------------------------------- ------------------------ ------------------------
Total taxation charge 5,586 8,258
-------------------------------------------------------- ------------------------ ------------------------
(a) 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.
(b) 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. 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 29% (31 December 2021: 29%).
(c) The recognition of previously unrecognised deferred tax
assets relates primarily to Oyu Tolgoi where ongoing progress
towards sustainable underground production in the current and
comparative periods reduces the risk of tax losses that expire if
not recovered against taxable profits within eight years. In the
comparative period to 31 December 2021 the recognition of
previously unrecognised deferred tax assets also included the
recognition of prior year deferred tax assets in our Australian
Aluminium business.
(d) The write-down of previously recognised deferred tax assets
relates to deferred tax assets of our US businesses. The enactment
of the US Inflation Reduction Act of 2022 in August included a new
Corporate Alternative Minimum Tax (CAMT) regime which applies a
minimum tax rate of 15% on accounting profits. As a result of the
new legislation, which does not give relief for some Federal
deferred tax assets, the deferred tax assets previously recognised
have been written down.
(e) In 2021, the utilisation of previously unrecognised deferred
tax assets arose due to higher than forecast profits in the year at
Oyu Tolgoi.
6. Taxation (continued)
(f) Unrecognised current year operating losses include tax
losses around the Group for which no tax benefit is currently
recognised due to uncertainty regarding whether suitable taxable
profits will be earned in future to obtain value for the tax
losses.
(g) In the year to 31 December 2022, adjustments in respect of
prior periods includes amounts related to the settlement of all tax
disputes with the Australian Tax Office for the years 2010 to
2021.
(h) Other items include non-deductible costs and withholding
taxes, and various adjustments to provisions for taxation, the most
significant of which relate to transfer pricing matters, including
issues previously under discussion with the Australian Tax
Office.
(i) The presentation of the prima facie tax reconciliation
comparatives has 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 (a) above.
Future tax developments
We continue to monitor 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 is expected to be enacted in 2023 with application
to the Group from 1 January 2024. We note the release in July by
the UK Government of draft legislation to implement a
"Multinational Top-up Tax" on a country-by-country basis in line
with Pillar Two.
We are in the process of evaluating the cash tax and accounting
implications of the Pillar Two global minimum tax rules under IAS
12. Recognition of any impact will only occur once legislation has
been substantively enacted.
7. Acquisitions and disposals
Acquisitions
2022
Following approval from Australia's Foreign Investment Review
Board (FIRB), 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. In
determining whether Rincon's set of activities is a business, we
have assessed whether it has inputs and substantive processes which
together significantly contribute to the ability to create outputs.
Based on this assessment, we have concluded that Rincon does not
meet the definition of a business as defined by IFRS 3 "Business
Combinations" and therefore no goodwill has been recorded. The
transaction has therefore been 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 has been allocated to property, plant & equipment
and other assets/liabilities. For the Group cash flow statement we
determined that, since Rincon constitutes a group of companies, it
is 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.
7. Acquisitions and disposals (continued)
On 31 August 2022 we made a US$25 million investment in McEwen
Copper Inc. through our copper leaching technology venture, Nuton.
We accounted for our holding in McEwen Copper Inc as an investment
in associate, given our representation on the board.
On 16 December 2022 we acquired the remaining 49% share of
Turquoise Hill Resources for expected consideration of US$3.2
billion, inclusive of transaction costs. This transaction was not
classified as a business combination as it related to the purchase
of non-controlling interests in an entity already consolidated as a
subsidiary. Accordingly the transaction did not result in the
remeasurement of assets or liabilities and has been accounted for
in the statement of equity as an adjustment to non-controlling
interests and retained earnings.
At 31 December 2022 consideration paid amounted to US$2,961
million (including US$33 million of transaction costs, with further
transaction costs of US$41 million expected to be paid in 2023).
Certain shareholders exercised their right to dissent to the
transaction. In accordance with the terms of the circular, those
dissenting shareholders have received initial consideration of
C$34.4 per share, with final consideration depending on the outcome
and timing of dissent proceedings. We have included within other
provisions (note 9) US$211 million for additional consideration to
be paid to the dissenting shareholders representing the difference
between their initial consideration and C$43 per share paid to all
other shareholders.
2021
On 18 November 2021, we announced that we had completed the
acquisition of the 40% share in the Diavik Diamond Mine in the
Northwest Territories of Canada held by Dominion Diamond Mines,
becoming the sole owner as a result. The transaction did not meet
the definition of a business combination and therefore the
incremental assets and liabilities were treated as an asset
purchase. Prior to purchase, we recognised our existing 60% share
of assets, revenues and expenses, with liabilities recognised
according to its contractual obligations, and a corresponding 40%
receivable or contingent asset representing the co-owner's share
where applicable. Receivables relating to the co-owner's share were
de-recognised and treated as part of the net purchase consideration
on completion.
Disposals
As summarised in note 5, we sold our Roughrider uranium
undeveloped project on 17 October 2022 for consideration of US$150
million (US$80 million in cash and US$70 million in shares of
Uranium Energy Corp). There were no other material disposals in
2022 or 2021.
