TIDMRIO
RNS Number : 6795G
Rio Tinto PLC
28 July 2021
In exceptional market conditions, Rio Tinto achieves record
financial results and declares total interim dividend of 561 US
cents per share, 75% of underlying earnings
28 July 2021
Rio Tinto Chief Executive Jakob Stausholm said "Government
stimulus in response to ongoing COVID-19 pressures has driven
strong demand for our products at a time of constrained supply
resulting in a significant spike in most prices. We focused on
safely running our world-class assets and supplying products to our
customers. This enabled us, despite operational challenges, to
deliver record financial results with free cash flow of $10.2
billion and underlying earnings of $12.2 billion, after taxes and
government royalties of $7.3 billion. We are further strengthening
the portfolio with our commitment to fund the high-quality Jadar
lithium project, which signals our large-scale entry into the
fast-growing battery materials market. We will pay an interim
dividend of 561 US cents per share, representing 75% of underlying
earnings.
"We are making progress on our four priorities, identifying
opportunities for operational improvement, advancing our ESG
agenda, taking important investment decisions and stepping up our
external engagement. We are making real and lasting changes to the
way we engage, interact and operate and are committed to ensuring
that we have strong and positive relationships wherever we do
business. We have identified what we need to do to make Rio Tinto a
better company for the long term, with the right teams in place to
unleash our full potential."
Six months ended 30 June 2021 2020 Change
--------------------------------------------- ------------ ---------------- --------
Net cash generated from operating activities
(US$ millions) 13,661 5,628 143%
--------------------------------------------- ------------ ---------------- ----
Capital expenditure(1) (US$ millions) 3,336 2,693 24%
--------------------------------------------- ------------ ---------------- ----
Free cash flow(2) (US$ millions) 10,181 2,809 262%
--------------------------------------------- ------------ ---------------- ----
Consolidated sales revenue (US$ millions) 33,083 19,362 71%
--------------------------------------------- ------------ ---------------- ----
Underlying EBITDA(2) (US$ millions) 21,037 9,640 118%
--------------------------------------------- ------------ ---------------- ----
Underlying earnings(2) (US$ millions) 12,166 4,750 156%
--------------------------------------------- ------------ ---------------- ----
Net earnings (US$ millions) 12,313 3,316 271%
--------------------------------------------- ------------ ---------------- ----
Underlying earnings(2) per share (US
cents) 751.9 293.7 156%
--------------------------------------------- ------------ ---------------- ----
Ordinary dividend per share (US cents) 376.0 155.0 143%
--------------------------------------------- ------------ ---------------- ----
Special dividend per share (US cents) 185.0 0.0 n/a
--------------------------------------------- ------------ ---------------- --------
Total dividend per share (US cents) 561.0 155.0 262%
--------------------------------------------- ------------ ---------------- ----
Underlying return on capital employed
(ROCE)(2) 50% 21%
--------------------------------------------- ----- ---- ------- ------
At 30 June At 31 December
2021 2020
--------------------------------------------- ------------ ----------------
Net cash / (debt)(2) (US$ millions) 3,140 (664)
--------------------------------------------- ------------ ----------------
Our financial results are prepared in accordance with
International Financial Reporting Standards (IFRS) and are
unaudited - see page 39 for further information. Footnotes are set
out on page 3.
-- Our colleague Nico Swart was tragically killed in a shooting
incident whilst driving to work at Richards Bay Minerals (RBM) in
South Africa on 24 May. Our sympathies are with Nico's family and
we are offering ongoing support to his family, friends and
colleagues.
-- We continue to prioritise the safety of our people and
communities and have now exceeded 30 months without a fatality on
site. However, our all injury frequency rate (AIFR) of 0.39 has
seen a slight increase versus 2020 first half (0.37).
-- Our new leadership team is now fully in place and focused on
driving forward our four priorities. We are developing a large
volume of work taking a company-wide, bottom-up and people-centric
approach as we look to embed real and sustainable changes to the
way we operate and engage.
-- In the first half, we sustained our efforts to earn back
trust and strengthen our social licence. We continue rebuilding our
relationships with Traditional Owners in the Pilbara and engaged
extensively with government representatives, business leaders,
current and former Rio Tinto employees and our shareholders. The
insights from these meetings are helping us improve how we operate
and effectively and respectfully engage in a collaborative manner
wherever we operate.
-- $13.7 billion net cash generated from operating activities
was 143% higher than 2020 first half, mainly due to higher pricing
for iron ore, aluminium and copper.
-- $10.2 billion free cash flow(2) reflected the stronger
operating cash flows partially offset by a 24% rise in capital
expenditure(1) to $3.3 billion, driven by an increase in
replacement and development capital as we ramp up our projects.
-- Funding committed for the Jadar lithium-borates project in
Serbia, subject to receiving all relevant approvals, permits and
licences and ongoing engagement with local communities, the
Government of Serbia and civil society: $2.4 billion investment,
targeting first saleable production in 2026 and ramp-up to full
annual production of 58,000 tonnes of battery-grade lithium
carbonate in 2029.(3)
-- $21.0 billion underlying EBITDA(2) was 118% higher than 2020
first half, with an underlying EBITDA margin(2) of 61%.
-- $12.2 billion underlying earnings(2) (underlying EPS of 751.9
US cents) were 156% higher than 2020 first half with an underlying
effective tax rate of 29%. Taking exclusions into account, net
earnings of $12.3 billion (basic EPS of 761.0 US cents) mainly
reflected $0.3 billion of exchange rate gains net of $0.1 billion
of net additional closure costs for non-operating and fully
impaired assets. See table on page 12.