8. Cash and cash equivalents
Closing cash and cash equivalents less overdrafts for the
purposes of the cash flow statement differs from cash and cash
equivalents on the Group balance sheet as per the following
reconciliation:
31 December 31 December
2022 2021
--------------------------------------------------
Closing cash and cash equivalents less overdrafts US$m US$m
-------------------------------------------------- ----------- -----------
Balance per Group balance sheet 6,775 12,807
Bank overdrafts repayable on demand (unsecured) (1) (2)
Balance per Group cash flow statement 6,774 12,805
-------------------------------------------------- ----------- -----------
9. Provisions including post-retirement benefits
Post-retirement
benefits
and other Close-down,
employee restoration Other Total Total
entitlements(a) and environmental(b) provisions 2022 2021
-----------------------------------------------
US$m US$m US$m US$m US$m
----------------------------------------------- ----------------------------- ----------------------------- ------------------- -------------- -----------
Opening Balance 2,492 14,542 1,002 18,036 17,665
Change in accounting policy(c) - - 17 17 -
=============================================== ============================= ============================= =================== ============== ===========
Revision to opening balance 2,492 14,542 1,019 18,053 17,665
Adjustment on currency translation (99) (699) (43) (841) (546)
Adjustments to mining properties/right
of use assets:
* increases to existing and new provisions - 520 4 524 521
Charged/(credited) to profit:
* increases to existing and new provisions 231 541 365 1,137 2,130
* unused amounts reversed (12) (72) (66) (150) (250)
* exchange losses on provisions - 17 - 17 23
* amortisation of discount(d) - 1,517 2 1,519 418
Utilised in the period (254) (609) (176) (1,039) (900)
Re-measurement gains recognised
in other comprehensive income (701) - - (701) (687)
Transfers and other movements(e) 1 2 193 196 (338)
----------------------------------------------- ----------------------------- ----------------------------- ------------------- -------------- -----------
Closing balance 1,658 15,759 1,298 18,715 18,036
----------------------------------------------- ----------------------------- ----------------------------- ------------------- -------------- -----------
Balance sheet analysis:
Current 353 1,142 554 2,049 2,106
Non-current 1,305 14,617 744 16,666 15,930
----------------------------------------------- ----------------------------- ----------------------------- ------------------- -------------- -----------
Total 1,658 15,759 1,298 18,715 18,036
----------------------------------------------- ----------------------------- ----------------------------- ------------------- -------------- -----------
(a) The provision for post-retirement benefits and other
employee entitlements includes a provision for long service leave
of US$271 million (31 December 2021: US$272 million), based on the
relevant entitlements in certain Group operations and includes
US$32 million (31 December 2021: US$60 million) of provision for
redundancy and severance payments.
9. Provisions including post-retirement benefits (continued)
(b) Close-down, restoration and environmental liabilities at 31
December 2022 have not been adjusted for closure-related
receivables amounting to US$351 million (31 December 2021: US$410
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) The way we calculate the cost of fulfilling a contract when
assessing whether it is onerous has changed with the adoption of
the amendments of IAS 37 (refer to note 2). This has led to an
increase in the opening provision by US$17 million .
(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 US$1,517 million (31 December 2021:
US$415 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 financial year 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.
(e) Transfers and other movements includes US$211 million
consideration to be paid to the dissenting shareholders of the
Turquoise Hill Resources transaction. It represents the difference
between their initial consideration of C$34.4 per share and C$43
per share paid to all other shareholders, with the final amount and
timing to be determined by dissent proceedings. As a transaction
with shareholders of a subsidiary in their capacity as owners, this
adjustment has been made through equity.
(e)
10. Financial Instruments
Valuation hierarchy of financial instruments carried at fair
value on a recurring basis
The table below shows the classifications of our financial
instruments by valuation method in accordance with IFRS 13 at 31
December 2022 and 31 December 2021.
All instruments shown as being held at fair value have been
classified as fair value through the profit and loss unless
specifically footnoted.
At 31 December 2022 At 31 December 2021
--------------------------------------------------------------------------------- -------------------------------------------------------------------------------
Held at fair value Held at fair value
----------------------------------------------- -----------------------------------------------
Held Held
at at
Level Level Level amortised Level Level Level amortised
Total 1(a) 2(b) 3(c) cost Total 1(a) 2(b) 3(c) costs
US$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) 6,775 2,725 - - 4,050 12,807 4,138 - - 8,669
Investments in
equity shares
and funds(e) 222 147 - 75 - 117 64 - 53 -
Other
investments,
including
loans(f) 2,275 2,018 - 229 28 2,682 2,422 - 238 22
Trade and other
financial
receivables(g) 2,765 18 1,306 - 1,441 2,762 1 1,163 - 1,598
Forward, option
and embedded
derivatives
contracts, not
designated
as hedges(h) 67 - 16 51 - 133 - 48 85 -
Derivatives
related to net
debt(i) 2 - 2 - - 139 - 139 - -
--------------- --------------- -------------- --------------- -------------- --------------- ------------- --------------- -------------- -------------- ---------------
Liabilities
Trade and other
financial
payables(j) (6,485) - (30) - (6,455) (6,356) - (67) - (6,289)
Forward, option
and embedded
derivatives
contracts,
designated
as hedges(h) (189) - - (189) - (125) - - (125) -
Forward, option
and embedded
derivatives
contracts, not
designated
as hedges(h) (92) - (57) (35) - (253) - (179) (74) -
Derivatives
related to net
debt(i) (692) - (692) - - (240) - (240) - -
--------------- --------------- -------------- --------------- -------------- --------------- ------------- --------------- -------------- -------------- ---------------
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 year to 31 December 2022 is below:
31 December 31 December
2022 2021
-------------------------------------------- ---------------------------------- --------------------------
Level 3 financial assets and liabilities US$m US$m
-------------------------------------------- ---------------------------------- --------------------------
Opening balance 177 395
Currency translation adjustments (4) (6)
Total realised gains/(losses) included
in:
* consolidated sales revenue 16 27
* net operating costs 365 (50)
Total unrealised gains included in:
* net operating costs 124 68
Total unrealised losses transferred into
other comprehensive income through cash
flow hedges (110) (212)
Additions to financial assets/(liabilities) 41 (21)
Disposals/maturity of financial instruments (478) (6)
Transfers - (18)
-------------------------------------------- ---------------------------------- --------------------------
Closing balance 131 177
-------------------------------------------- ---------------------------------- --------------------------
Net gains included in the income statement
for assets and liabilities held at year
end 103 20
-------------------------------------------- ---------------------------------- --------------------------
(d) Our "cash and cash equivalents" of US$6,775 million (31
December 2021:US$12,807 million), includes US$2,725 million (31
December 2021:US$4,138 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$153
million (31 December 2021: US$98 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 31 December 2022,
US$1,234 million (31 December 2021: US$1,114 million) of
provisionally priced receivables were recognised.
10. Financial Instruments (continued)
(h) Level 3 derivatives consist of derivatives embedded in
electricity purchase contracts linked to the LME, midwest premium
and billet premium with terms expiring between 2025 and 2036 (31
December 2021: 2025 and 2036).
(i) Net debt derivatives include interest rate swaps and cross-currency swaps.
(j) Trade and other financial payables comprise trade payables,
other financial payables, accruals and amounts due to equity
accounted units.
There were no material transfers between level 1 and level 2, or
between level 2 and level 3 in the period ended 31 December 2022 or
in the year ended 31 December 2021.
Valuation techniques and inputs
The techniques used to value our more significant fair value
assets/(liabilities) categorised under Level 2 and Level 3 are
summarised below:
Fair Value
Description US$m Valuation technique Significant Inputs
Level 2
Interest rate swaps (356) Discounted cash Applicable market
flows quoted swap yield
curves
Credit default spread
-------------------------------- --------------------- -------------------
Cross currency interest (334) Discounted cash Applicable market
rate swaps flows quoted swap yield
curves
Credit default spread
Market quoted FX
rate
-------------------------------- --------------------- -------------------
Provisionally priced receivables 1,234 Closely related Applicable forward
listed product quoted metal price
-------------------------------- --------------------- -------------------
Level 3
Derivatives embedded in (208) Option pricing LME forward aluminium
electricity contracts model price
Midwest premium
and billet premium
-------------------------------- --------------------- -------------------
Royalty receivables 209 Discounted cash Forward commodity
flows price
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$208 million at
31 December 2022 (31 December 2021: US$146 million).
10. Financial Instruments (continued)
Royalty receivables include amounts arising from our divested
coal businesses with a carrying value of US$209 million (31
December 2021: US$136 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$81 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$68 million increase (31
December 2021: US$63 million increase) in the carrying value. A 15%
decrease in the coal spot price would result in a US$18 million
decrease (31 December 2021: US$53 million decrease) in the carrying
value. We have used a 15% assumption to calculate our exposure as
it represents the annual coal price movement that we deem to be
reasonably probable (on an annual basis over the long run).
Fair values disclosure of financial instruments
The following table shows the carrying amounts and fair values
of our borrowings including those which are not carried at an
amount which approximates their fair value at 31 December 2022 and
31 December 2021. The fair values of our remaining financial
instruments approximate their carrying values because of their
short maturity, or because they carry floating rates of
interest.
31 December 31 December
2022 2021
---------------------------------- -------------------------- --------------------------
Carrying Fair Carrying Fair
value value value value
US$m US$m US$m US$m
---------------------------------- ------------ ------------ ------------ ------------
Borrowings (including overdrafts) 11,071 11,192 12,168 13,904
---------------------------------- ------------ ------------ ------------ ------------
Total borrowings with a carrying value of US$6.6 billion (31
December 2021: US$7.3 billion) relate to listed bonds with a fair
value of US$6.6 billion (31 December 2021: US$8.7 billion) and are
categorised as level 1 in the fair value hierarchy. Borrowings with
a carrying value of US$3.8 billion (31 December 2021: US$4.2
billion) relate to project finance drawn down by Oyu Tolgoi, with a
fair value of US$3.9 billion (31 December 2021: US$4.4 billion)
using a number of level 3 valuation inputs. 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.
11. Commitments and contingencies (continued)
Contingent liabilities, indemnities and other performance
guarantees were US$498 million at 31 December 2022 (31 December
2021: US$441 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:
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 has requested 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. No provision has been recognised for this
case.
========================== =======================================================
11. Commitments and contingencies (continued)
At 31 December 2022, the outcomes of the matters remain
uncertain, but they could ultimately expose the Group to material
financial cost. We believe these cases are unwarranted and will
defend the allegations vigorously. A dedicated Board committee
continues to monitor the progress of these matters, as
appropriate.
On 6 March 2022 we reached a settlement with ASIC regarding the
disclosure of the impairment of Rio Tinto Coal Mozambique (RTCM),
which was reflected in Rio Tinto's 2012 year-end accounts. This was
previously disclosed as a contingent liability at 31 December 2021.
As part of the court approved settlement, we paid a A$750,000
penalty for a single contravention of our continuous disclosure
obligations in the period 21 December 2012 to 17 January 2013,
immediately preceding the impairment announcement. As part of this
court approved settlement between ASIC and Rio Tinto, there were no
findings of fraud or any systemic or widespread failure by Rio
Tinto. The case against Tom Albanese and Guy Elliott brought by
ASIC has been wholly dismissed.
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 31 December 2022
Capital commitments, excluding the Group's share of joint
venture capital commitments, were US$3,354 million (31 December
2021: US$2,551 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. It does 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$1.0 billion (2021: US$1.1
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$15
million at 31 December 2022 (31 December 2021: US$11 million).
12. Purchase of Turquoise Hill Resources Ltd
On 16 December 2022, we purchased the remaining 49% share of
Turquoise Hill Resources Ltd. The Group now holds a 66% direct
interest in Oyu Tolgoi LLC (OT). Up until December 2022 the Group
had a 50.79% interest in Turquoise Hill Resources Ltd, which held a
66% interest in OT. The Group therefore had a 33.5% indirect
interest in OT.
Summarised below is the financial information of Oyu Tolgoi on a
100% basis. It represents the amounts shown in the subsidiaries'
financial statements prepared in accordance with IFRS under Group
accounting policies, including fair value adjustments, and before
intercompany eliminations.
Oyu Tolgoi Oyu Tolgoi
2022 2021
Income statement summary for the year ended 31 December US$m US$m
======================================================== ================= ================
Revenue 1,424 1,971
(Loss)/profit after tax (224) 465
- attributable to non-controlling interests (159) 285
- attributable to Rio Tinto (65) 180
Total comprehensive (loss)/income (224) 465
======================================================== ================= ================
2022 2021
Balance sheet summary as at 31 December US$m US$m
Non-current assets 13,662 12,199
Current assets 753 523
Current liabilities (4,253) (3,172)
Non-current liabilities (10,731) (9,874)
============================================ ============ =============
Net assets (569) (324)
- attributable to non-controlling interests (210) (89)
- attributable to Rio Tinto (359) (235)
============================================ ============ =============
Cash flow statement summary for the year ended 31 2022 2021
December US$m US$m
Cash flow from operations 406 851
Oyu Tolgoi: approval for commencement of underground
operations
On 25 January 2022, Rio Tinto, Turquoise Hill Resources Ltd
(Turquoise Hill) and the Government of Mongolia announced their
agreement, and unanimous approval by the Board of Oyu Tolgoi, to
commence the underground operations.