-- $3.1 billion of net cash(2) at 30 June 2021, compared with
net debt(2) of $0.7 billion at the start of the year, which
reflected the free cash flow of $10.2 billion partly offset by $6.4
billion of cash returns paid to shareholders.
-- Cash returns of $9.1 billion announced today, comprising
interim ordinary dividend of $6.1 billion, equivalent to 376 US
cents per share, and special dividend of $3.0 billion, equivalent
to 185 US cents per share. Interim pay-out ratio represents 75% of
first half underlying earnings.
Strong cash flow from operations
Six months Six months
ended ended
30 June 2021 30 June 2020
US$m US$m
--------------------------------------------- ------------- -------------
Net cash generated from operating activities 13,661 5,628
--------------------------------------------- ------------- -------------
Capital expenditure(1) (3,336) (2,693)
--------------------------------------------- ------------- -------------
Sales of property, plant and equipment 26 28
--------------------------------------------- ------------- -------------
Lease principal payments (170) (154)
--------------------------------------------- ------------- -------------
Free cash flow(2) 10,181 2,809
--------------------------------------------- ------------- -------------
Cash inflows from prior years' disposals 10 10
--------------------------------------------- ------------- -------------
Dividends paid to equity shareholders (6,435) (3,607)
--------------------------------------------- ------------- -------------
Share buy-back - (208)
--------------------------------------------- ------------- -------------
Other 48 (179)
--------------------------------------------- ------------- -------------
Decrease / (increase) in net debt(2) 3,804 (1,175)
--------------------------------------------- ------------- -------------
Footnotes are set out on page 3.
-- $13.7 billion of net cash generated from operating activities
was 143% higher than 2020 first half, primarily driven by higher
prices for our major commodities, which also resulted in higher
dividends from equity accounted units. It is net of a tax payment
of $0.4 billion in Mongolia (disputed by Oyu Tolgoi, including
through international arbitration) and a $0.3 billion settlement
related to the transfer of pension obligations in France.
-- $3.3 billion of capital expenditure(1) was 24% higher,
comprised of $1.4 billion of sustaining capital and $1.9 billion of
development capital, of which $0.5 billion was growth and $1.4
billion was replacement.
-- Free cash flow(2) of $10.2 billion, up 262%.
-- $6.4 billion of dividends reflected the 2020 final ordinary
and special dividends paid in April 2021.
-- As a result of the above, net debt(2) improved by $3.8
billion in 2021 first half to net cash of $3.1 billion.
Entry into battery minerals at scale: funding committed for
Jadar lithium-borates project in Serbia
-- $2.4 billion funding committed to one of the world's largest
greenfield lithium projects, subject to receiving all relevant
approvals, permits and licences and ongoing engagement with local
communities, the Government of Serbia and civil society.
-- To be built to the highest environmental standards, including
utilising dry stacking of tailings, with no need for a tailings
dam. Approximately 70% of raw water to come from recycled sources
or treated mine water.
-- Expected to operate in the first quartile of the cost curve
for both products, with a 40-year mine life.
-- First saleable production in 2026 at a time of strong market
fundamentals with lithium demand forecast to grow 25-35% per year
over the next decade.
-- Following ramp-up to to full production in 2029, the mine is
expected produce 58,000 tonnes of battery-grade lithium carbonate,
160,000 tonnes of boric acid (B(2) O(3) units) and 255,000 tonnes
of sodium sulphate annually.(3)
-- Positions Rio Tinto as the largest source of lithium supply
in Europe. Jadar could supply enough lithium to power over one
million electric vehicles per year.(4)
Our projects
-- Increased our spend on exploration and evaluation to $324
million in 2021 first half, as we progressed our greenfield
programmes across 8 commodities in 19 countries and advanced our
evaluation projects, notably Resolution Copper in Arizona and Winu
copper-gold in Western Australia.
-- At the Winu project in Western Australia, we continue to
actively engage with the Traditional Owners and we plan to commence
discussions on the initial scope and mine design, also in
consultation with the Western Australian Environmental Protection
Authority, with sanction now targeted for next year and first
production in 2025, partly due to COVID-19 constraints. Drilling,
fieldwork and study activities continue to progress.
-- At Resolution, we are continuing to assist the US Forest
Service with its review of the Final Environmental Impact Statement
and draft Record of Decision. Mine studies continue to progress in
parallel.
-- At the Simandou iron ore project in Guinea, we are reviewing
results from the technical optimisation of the infrastructure
studies, and product test sample analysis is now underway. A new
office was established in Conakry in the first half as we expand
our in-country team.
-- Mining has commenced at the $2.6 billion Gudai-Darri
replacement iron ore mine in Western Australia, with more than nine
million cubic metres of pre-stripping completed in June. Despite
labour shortages, first ore in the crusher is expected in 2021,
although commissioning is later than originally planned. The
project is expected to ramp up in early 2022, consistent with
previous guidance, and reach full capacity in 2023. The first phase
of this new hub, which will be our most technologically advanced
mine, connecting up with our autonomous rail network, will have a
43 Mt annual capacity, underpinning production of the Pilbara
Blend(TM).
-- The $0.9 billion (our share, previously $0.8 billion)
investment in the Robe River Joint Venture replacement mine
projects are progressing. First ore at West Angelas (C, D) was
achieved in June with load commissioning expected later in the year
following delays related to heritage management. First ore at Robe
Valley (Mesa B, C, H) is still expected in 2021, consistent with
previous guidance.
-- First ore at the $0.8 billion Western Turner Syncline phase 2
mine, which will also replace existing production, is still
expected in 2021, consistent with previous guidance.
-- At the Oyu Tolgoi copper/gold underground project, project
progress has been significantly affected by heightened COVID-19
constraints in Mongolia. To comply with COVID-19 restrictions, site
manning levels were less than 25% of planned requirements. Despite
these restrictions, as the Material Handling System 1 had been
ahead of the definitive estimate schedule, it is now 90% complete
with technical criteria achieved to support undercut commencement,
subject to the ongoing impacts of COVID-19 and satisfactory
resolution of the non-technical undercut criteria.
-- The $0.9 billion first phase of the south wall pushback at
the Kennecott copper mine in the US remains on track, with gradual
access to higher grades expected over 2021. The $1.5 billion second
phase is expected to extend copper operations to 2032. On 22 July,
we announced the approval of a $108 million investment for
underground characterisation studies.
-- The Zulti South project at RBM in South Africa, to sustain
current capacity and extend mine life, remains on full
suspension.
1. Capital expenditure is presented gross, before taking into
account any cash received from disposals of property, plant and
equipment (PP&E).
2. This financial performance indicator is a non-GAAP
alternative performance measure ("APM"). It is used internally by
management to assess the liquidity and 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 74 to
79.
3. These production targets were previously reported in a
release to the Australian Securities Exchange (ASX) dated 10
December 2020, "Rio Tinto declares maiden Ore Reserve at Jadar"
(for battery-grade lithium carbonate it was 55,000 tonnes). All
material assumptions underpinning the production targets continue
to apply and have not materially changed.
4. Assuming 60kWh battery size.
$ 9.1 billion interim cash returns declared to shareholders in
first half
2021 2020
2021 USc per 2020 USc per
Six months ended 30 June US$bn share US$bn share
---------------------------- ------ ---------- ------ ----------
Ordinary dividend
---------------------------- ------ ---------- ------ ----------
Interim 6.1 376.0 2.5 155.0
---------------------------- ------ ---------- ------ ----------
Pay-out ratio on ordinary
interim dividend 50% 53%
---------------------------- ------ ---- --- ------ ---- ---
Additional return
---------------------------- ------ ---------- ------ ----------
Special dividend 3.0 185.0 n/a n/a
---------------------------- ------ ---------- ------ ----------
Total cash returns declared
in first half 9.1 561.0 2.5 155.0
---------------------------- ------ ---------- ------ ----------
Pay-out ratio on total
interim dividend 75% 53%
---------------------------- ------ ---- --- ------ ---- ---
Total cash returns paid to shareholders in first half
2021 2020
Six months ended 30 June US$bn US$bn
------------------------------------------------ ------ ------
Previous year's final ordinary dividend
paid in April of each year 4.9 3.6
------------------------------------------------ ------ ------
2020 special dividend announced in February
2021, paid in April 2021 1.5 n/a
------------------------------------------------ ------ ------
Share buy-back programme, completed in February
2020 n/a 0.2
------------------------------------------------ ------ ------
Total cash returns paid to shareholders
in first half 6.4 3.8
------------------------------------------------ ------ ------
Guidance
-- Capital expenditure(1) is expected to be around $7.5 billion
in each of 2021, 2022 and 2023, unchanged from previous guidance.
Each year includes $3.0 to $3.5 billion of sustaining capital, of
which Pilbara iron ore sustaining capital is $1.2 to $1.6 billion.
We continue to proactively manage COVID-19 and prioritise work
across critical projects, as challenges associated with interstate
and international border access continue, impacting the
availability and movement of people, most notably in Australia,
Canada and Mongolia.
-- Effective tax rate on underlying earnings of approximately
30% in 2021.
2021 production guidance (Rio Tinto share,
unless otherwise stated)
-------------------------------------------------- -------------------
Pilbara iron ore (shipments, 100% basis) 325 to 340 Mt(1)
-------------------------------------------------- -------------------
Bauxite 56 to 59 Mt(2)
-------------------------------------------------- -------------------
Alumina 7.8 to 8.2 Mt
-------------------------------------------------- -------------------
Aluminium 3.1 to 3.3 Mt
-------------------------------------------------- -------------------
Mined copper 500 to 550 kt(2)
-------------------------------------------------- -------------------
Refined copper 210 to 250 kt
-------------------------------------------------- -------------------
Diamonds(3) 3.0 to 3.8 M carats
-------------------------------------------------- -------------------
Titanium dioxide slag n/a(4)
-------------------------------------------------- -------------------
Iron Ore Company of Canada pellets and concentrate 10.5 to 12.0 Mt
-------------------------------------------------- -------------------
Boric oxide equivalent 0.5 Mt
-------------------------------------------------- -------------------
2021 unit cost guidance
----------------------------------------------- -----------------
Pilbara iron ore unit cash costs per wet metric
tonne, free on board (FOB) basis $18.0-18.5/t(5)
----------------------------------------------- -----------------
Copper C1 unit costs (average for Kennecott,
Oyu Tolgoi and Escondida) 60-75 US cents/lb
----------------------------------------------- -----------------
1. At the low end of the range and remains subject to COVID-19
disruptions, risks around tie-in of new mines and management of
cultural heritage.
2. At the low end of the range.
3. Diamonds 2021 guidance and actuals are for Diavik only for
comparability, following Argyle closure in 2020. Unadjusted
Diamonds production for 2020 was 14.7 million carats, including
both Diavik and Argyle operations.
4. Full year titanium dioxide slag production guidance has been
removed as a result of risks around the timing of resumption of
operations due to an escalation in the security situation at our
Richards Bay Minerals operation in South Africa.
5. Assumes a 0.77 Australian dollar exchange rate.
-- Production and unit cost guidance is consistent with our
Second Quarter Operations Review released on 16 July 2021.
-- We will continue to monitor government-imposed restrictions
related to COVID-19, and any other potential COVID-19 related
disruptions. Restrictions on movement and availability of people
can impact our ability to execute planned maintenance and deliver
projects.