As part of a comprehensive project budget and funding package
undertaken between the parties in reaching this agreement,
Turquoise Hill agreed to waive in full, funding balances arising
from a carry account loan with Erdenes Oyu Tolgoi (Erdenes) of
US$2.4 billion. This comprised the amount of common share
investments in Oyu Tolgoi LLC funded by Turquoise Hill on behalf of
Erdenes to build the project to date, plus US$1.0 billion of
accrued interest. The waiver took effect on 25 January 2022. Rio
Tinto and Turquoise Hill also agreed a plan to deliver the funding
required until sustainable underground production is reached.
12. Purchase of Turquoise Hill Resources Ltd (continued)
Prior to the waiver agreement, the funding balances owing from
Erdenes to Turquoise Hill were expected to be repaid via a pledge
over Erdenes' share of future Oyu Tolgoi common share dividends.
For this reason, and because the arrangement was between Turquoise
Hill and Erdenes rather than with Oyu Tolgoi LLC itself, both the
principal and interest were treated as transactions with owners
acting in their capacity as owners. Consequently, at 31 December
2021, related amounts were recorded as a reduction in the share of
equity attributable to non-controlling interests, resulting in an
increase to the effective interest in Oyu Tolgoi attributable to
owners of Rio Tinto.
Funding balances owing from Erdenes to Turquoise Hill were not
classified as loan receivables in the Group Balance Sheet, and
there was no interest income shown in the Group Income Statement.
Accumulation of interest on the funding balances increased the
share of retained earnings attributable to Rio Tinto as it
accrued.
Waiving the funding balances owing from Erdenes to Turquoise
Hill increases Erdenes' economic share arising through entitlement
to cash flows from future dividends of Oyu Tolgoi. In the 2022
Group results, there is no Income Statement charge for loan
forgiveness or write-off as a result of the waiver, and net assets
and liabilities for Oyu Tolgoi included in the Group Balance sheet
remained unchanged as a result of this transaction. There was no
exchange of cash or other financial assets between parties and
there has been no change to the underlying free cash flows of the
Oyu Tolgoi operations and development project. The waiver did not
have an impact on the Group's assessment of impairment indicators
for either 2021 or 2022, since it related to the project
shareholders' funding arrangements rather than the economic
capability of the Cash Generating Unit itself. A reallocation of
the net asset value allocation between the owners of Oyu Tolgoi has
been recorded in the Group Statement of Changes in Equity for 2022
by reducing equity attributable to owners of Rio Tinto and
increasing equity attributable to non-controlling interests.
13. Events after the balance sheet date
On 16 February 2023, we re-financed the US$3.9 billion Oyu
Tolgoi project finance facility with a syndicate of international
financial institutions, export credit agencies and commercial
lenders. The lenders have agreed to a deferral of the principal
repayments by three years to June 2026 and to an extension of the
final maturity date by five years from 2030 to 2035. The terms and
conditions are broadly unchanged and lenders continue to benefit
from the Debt Service Undertaking from Turquoise Hill Resources
Limited and the Completion Support Undertaking from Rio Tinto
plc.
There were no other significant events after the balance sheet
date requiring disclosure.
Rio Tinto financial information by business unit
Segmental Underlying Depreciation Underlying
revenue(a) EBITDA(a) and amortisation earnings(a)
Rio
Tinto
interest 2022 2021 2022 2021 2022 2021 2022 2021
Year ended 31 December % US$m US$m US$m US$m US$m US$m US$m US$m
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Iron Ore
Pilbara (b) 29,313 39,111 18,474 27,837 2,011 2,003 11,075 17,544
Dampier Salt 68.4 352 298 56 39 19 20 19 10
Evaluation
projects/other (c) 2,711 2,147 33 (81) - - 53 (79)
Intra-segment (c) (1,470) (1,974) 49 (203) - - 35 (152)
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Total Iron Ore Segment 30,906 39,582 18,612 27,592 2,030 2,023 11,182 17,323
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Aluminium
Bauxite 2,396 2,203 618 619 361 328 83 174
Alumina 3,215 2,743 289 569 200 165 17 306
Primary Metal 7,561 6,706 2,426 2,592 704 694 1,266 1,454
Pacific Aluminium 3,102 2,947 497 693 135 103 248 426
Intra-segment and other (3,138) (2,718) 12 14 - (1) (8) 192
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Integrated operations 13,136 11,881 3,842 4,487 1,400 1,289 1,606 2,552
Other product group
items 973 814 25 26 - - 15 17
======================== ================== ========= ========= ========= ========= ---------- ---------- ========== =========
Product group operations 14,109 12,695 3,867 4,513 1,400 1,289 1,621 2,569
---------- ----------
Evaluation
projects/other - - (195) (131) - - (149) (101)
======================== ================== ========= ========= ========= ========= ---------- ---------- ========== =========
Total Aluminium Segment 14,109 12,695 3,672 4,382 1,400 1,289 1,472 2,468
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Copper
Kennecott 100.0 1,923 2,528 857 1,142 624 538 (9) 513
Escondida 30.0 2,628 2,935 1,641 2,013 330 348 798 1,003
Oyu Tolgoi and Turquoise
Hill (d) 1,424 1,971 449 1,213 194 213 130 325
Product group operations 5,975 7,434 2,947 4,368 1,148 1,099 919 1,841
Simandou iron ore
project (e) - - (189) (58) - - (145) (43)
Evaluation
projects/other 724 393 (382) (341) 5 4 (253) (219)
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Total Copper Segment 6,699 7,827 2,376 3,969 1,153 1,103 521 1,579
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Minerals
Iron Ore Company of
Canada 58.7 2,818 3,526 1,381 2,026 207 197 475 734
Rio Tinto Iron &
Titanium (f) 2,366 1,791 799 470 224 213 369 176
Rio Tinto Borates 100.0 742 592 155 89 54 51 80 32
Diamonds (g) 816 501 330 180 45 12 151 99
------------------------ ------------------ --------- --------- --------- --------- ---------- ---------- ---------- ---------
Product group operations 6,742 6,410 2,665 2,765 530 473 1,075 1,041
Evaluation
projects/other 12 71 (246) (162) 1 1 (226) (153)
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Total Minerals Segment 6,754 6,481 2,419 2,603 531 474 849 888
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Reportable segments
total 58,468 66,585 27,079 38,546 5,114 4,889 14,024 22,258
------------------------ ------------------ --------- --------- --------- --------- ---------- ---------- ---------- ---------
Other operations (h) 192 251 (16) (28) 272 199 (340) (84)
Inter-segment
transactions (256) (268) 24 42 26 19
Central pension costs,
share-based
payments, insurance and
derivatives 377 110 374 133
Restructuring, project
and
one-off costs (173) (80) (87) (51)
Central costs (766) (613) 94 106 (651) (585)
Central exploration and
evaluation (253) (257) (209) (215)
Net interest 138 (95)
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Underlying
EBITDA/earnings 26,272 37,720 13,275 21,380
Items excluded from
underlying
EBITDA/earnings 269 (811) (855) (286)
Reconciliation to Group
income
statement
Share of equity
accounted
unit sales and
intra-subsidiary/equity
accounted unit sales (2,850) (3,073)
Impairment charges net
of
reversals (52) (269)
Depreciation and
amortisation
in subsidiaries
excluding
capitalised
depreciation (4,871) (4,525)
Depreciation and
amortisation
in equity accounted
units (470) (497) (470) (497)
Taxation and finance
items
in equity accounted
units (640) (759)
Finance items (1,846) (26)
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Consolidated sales
revenue/profit
before
taxation/depreciation
and amortisation/net
earnings 55,554 63,495 18,662 30,833 5,010 4,697 12,420 21,094
======================== ================== ========= ========= ========= ========= ========== ========== ========== =========
Rio Tinto financial information by business unit (continued)
Capital expenditure(i)
for the year Operating assets(j)
ended 31 December as at
Rio
Tinto Adjusted 31 December 31 December
interest 2022 2021 2022 2021
% US$m US$m US$m US$m
=============== ================== =========================== =========================== ========================== ==========================
Iron Ore
Pilbara (b) 2,906 3,928 17,510 16,850
Dampier Salt 68.4 34 19 153 159
Evaluation
projects/other (c) - - 835 1,283
Intra-segment (c) - - (220) (255)
=============== ================== =========================== =========================== ========================== ==========================
Total Iron Ore
Segment 2,940 3,947 18,278 18,037
=============== ================== =========================== =========================== ========================== ==========================
Aluminium
Bauxite 161 155 2,395 2,542
Alumina 356 362 2,372 2,258
Primary Metal 752 690 9,343 9,734
Pacific
Aluminium 108 93 155 228
Intra-segment
and other - - 629 839
Total Aluminium
Segment 1,377 1,300 14,894 15,601
=============== ================== =========================== =========================== ========================== ==========================
Copper
Kennecott 100.0 563 411 2,006 2,404
Escondida 30.0 - - 2,792 2,515
Oyu Tolgoi and
Turquoise
Hill (d) 1,056 911 13,477 8,998
Product group
operations 1,619 1,322 18,275 13,917
Simandou iron
ore project (e) - - (22) 13
Evaluation
projects/other 3 6 165 210
=============== ================== =========================== =========================== ========================== ==========================
Total Copper
Segment 1,622 1,328 18,418 14,140
=============== ================== =========================== =========================== ========================== ==========================
Minerals
Iron Ore
Company of
Canada 58.7 366 377 1,146 1,077
Rio Tinto Iron
& Titanium (f) 217 184 3,348 3,369
Rio Tinto
Borates 100.0 34 43 496 487
Diamonds (g) 48 25 (106) (19)
--------------- ------------------ --------------------------- --------------------------- -------------------------- --------------------------
Product group
operations 665 629 4,884 4,914
Evaluation
projects/other 14 15 874 43
=============== ================== =========================== =========================== ========================== ==========================
Total Minerals
Segment 679 644 5,758 4,957
=============== ================== =========================== =========================== ========================== ==========================
Reportable
segments total 6,618 7,219 57,348 52,735
--------------- ------------------ --------------------------- --------------------------- -------------------------- --------------------------
Other
operations (h) 53 (13) (1,883) (1,533)
Inter-segment
transactions 12 (12)
Other items 79 117 (1,114) (1,334)
Total 6,750 7,323 54,363 49,856
--------------- ------------------ --------------------------- --------------------------- -------------------------- --------------------------
Add back:
Proceeds from
disposal of
property,
plant and
equipment - 61
--------------- ------------------ --------------------------- --------------------------- -------------------------- --------------------------
Total purchases
of property,
plant &
equipment and
intangibles as
per cash
flow statement 6,750 7,384
=============== ================== =========================== =========================== ========================== ==========================
Add: Net
(debt)/cash (4,188) 1,576
Equity
attributable
to
owners of Rio
Tinto 50,175 51,432
=============== ================== =========================== =========================== ========================== ==========================
Notes to financial information by business unit
Business units are classified according to the Group's
management structure.
(a) Segmental revenue, Underlying EBITDA and Capital expenditure
are defined and calculated in note 3 from pages 45 to 49 .
Underlying Earnings is defined and calculated within the
Alternative performance measures section on pages 69 to 78 .
(b) 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.
(c) 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".
(d) 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.
(e) 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.
(f) 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%).
(g) Includes our interests in Argyle (100%) residual operations
which relates to the sale of remaining inventory and Diavik. Until
18 November 2021 we recognised our 60% share of assets, revenue and
expenses relating to the Diavik joint venture. Liabilities were
recognised according to Diavik Diamond Mine Inc's contractual
obligations at 100%, with a corresponding 40% receivable or
contingent asset representing the co-owner's share where
applicable. Post acquisition, we now consolidate (100%) of the
Diavik Diamond Mine. From 1 June 2021, management responsibility
for rehabilitation of the Argyle site moved from Minerals to Rio
Tinto Closure (RTC), hence the Argyle closure is reported in Other
operations effective from 1 January 2021. Refer to (h).
(h) 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.