-- Iron ore shipments and bauxite production guidance remain
subject to weather and market conditions. We expect iron ore
shipments to be at the low end of the guidance range which remains
subject to tie-in and ramp-up of brownfield replacement mines, and
ongoing cultural heritage management. Progress has been made on
tying in approximately 90 million tonnes of replacement mine
capacity at existing hubs in Robe Valley, West Angelas and Western
Turner Syncline Phase 2. Replacement projects remain on track for
completion in 2021, and Gudai-Darri is set to ramp up during 2022.
The tight labour market in Western Australia has limited our access
to experienced contractors and specific skill sets.
-- The full impact on our Pilbara iron ore operations, mine
developments and heritage approach from the reform of the
Aboriginal Heritage Act 1972 (WA) remains unknown. We continue to
engage with Traditional Owners regarding current and proposed plans
for mining activities and work through development scenarios,
adjusting mine plans where required. Given the quality of our
resource, we retain a range of development options in the Pilbara,
subject to heritage and environmental approvals.
-- Full year titanium dioxide slag production guidance has been
removed as a result of risks around the timing of resumption of
operations at RBM in South Africa, due to a deterioration in the
security situation. On 21 July, we announced that we would shut one
of the four furnaces due to depletion of available feedstock. We
continue to work with national and provincial governments as well
as community structures to find a lasting solution to the current
situation. However, if the situation does not improve, then we
could be forced to progressively shut down the other furnaces by
the end of August.
Update on our Sustainability targets
Progress against our Safety targets
Our first priority is to operate with zero fatalities and
eliminate workplace injuries and catastrophic events. We have
exceeded 30 months without a fatality on site, but we have seen an
increase in our AIFR to 0.39 in the first half of 2021 versus 0.37
in 2020.
We continue to focus on eliminating the possibility of a
fatality and we are currently working to strengthen the critical
controls for incidents where a falling object had the potential to
cause fatality. In the first half of 2021, and for the past three
years, nearly 30% of all our Potential Fatal Incidents have related
to falling objects.
The increase in injury rate is most prominent in our contractor
teams and we are taking deliberate steps to ensure our care and
systems extend to all of the people who work for us, including both
employees and contractors. The maturity of our safety culture
relies on having an inclusive work environment such that we all
share the same unwavering commitment to eliminate injuries and
incidents.
Progress against our Climate targets
We are targeting a reduction in our absolute Scope 1 and 2
emissions by 15% and our emission intensity by 30% by 2030 relative
to our 2018 equity baseline.
In the first half of 2021, we continued making progress
executing our climate strategy, initiating a number of partnerships
to address our operational and value chain emissions. As with
governments in the lead up to COP26, we continue our work to
identify and develop options to raise our climate ambition in line
with the goals of the Paris Agreement.
Reducing the carbon footprint of our operations
Mt CO(2) e H1 2021* 2020 2019 2018**
------------------ -------- ---- ---- ------
Scope 1 emissions 11.2 22.8 23.1 23.8
------------------ -------- ---- ---- ------
Scope 2 emissions 4.3 8.7 8.3 8.8
------------------ -------- ---- ---- ------
Total 15.5 31.5 31.5 32.6
------------------ -------- ---- ---- ------
*All emissions for June 2021 and non-managed operations are
estimated based on production and emission intensity
**Adjusted for divestments and acquisitions baseline for
target
Our absolute emissions in the first half of 2021 remain at
approximately the same level as in 2019 and 2020. We continued, as
planned, to progress the abatement projects identified in the
short-term incentive plan targets through feasibility, design and
approvals stages. However, as indicated in the 2020 Climate Change
Report, these projects are expected to deliver more significant
reductions later this decade and current emissions levels are
mostly influenced by changes in operational factors.
-- In the first half of 2021, we have announced multiple new
initiatives that we are exploring in order to reduce our future
emissions. These include; a Memorandum of Understanding (MoU) with
Schneider Electric to develop a circular and sustainable market
ecosystem for both companies and their customers; a partnership
with energy technology company, Heliogen, to explore the deployment
of breakthrough solar technology at our borates mine in California;
the Charge On Innovation Challenge, with BHP and Vale, and in
partnership with Australia's Mining Equipment, Technology and
Services industry body Austmine, which is a global competition to
develop new concepts for large-scale haul truck electrification
systems for surface mine operations; and a partnership with the
Australian Renewable Energy Agency (ARENA) to study whether
hydrogen can replace natural gas in alumina refineries.
-- On 26 July, we announced that we had signed a power
purchasing agreement for a new renewable energy plant to power the
operations of our QMM ilmenite mine in Fort Dauphin, southern
Madagascar. The renewable energy plant, to be built, owned and
operated by independent power producer CrossBoundary Energy, over a
20-year period, will consist of an 8 MW solar facility and a 12 MW
wind energy facility to power mining and processing operations.
There will also be a lithium-ion battery energy storage system of
up to 8.25 MW as reserve capacity to ensure a stable and reliable
network. The project will significantly contribute towards our
operation in Madagascar achieving its carbon neutral objective by
2023.
Climate partnerships across our value chains
As part of our Climate Strategy, we made further progress
against our Scope 3 goals in our partnerships to decarbonise our
value chain in the first half of 2021:
-- We signed a MoU with POSCO, the largest steel producer in
South Korea and one of the world's leading steel producers, to
jointly explore, develop and demonstrate technologies to transition
to a low-carbon emission steel value chain. The partnership will
explore a range of technologies for decarbonisation across the
entire steel value chain from iron ore mining to steelmaking,
including integrating Rio Tinto's iron ore processing technology
and POSCO's steelmaking technology.