From 16 June 2022, Commercial Treasury and related central costs
are reported as part of 'Other operations' instead of 'Other items'
in previous periods. We have not restated prior year balances as
the impact was not significant. From 1 January 2021, Uranium moved
from Minerals to Other operations and Argyle closure has been
included in Other operations.
Notes to financial information by business unit (continued)
(i) 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.
(j) Operating assets of the Group represents equity attributable
to Rio Tinto adjusted for net (debt)/cash. 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)/cash 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).
(j)
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 tax, 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 47 .
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.
2022 2021
US$m US$m
----------------------------------------------------------------- --------- ---------
Underlying EBITDA 26,272 37,720
Consolidated sales revenue 55,554 63,495
Share of equity accounted unit sales and inter-subsidiary/equity
accounted unit sales eliminations 2,850 3,073
----------------------------------------------------------------- --------- ---------
58,404 66,568
----------------------------------------------------------------- --------- ---------
Underlying EBITDA margin 45 % 57 %
----------------------------------------------------------------- --------- ---------
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is
defined as Pilbara underlying EBITDA divided by Pilbara segmental
revenue, excluding freight revenue.
2022 2021
US$m US$m
--------------------------------------------- --------- ---------
Pilbara
Underlying EBITDA 18,474 27,837
--------------------------------------------- --------- ---------
Pilbara segmental revenue 29,313 39,111
Less: Freight revenue (2,206) (2,707)
--------------------------------------------- --------- ---------
Pilbara segmental revenue, excluding freight
revenue 27,107 36,404
--------------------------------------------- --------- ---------
Pilbara underlying FOB EBITDA margin 68 % 76 %
--------------------------------------------- --------- ---------
Underlying EBITDA margin from Aluminium integrated
operations
Underlying EBITDA margin from integrated operations is defined
as underlying EBITDA divided by segmental revenue.
2022 2021
US$m US$m
---------------------------------------------------- --------- ---------
Aluminium
Underlying EBITDA - integrated operations 3,842 4,487
---------------------------------------------------- --------- ---------
Segmental revenue - integrated operations 13,136 11,881
---------------------------------------------------- --------- ---------
Underlying EBITDA margin from integrated operations 29 % 38 %
---------------------------------------------------- --------- ---------
Alternative performance measures (continued)
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined
as underlying EBITDA divided by segmental revenue.
2022 2021
US$m US$m
---------------------------------------------------- --------- ---------
Copper
Underlying EBITDA - product group operations 2,947 4,368
---------------------------------------------------- --------- ---------
Segmental revenue - product group operations 5,975 7,434
---------------------------------------------------- --------- ---------
Underlying EBITDA margin - product group operations 49 % 59 %
---------------------------------------------------- --------- ---------
2022 2021
US$m US$m
---------------------------------------------------- --------- ---------
Minerals
Underlying EBITDA - product group operations 2,665 2,765
---------------------------------------------------- --------- ---------
Segmental revenue - product group operations 6,742 6,410
---------------------------------------------------- --------- ---------
Underlying EBITDA margin - product group operations 40 % 43 %
---------------------------------------------------- --------- ---------
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 year 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.
Alternative performance measures (continued)
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.
Exclusions from underlying earnings relating to equity accounted
units are stated after tax and included in the column
"Pre-tax".
Reconciliation of underlying earnings to net earnings
Non-controlling Net
Pre-tax Taxation interests amount Net amount
2022 2022 2022 2022 2021
US$m US$m US$m US$m US$m
--------------------------------- ============== =============== ================== ============== ==============
Underlying earnings 18,613 (4,684) (654) 13,275 21,380
================================= ============== =============== ================== ============== ==============
Items excluded from underlying
earnings
Impairment charges net of
reversals(a) (52) - - (52) (197)
Loss on disposal of interest in
subsidiary(b) (105) - - (105) -
Foreign exchange and derivative
(losses)/gains:
- Foreign exchange gains on
external
net debt, intragroup balances
and
derivatives(c) 244 (25) (3) 216 726
- Losses on currency and
interest
rate derivatives not qualifying
for hedge accounting(d) (435) 60 2 (373) (127)
- Gains/(losses) on embedded
commodity
derivatives not qualifying for
hedge
accounting(e) 29 (8) (1) 20 (53)
Gain recognised by Kitimat
relating
to LNG Canada's project(f) 116 (10) - 106 336
Change in closure estimates
(non-operating
and fully impaired sites)(g) (180) 2 - (178) (971)
Gain on sale of the Cortez
Royalty(h) 432 (101) - 331 -
Write-off of Federal deferred tax
assets in the United States(i) - (820) - (820) -
Total excluded from underlying
earnings 49 (902) (2) (855) (286)
================================= ============== =============== ================== ============== ==============
Net earnings 18,662 (5,586) (656) 12,420 21,094
================================= ============== =============== ================== ============== ==============
(a) Refer to Note 5
(b) Relates to the recycling of currency translation reserve on
sale of the Roughrider deposit, 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$262
million offset by post-tax gains of US$478 million on intragroup
balances, primarily as a result of the Australian dollar weakening
against the US dollar. In 2021, exchange gains on external net debt
and intragroup balances included post-tax foreign exchange gains on
intragroup balances of US$913 million partially offset by post-tax
losses of US$187 million on external net debt/cash, primarily as a
result of a weakening Australian dollar against the US dollar
during the year.
Alternative performance measures (continued)
(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.
(f) 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 resulted
gain has been excluded from underlying earnings consistent with
prior years as it is part of a series of transactions that together
were material. On 3 December 2021 we gained control over a new
wharf at Kitimat, Canada that was built and paid for by LNG Canada.
The gain on recognition was excluded from underlying earnings on
the grounds of individual magnitude and consistency with the
associated impairment charge, refer to note 5.
(g) In 2022 the charge relates to inflationary increases to the
closure provision for non-operating and fully impaired sites in
excess of the unwind of the discount. On 2 February 2022, Energy
Resources of Australia released preliminary findings from its
reforecast of the total undiscounted cost schedule for the Ranger
rehabilitation project. Information available from this study
resulted in the Group recording an increase to the closure
provision of US$510 million at 31 December 2021. Other increases to
closure estimates charged to the income statement in 2021 related
to Diavik, Gove refinery, and a number of the Group's legacy sites
where the environmental damage preceded ownership by Rio Tinto. The
adjustments at Energy Resources Australia and Gove refinery were
recognised in the income statement as these are non-operating
sites, and excluded from underlying earnings due to the magnitude
of the individual updates and materiality when aggregated.
(h) On 2 August 2022, we completed the sale of a gross
production royalty which was retained following the disposal of the
Cortez Complex in 2008. The gain recognised on sale of the royalty
has been excluded from underlying earnings on the grounds of
individual magnitude.
(i) In 2022 we wrote off US$0.8 billion of our deferred tax
assets in the United States following the introduction of the
Corporate Alternative Minimum Tax legislation, refer to Note 6.
(i)
Alternative performance measures (continued)
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying
earnings divided by the weighted average number of shares
outstanding during the year.
Year ended 31 December 2022 2021
--------------------------------------------- ------- -------
Net earnings (US$ million) 12,420 21,094
Weighted average number of shares (millions) 1,619.8 1,618.4
--------------------------------------------- ------- -------
Basic earnings per ordinary share (cents) 766.8 1,303.4
Items excluded from underlying earnings per
share (cents)(a) 52.8 17.7
--------------------------------------------- ------- -------
Basic underlying earnings per ordinary share
(cents) 819.6 1,321.1
--------------------------------------------- ------- -------
(a) Calculation of items excluded from underlying
earnings per share 2022 2021
Income excluded from underlying earnings (refer
to page 72 ) 855 286
Weighted average number of shares (millions) 1,619.8 1,618.4
-------------------------------------------------- ------- -------
Items excluded from underlying earnings per
share (cents) 52.8 17.7
-------------------------------------------------- ------- -------
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.
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.
2022 2021
Year ended 31 December US$m US$m
------------------------------------------------- ----------------------------- -----------------------------
Profit before taxation 18,662 30,833
Add back
Finance income (179) (64)
Finance costs 335 243
Share of profit after tax of equity accounted
units (777) (1,042)
Items excluded from underlying earnings (49) 508
Add: Dividends from equity accounted units 879 1,431
------------------------------------------------- ----------------------------- -----------------------------
Calculated earnings 18,871 31,909
Finance income 179 64
Finance costs (335) (243)
Add: Amounts capitalised (416) (358)
------------------------------------------------- ----------------------------- -----------------------------
Total finance income/costs before capitalisation (572) (537)
Interest cover 33 59
------------------------------------------------- ----------------------------- -----------------------------
Alternative performance measures (continued)
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.
2022 2021
For year ended 31 December (cents) (cents)
----------------------------------------------- ---------- ---------
Interim dividend declared per share 267.0 376.0
Interim special dividend declared per share - 185.0
Final dividend declared per share 225.0 417.0
Final special dividend declared per share - 62.0
----------------------------------------------- ---------- ---------
Total dividend declared per share for the year 492.0 1,040.0
Underlying earnings per share 819.6 1,321.1
----------------------------------------------- ---------- ---------
Payout ratio 60 % 79 %
=============================================== ========== ---------
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 the Group's
economic investment in capital projects. It has been newly
introduced during the year 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 the
Group's approach to capital allocation.
Alternative performance measures (continued)
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. 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 years the Capital expenditure APM and
Rio Tinto share of capital investment are identical. However, the
capital guidance on page 6 has been provided on this new basis and
a reconciliation of the measure will be published in future periods
when the two measures differ.
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.
2022 2021
Year ended 31 December US$m US$m
------------------------------------------------ ------- -------
Net cash generated from operating activities 16,134 25,345
Less: Purchase of property, plant and equipment
and intangible assets (6,750) (7,384)
Less: Lease principal payments (374) (358)
Add: Sales of property, plant and equipment
and intangible assets - 61
------------------------------------------------ ------- -------
Free cash flow 9,010 17,664
------------------------------------------------ ------- -------
Alternative performance measures (continued)
APMs derived from the balance sheet
Consolidated net (debt)/cash
Net (debt)/cash is total borrowings plus lease liabilities less
cash and cash equivalents and other liquid investments, adjusted
for derivatives related to net (debt)/cash.
Net (debt)/cash measures how we are managing our balance sheet
and capital structure.
Financing liabilities Other assets
------------- ------------------------------------------------------------------- ------------------------------------------------
Cash and
Borrowings Net debt cash equivalents
excluding Lease related including
Year ended 31 overdrafts(a) liabilities(b) derivatives(c) overdrafts(a) Other investments(d) Net (debt)/cash
December US$m US$m US$m US$m US$m US$m
------------- -------------------- --------------------- ---------------------- ---------------------- ------------------------ -----------------
Analysis of
changes
in
consolidated
net
(debt)/cash
Opening
balance (12,166) (1,363) (101) 12,805 2,401 1,576
Foreign
exchange
adjustment 118 69 (92) 15 - 110
Cash
movements
excluding
exchange
movements 470 374 (3) (6,046) (352) (5,557)
Other
non-cash
movements 508 (280) (494) - (51) (317)
------------- -------------------- --------------------- ---------------------- ---------------------- ------------------------ -----------------
Closing
balance (11,070) (1,200) (690) 6,774 1,998 (4,188)
------------- -------------------- --------------------- ---------------------- ---------------------- ------------------------ -----------------
(a) Borrowings excluding overdrafts, of US$11,070 million
(2021:US$12,166 million) differs from Borrowings on the balance
sheet as it excludes bank overdrafts of US$1 million (2021: US$2
million) which has been included in cash and cash equivalents for
the net (debt)/cash reconciliation.
(b) Other non-cash movements in lease liabilities include the
net impact of additions, modifications and terminations during the
year.
(c) Included within "Net (debt)/cash-related derivatives" are
interest rate and cross currency interest rate swaps that are in
hedge relationships with the Group's debt.
(d) Other investments includes US$1,998 million (2021: US$2,401
million) of highly liquid financial assets held in managed
investment funds classified as held for trading.
Alternative performance measures (continued)
Net gearing ratio
Net gearing ratio is defined as net (debt)/cash divided by the
sum of net (debt)/cash and total equity at the end of each year. It
demonstrates the degree to which the Group's operations are funded
by debt versus equity.