-- We took a major step forward in eliminating all direct
greenhouse gases from aluminium smelting with the start of
construction on the first commercial-scale prototype cells of
ELYSIS' technology, at our Alma smelter in Saguenay-Lac-Saint-Jean,
Quebec. ELYSIS is a joint venture company led by Rio Tinto and
Alcoa that is developing a new breakthrough technology, known as
inert anode, that eliminates all direct greenhouse gases from the
traditional smelting process and instead produces oxygen.
-- We signed a charter agreement with Singapore's ship
management company Eastern Pacific Shipping for three liquefied
natural gas dual-fuel Newcastlemax bulk carriers, to further reduce
our scope 3 shipping emissions. The delivery of the ships will
commence from the second half of 2023.
Progress against our Water targets
By 2023, we are set to disclose for all managed operations,
their permitted surface water allocation, how much of their
allocation they have used, and the average rainfall volume that the
catchment receives. We also expect to achieve local water
stewardship targets for selected sites by 2023.
We have been focused on the collection and analysis of data for
our Copper and Atlantic Aluminium businesses. In addition, we have
developed a set of standardised water risk controls that our assets
need to implement to satisfactorily prevent or mitigate, not just
water scarcity risks, but also those associated with discharge
quality and quantity, and long-term dewatering and geochemical
impacts. The integration of these controls into our risk management
systems completes the realignment of our approach to water risk and
further enables our assets to improve water management and
stewardship.
Progress against our Gender Diversity targets
We want to create a workplace that reflects the communities in
which we operate and is safe, respectful and inclusive for all. We
have set a target to increase the representation of women in our
workforce by two percentage points this year. We have improved our
gender balance across all employment categories in the first half
but we are tracking slightly below target. Overall, we increased
female representation by 0.9% to 21.0%, hiring 1,270 women, 32% of
all hires. Improving the gender balance also requires a focus on
retention as 323 women left Rio Tinto in the first half of
2021.
We have been looking closely at our workplace environment
through the Everyday Respect initiative launched in March.
Listening sessions have been held across the business to allow
employees to share stories of their experiences and suggestions to
ensure that we are providing a safe working environment that is
free from sexual harassment, bullying and racism. Addressing these
issues will, over time, contribute to a more inclusive and
supportive work environment and help improve retention for both
women and men from all backgrounds and abilities.
Progress against our Communities and Social Performance
targets
In May, we recognised a year since the destruction of the Juukan
Gorge rock shelters. We reflected on the magnitude of what was lost
by our actions, and that the hurt we have caused will never be
forgotten. We are collaborating with Puutu Kunti Kurrama and
Pinikura (PKKP) leadership on both the Juukan Gorge remediation and
development of a co-management of country model as part of
agreement modernisation. Rehabilitation works around Juukan Gorge
have now commenced. A key focus over the coming months is to
finalise agreement on an appropriate remedy for the destruction of
Juukan Gorge.
Cultural heritage awareness and management
The first phase of the Integrated Heritage Management Process to
manage cultural heritage in Western Australia is now complete.
Known sites of cultural significance have been re-assessed and mine
plans adjusted or measures taken to avoid disturbance, and we
increased buffer zones in some cases.
We have also further developed our internal awareness with the
delivery of a new co-developed cultural awareness training via
immersive virtual reality. We are on track to have 90% of our
14,000 Pilbara iron ore employees complete this training by
mid-August 2021.
Our communities expertise
We are focused on building our social performance technical
capability and competency and have continued to expand our
Communities and Social Performance (CSP) headcount, with more than
300 CSP professionals now working on 60 sites in 35 countries
(compared with 250 CSP professionals in 2020).
Indigenous leadership and engagement
In line with our commitment to establish an Indigenous Advisory
Group, the terms of reference are under active development to
ensure the group can help us manage policies and positions that are
important to Indigenous Australia and our broader business. Further
consultation with Traditional Owners and Indigenous leaders is
planned for the third quarter.
Our $50 million investment to attract, retain and grow
Indigenous professionals and leaders has enabled us to nearly
triple the number of Indigenous leaders in Rio Tinto over the past
12 months to 19 through internal promotion and recruitment, ahead
of the original target. The 2021 target has therefore been revised
to 50 Indigenous leaders.
Former Panguna copper mine in Bougainville
On 21 July, we announced that we had reached an agreement with
Bougainville community members, represented by the Human Rights Law
Centre, to identify and assess legacy impacts of the former Panguna
copper mine in Bougainville. This follows several months of
constructive discussions facilitated by the Australian OECD
National Contact Point.
A joint committee of stakeholders will be formed to oversee a
detailed independent assessment of the Panguna mine to identify and
better understand actual and potential environmental and human
rights impacts of the mine which ceased operating in 1989.
Underlying EBITDA, underlying earnings by product group
Underlying Underlying
EBITDA Earnings
-------------- -------------
2021 2020 Change 2021 2020 Change
Six months ended 30 June US$m US$m % US$m US$m %
---------------------------------------- ------ ------ --------- ------ ----- ---------
Iron Ore 16,060 7,698 109% 10,216 4,563 124%
---------------------------------------- ------ ------ ----- ------ ----- -----
Aluminium 1,924 925 108% 921 193 377%
---------------------------------------- ------ ------ ----- ------ ----- -----
Copper 2,048 686 199% 885 111 697%
---------------------------------------- ------ ------ ----- ------ ----- -----
Minerals 1,398 712 96% 498 190 162%
---------------------------------------- ------ ------ ----- ------ ----- -----
Reportable segment total 21,430 10,021 114% 12,520 5,057 148%
---------------------------------------- ------ ------ ----- ------ ----- -----
Other operations (4) 1 (500)% (51) (29) 76%
---------------------------------------- ------ ------ ----- ------ ----- -----
Inter-segment transactions (6) (18) (67)% (3) (6) (50)%
---------------------------------------- ------ ------ ----- ------ ----- -----
Product group total 21,420 10,004 114% 12,466 5,022 148%
---------------------------------------- ------ ------ ----- ------ ----- -----
Central pensions, share-based payments,
insurance and derivatives 119 102 17% 120 97 24%
---------------------------------------- ------ ------ ----- ------ ----- -----
Restructuring, project and one-off
costs (36) (72) (50)% (23) (53) (57)%
---------------------------------------- ------ ------ ----- ------ ----- -----
Other central costs (346) (273) 27% (294) (233) 26%
---------------------------------------- ------ ------ ----- ------ ----- -----
Central exploration and evaluation (120) (121) (1)% (100) (97) 3%
---------------------------------------- ------ ------ ----- ------ ----- -----
Net interest (3) 14 (121)%
---------------------------------------- ------ ------ --------- ------ ----- -----
Total 21,037 9,640 118% 12,166 4,750 156%
---------------------------------------- ------ ------ ----- ------ ----- -----
Underlying EBITDA and underlying earnings are non-GAAP
alternative performance measures ("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 74 to 79.
Central and other costs
Pre-tax central pension costs, share-based payments, insurance
and derivatives were a $119 million credit compared with a $102
million credit in 2020 first half mainly due to higher insurance
premiums in 2021 first half with a lower offset from claims than
2020 first half, coupled with lower costs associated with share
based payments.
On a pre-tax basis, restructuring, project and one-off central
costs were 50% lower than 2020 first half mainly due to provisions
recognised in 2020 in respect of legacy operations.
Other central costs of $346 million (pre-tax) were 27% higher
than 2020 first half mainly attributable to stronger local
currencies, and also includes a modest increase in costs associated
with progressing our CSP and ESG objectives.
Central exploration and evaluation costs
We have a strong portfolio of projects with activity in 19
countries across 8 commodities in early exploration and studies
stages. We have followed government COVID-19 requirements and
guidelines at all our projects while focusing on protecting the
health and well-being of local communities. The bulk of our central
exploration expenditure in the half was prioritised on copper
projects in Australia, Canada, Kazakhstan, the United States and
Zambia, and diamond projects in Canada.
Commentary on financial results
To provide additional insight into the performance of our
business, we report underlying EBITDA and underlying earnings. The
principal factors explaining the movements in underlying EBITDA are
set out in this table.
US$m
---------------------------------------- ------
2020 first half underlying EBITDA 9,640
---------------------------------------- ------
Prices 12,833
---------------------------------------- ------
Exchange rates (627)
---------------------------------------- ------
Volumes and mix (381)
---------------------------------------- ------
General inflation (137)
---------------------------------------- ------
Energy 43
---------------------------------------- ------
Operating cash unit costs (318)
---------------------------------------- ------
Higher exploration and evaluation spend (44)
---------------------------------------- ------
Non-cash costs/other 28
---------------------------------------- ------
2021 first half underlying EBITDA 21,037
---------------------------------------- ------
Strong financials benefiting from higher prices across most of
our commodities
Due to our disciplined focus on cost containment, we managed to
retain around 90% of the benefit from higher prices in 2021 first
half. These increased underlying EBITDA by $12,833 million compared
with 2020 first half. We have included a table of prices and
exchange rates on page 81.
The monthly average Platts index for 62% iron fines converted to
an FOB basis more than doubled compared with 2020 first half. This
was driven by a strong resurgence in global demand, in particular
from China, and slower than anticipated growth in seaborne
supply.
Average LME prices for copper and aluminium rebounded 66% and
41%, respectively, compared with 2020 first half. The mid-west
premium duty paid for aluminium in the US averaged $318 per tonne,
28% higher than in 2020 first half, reflective of strong demand and
tight supply. The published gold price increased 10% compared with
2020 first half.
Headwinds from appreciating Australian and Canadian dollars
Compared with 2020 first half, on average the US dollar weakened
by 17% against the Australian dollar, by 9% against the Canadian
dollar and by 13% against the South African rand. Currency
movements lowered underlying EBITDA by $627 million relative to
2020 first half.
Lower underlying EBITDA from volumes and mix
We experienced some operational challenges in 2021 first half,
including COVID-19 and significantly above average rainfall. These
were reflected in the movement in volumes and mix, which lowered
underlying EBITDA by $381 million compared with 2020 first half.
This was mostly attributable to iron ore shipments from the
Pilbara, which decreased by 3%, driven by lower production
following sustained wet weather, particularly at West Pilbara and
Robe Valley operations, shutdowns to enable new replacement mines
to be tied in, processing plant availability and cultural heritage
management. Other key variances included lower volumes at Iron Ore
Company of Canada (labour and equipment availability challenges)
and reduced copper sales volumes at both Escondida (prolonged
COVID-19 impact leading to lower recoveries and throughput) and Oyu
Tolgoi (COVID-19-related constraints on exports to China). These
were partly offset by higher refined copper sales at Kennecott
(recovery from the earthquake and planned smelter maintenance
shutdown, both in 2020), increased gold sales from Oyu Tolgoi
(significant improvement in grades) and higher titanium dioxide
feedstock volumes (in line with market demand).
Lower energy prices and general price inflation
Lower energy prices, on average, compared to 2020 first half
benefited underlying EBITDA by $43 million, mainly due to lower
energy prices at our aluminium smelters, including the new
agreement reached during the first half in relation to the
electricity supply to New Zealand Aluminium Smelter (NZAS). This
was outweighed by the $137 million impact of general price
inflation.