31 December 31 December
2022 2021
US$m US$m
---------------------------------- ----------- -------------------
Net (debt)/cash (4,188) 1,576
---------------------------------- ----------- -------------------
Net (debt)/cash (4,188) 1,576
Total equity (52,274) (56,590)
---------------------------------- ----------- -------------------
Net (debt)/cash plus total equity (56,462) (55,014)
---------------------------------- ----------- -------------------
Net gearing ratio 7% (3%)
---------------------------------- ----------- -------------------
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as
underlying earnings excluding net interest divided by average
capital employed (operating assets).
Underlying ROCE measures how efficiently we generate profits
from investment in our portfolio of assets.
2022 2021
US$m US$m
----------------------------------------------- -------- --------
Profit after tax attributable to owners of Rio
Tinto (net earnings) 12,420 21,094
Items added back to derive underlying earnings
(refer to page 72 ) 855 286
----------------------------------------------- -------- --------
Underlying earnings 13,275 21,380
Add/(deduct):
Finance income per the income statement (179) (64)
Finance costs per the income statement 335 243
Tax on finance cost (238) (52)
Non-controlling interest share of net finance
costs (98) (64)
Net interest cost in equity accounted units
(Rio Tinto share) 42 32
----------------------------------------------- -------- --------
Net interest (138) 95
----------------------------------------------- -------- --------
Adjusted underlying earnings 13,137 21,475
Equity attributable to owners of Rio Tinto -
beginning of the year 51,432 47,054
Net (cash)/debt - beginning of the year (1,576) 664
----------------------------------------------- -------- --------
Operating assets - beginning of the year 49,856 47,718
----------------------------------------------- -------- --------
Equity attributable to owners of Rio Tinto -
end of the year 50,175 51,432
Net debt/(cash) - end of the year 4,188 (1,576)
----------------------------------------------- -------- --------
Operating assets - end of the year 54,363 49,856
----------------------------------------------- -------- --------
Average operating assets 52,110 48,787
----------------------------------------------- -------- --------
Underlying return on capital employed 25 % 44 %
----------------------------------------------- -------- --------
Metal prices and exchange rates
Increase/
2022 2021 (Decrease)
Metal prices - average for the
period
Copper - US cents/lb 398 422 (6) %
Aluminium - US$/tonne 2,703 2,480 9 %
- US$/troy
Gold oz 1,800 1,799 0 %
-------------- ------------------ ---------------------- ------------------- -----------
Full-year average Year-end
------------------------------- ------------------------------------
Exchange rates against Increase/ Increase/
the US dollar 2022 2021 (Decrease) 2022 2021 (Decrease)
----------------------- -------- -------- ----------- ---------- ---------- ------------
(10)
Pound sterling 1.24 1.38 % 1.21 1.35 (10) %
Australian dollar 0.69 0.75 (8) % 0.68 0.73 (7) %
Canadian dollar 0.77 0.80 (4) % 0.74 0.78 (5) %
(11)
Euro 1.05 1.18 % 1.07 1.13 (5) %
(10)
South African rand 0.061 0.068 % 0.059 0.063 (6) %
----------------------- -------- -------- ----------- ---------- ---------- ------------
Forward-looking statements
This report includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical facts included
in this report, including, without limitation, those regarding Rio
Tinto's financial position, business strategy, plans and objectives
of management for future operations (including development plans
and objectives relating to Rio Tinto's products, production
forecasts and reserve and resource positions), are forward-looking
statements. The words "intend", "aim", "project", "anticipate",
"estimate", "plan", "believes", "expects", "may", "should", "will",
"target", "set to" or similar expressions, commonly identify such
forward-looking statements.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Rio Tinto, or industry results, to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding Rio Tinto's present and future business
strategies and the environment in which Rio Tinto will operate in
the future. Among the important factors that could cause Rio
Tinto's actual results, performance or achievements to differ
materially from those in the forward-looking statements include,
but are not limited to: an inability to live up to Rio Tinto's
values and any resultant damage to its reputation; the impacts of
geopolitics on trade and investment; the impacts of climate change
and the transition to a low-carbon future; an inability to
successfully execute and/or realise value from acquisitions and
divestments; the level of new ore resources, including the results
of exploration programmes and/or acquisitions; disruption to
strategic partnerships that play a material role in delivering
growth, production, cash or market positioning; damage to Rio
Tinto's relationships with communities and governments; an
inability to attract and retain requisite skilled people; declines
in commodity prices and adverse exchange rate movements; an
inability to raise sufficient funds for capital investment;
inadequate estimates of ore resources and reserves; delays or
overruns of large and complex projects; changes in tax regulation;
safety incidents or major hazard events; cyber breaches; physical
impacts from climate change; the impacts of water scarcity; natural
disasters; an inability to successfully manage the closure,
reclamation and rehabilitation of sites; the impacts of civil
unrest; the impacts of the Covid-19 pandemic; breaches of Rio
Tinto's policies, standard and procedures, laws or regulations;
trade tensions between the world's major economies; increasing
societal and investor expectations, in particular with regard to
environmental, social and governance considerations; the impacts of
technological advancements; and such other risks identified in Rio
Tinto's most recent Annual Report and accounts in Australia and the
United Kingdom and the most recent Annual Report on Form 20-F filed
with the United States Securities and Exchange Commission (the
"SEC") or Form 6-Ks furnished to, or filed with, the SEC.
Forward-looking statements should, therefore, be construed in light
of such risk factors and undue reliance should not be placed on
forward-looking statements. These forward-looking statements speak
only as of the date of this report. Rio Tinto expressly disclaims
any obligation or undertaking (except as required by applicable
law, the UK Listing Rules, the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority and the Listing Rules of
the Australian Securities Exchange) to release publicly any updates
or revisions to any forward-looking statement contained herein to
reflect any change in Rio Tinto's expectations with regard thereto
or any change in events, conditions or circumstances on which any
such statement is based.
Nothing in this report should be interpreted to mean that future
earnings per share of Rio Tinto plc or Rio Tinto Limited will
necessarily match or exceed its historical published earnings per
share.
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
Clare Peever
M +44 7788 967 877
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.
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