Continued focus on cost control
We maintained tight controls even during this period of high
prices with continued focus on cost and working capital. However,
lower volumes led to o ur operating cash unit costs rising by $318
million (on a unit cost basis) compared with 2020 first half. Unit
costs at our Pilbara iron ore operations increased to $17.9 per
tonne due to Gudai-Darri commissioning costs, a higher mining work
index, increased plant maintenance and higher demurrage due to
increased shipping rates. At our Aluminium business, we incurred
cyclical cost increases for coke and alloys, while our Bauxite
business in Queensland also experienced higher demurrage costs from
inclement weather. These cost pressures were partly offset by fixed
cost efficiencies at Kennecott following completion of planned
smelter maintenance and recovery from the earthquake in 2020.
Increase in our exploration and evaluation activity
We increased our exploration and evaluation activity, expensing
$44 million more than in 2020 first half. This was focused on our
greenfield programmes across 18 countries and our highest value
evaluation projects, particularly in copper, Winu in Western
Australia and Resolution in Arizona, and lithium-borates in
Serbia.
Non-cash costs and Other
The movement in non-cash costs, one-off and other items
increased underlying EBITDA by $28 million compared with 2020 first
half. This primarily reflected lower COVID-19 related costs ($131
million in 2021 first half compared with $157 million), and also
includes the non-recurrence of certain one-off costs in 2020, such
as the pot-lining replacement at the Kitimat aluminium smelter ($50
million) and the impact from curtailment of operations at RBM ($40
million) in early 2020, offset by provisions recognised, mainly
environmental and provisions associated with our legacy
operations.
Net earnings
The principal factors explaining the movements in underlying
earnings and net earnings are set out here.
US$m
------------------------------------------------------------------ -------
2020 first half net earnings 3,316
------------------------------------------------------------------ -------
Total changes in underlying EBITDA 11,397
------------------------------------------------------------------ -------
Increase in depreciation and amortisation (pre-tax) in underlying
earnings (214)
------------------------------------------------------------------ -------
Decrease in interest and finance items (pre-tax) in underlying
earnings 23
------------------------------------------------------------------ -------
Increase in tax on underlying earnings (3,171)
------------------------------------------------------------------ -------
Increase in underlying earnings attributable to outside
interests (619)
------------------------------------------------------------------ -------
Total changes in underlying earnings 7,416
------------------------------------------------------------------ -------
Changes in exclusions from underlying earnings:
------------------------------------------------------------------ -------
Movement in net impairment charges 1,033
------------------------------------------------------------------ -------
Movement in closure estimates (non-operating and fully impaired
sites) (15)
------------------------------------------------------------------ -------
Movement in exchange differences and gains/losses on debt 563
------------------------------------------------------------------ -------
2021 first half net earnings 12,313
------------------------------------------------------------------ -------
Depreciation and amortisation, net interest and tax
Our depreciation and amortisation charge was $214 million higher
than 2020 first half, mainly due to the impact of the stronger
Australian and Canadian dollars against the US dollar.
Interest and finance items (pre-tax) were $23 million lower than
2020 first half, mainly reflecting the impact of floating interest
rates on our net debt and the repayment of the $526 million of Euro
Bonds, which matured in May 2020.
The 2021 first half effective corporate income tax rate on
underlying earnings, excluding equity accounted units, was 29%,
which compared with 30% in 2020 first half. The effective tax rate
on underlying earnings in Australia in both years was just over
30%. We anticipate an effective tax rate on underlying earnings of
approximately 30% in 2021.
Items excluded from underlying earnings
There were no impairment charges in 2021 first half. In 2020
first half, we recognised $1,033 million of impairment charges,
related to three of our Pacific Aluminium smelters (NZAS, Bell Bay
and Boyne), the ISAL smelter in Iceland and our interest in the
Diavik diamond mine. On pages 45 and 46 there is a detailed
explanation of the impairment process.
In 2021 first half, we recognised net additional closure costs
of $15 million, after tax and non-controlling interests,
principally relating to an increase in Diavik's closure provision
to reflect the completion of the pre-feasibility study that was in
progress when the asset was fully impaired in 2020. The 2021 charge
also includes closure provision increases at some of the Group's
legacy sites. Further analysis can be found on page 57.
In 2021 first half, we recognised non-cash exchange and
derivative gains of $280 million. This was mainly on US dollar debt
in non-US dollar functional currency Group companies, intragroup
balances, and on the revaluation of certain derivatives which do
not qualify for hedge accounting. These gains compared with 2020
first half losses of $283 million, giving rise to a favourable
period-on-period movement of $563 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.
Profit
Net earnings and underlying earnings refer to amounts
attributable to the owners of Rio Tinto. The profit after tax
attributable to the owners of Rio Tinto in 2021 first half totalled
$12.3 billion (2020 first half: $3.3 billion). We recorded a profit
in 2021 first half of $13.1 billion (2020 first half: $3.5 billion)
of which a profit of $0.8 billion (2020 first half: $0.1 billion)
was attributable to non-controlling interests.
Net earnings and underlying earnings
The differences between underlying earnings and net earnings are
set out in this table (all numbers are after tax and exclude
non-controlling interests).
Six months Six months
ended ended
30 June 2021 30 June 2020
US$m US$m
----------------------------------------------------- ------------- -------------
Underlying earnings 12,166 4,750
----------------------------------------------------- ------------- -------------
Items excluded from underlying earnings
----------------------------------------------------- ------------- -------------
Impairment charges - (1,033)
----------------------------------------------------- ------------- -------------
Foreign exchange and derivative gains /(losses)
on US dollar net debt and intragroup balances
and derivatives not qualifying for hedge accounting 280 (283)
----------------------------------------------------- ------------- -------------
Net increases in closure estimates (non-operating
and fully impaired sites) (133) (118)
----------------------------------------------------- ------------- -------------
Net earnings 12,313 3,316
----------------------------------------------------- ------------- -------------
On pages 56 and 57 there is a detailed reconciliation from
underlying earnings to net earnings, including pre-tax amounts and
additional explanatory notes. The differences between underlying
EBITDA and Profit after tax are set out on the table on page
75.
Balance sheet
Net debt reduced by $3.8 billion in 2021 first half, resulting
in a net cash position of $3.1 billion at 30 June 2021. This
reflected the strong free cash flows partly offset by payment of
the final and special dividends of $6.4 billion.
Our net gearing ratio (net (cash) / debt to total capital)
improved to (6)% at 30 June 2021 (31 December 2020: 1%).
Our total financing liabilities at 30 June 2021 were $13.4
billion (see page 48) and the weighted average maturity was around
9 years. At 30 June 2021, approximately 86% of Rio Tinto's total
borrowings were at floating interest rates (94% excluding leases).
During the six months to 30 June 2020 we entered into $1.5 billion
of interest rate swaps to convert the remaining fixed Alcan debt to
floating interest rates. The maximum amount, within non-current
borrowings, maturing in any one calendar year is $1.8 billion,
which matures in 2025.
Cash and cash equivalents plus other short-term cash investments
at 30 June 2021 were $16.5 billion (31 December 2020: $12.9
billion) and we have a $7.5 billion fully committed Revolving
Credit Facility, which remained undrawn throughout the period and
matures in November 2023.
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 shareholder value.
At the end of each financial period, the Board determines an
appropriate total level of ordinary dividend per share, taking 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 40-60% of underlying earnings in
aggregate through the cycle. Acknowledging the cyclical nature of
the industry, in periods of strong earnings and cash generation, it
is the Board's intention to supplement the ordinary dividends with
additional returns to shareholders. 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
2021 interim dividend has been converted at exchange rates
applicable on 27 July 2021 (the latest practicable date prior to
the declaration of the dividend). American Depository Receipt (ADR)
holders receive dividends at the declared rate in US dollars.
2021 2020
Ordinary dividend per share interim interim
---------------------------- -------- --------
Rio Tinto Group
---------------------------- -------- --------
US cents per share 376.00 155.00
---------------------------- -------- --------
Rio Tinto plc
---------------------------- -------- --------
UK pence per share 270.84 119.74
---------------------------- -------- --------
Rio Tinto Limited
---------------------------- -------- --------
Australian cents per share 509.42 216.47
---------------------------- -------- --------
Special dividend per share
---------------------------- -------- --------
Rio Tinto Group
---------------------------- -------- --------
US cents per share 185.00 n/a
---------------------------- -------- --------
Rio Tinto plc
---------------------------- -------- --------
UK pence per share 133.26 n/a
---------------------------- -------- --------
Rio Tinto Limited
---------------------------- -------- --------
Australian cents per share 250.64 n/a
---------------------------- -------- --------
The 2021 interim dividend and the special 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 23 September 2021, we will pay the 2021 interim dividend and
the special dividend to holders of ordinary shares and holders of
ADRs on the register at the close of business on 13 August 2021
(record date). The ex-dividend date is 12 August 2021.
Rio Tinto plc shareholders may choose to receive their dividend
in Australian dollars, and Rio Tinto Limited shareholders may
choose to receive theirs in pounds sterling. Currency conversions
will be based on the pound sterling and Australian 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 2 September 2021.
We continue to operate our Dividend Reinvestment Plans - see our
website (riotinto.com) for details. Rio Tinto plc and Rio Tinto
Limited shareholders' election notice for the Dividend Reinvestment
Plans must be received by 2 September 2021. 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.
As previously announced at our 2020 full year results on 17
February 2021, and in line with market practice, we will be
introducing a dividend fee on cash dividends paid on the ADR. The
fee revenue will cover costs associated with the management of the
ADR programme. The fee of $0.005 per ADR, per cash dividend, will
be introduced with the 2021 interim dividend which is payable on 23
September 2021. The fee will be deducted by the depositary.
Review of operations
Iron Ore
Six months ended 30 June 2021 2020 Change
-------------------------------------------------- --------- --------- --------
Pilbara production (million tonnes - 100%) 152.3 161.1 (5)%
-------------------------------------------------- --------- --------- ----
Pilbara shipments (million tonnes - 100%) 154.1 159.6 (3)%
-------------------------------------------------- --------- --------- ----
Salt production (000 tonnes - Rio Tinto share)(1) 2,869 2,469 16%
-------------------------------------------------- --------- --------- ----
Gross product sales (US$ millions) 21,707 11,465 89%
-------------------------------------------------- --------- --------- ----
Average realised price (US$ per dry metric
tonne, FOB basis) 168.4 85.4 97%
-------------------------------------------------- --------- --------- ----
Underlying EBITDA (US$ millions) 16,060 7,698 109%
-------------------------------------------------- --------- --------- ----
Pilbara underlying FOB EBITDA margin(2) 79% 72%
-------------------------------------------------- ----- ---- --------
Underlying earnings (US$ millions) 10,216 4,563 124%
-------------------------------------------------- --------- --------- ----
Net cash generated from operating activities
(US$ millions) 11,049 5,460 102%
-------------------------------------------------- --------- --------- ----
Capital expenditure (US$ millions)(3) (1,912) (1,185) 61%
-------------------------------------------------- --------- --------- ----
Free cash flow (US$ millions) 9,112 4,255 114%
-------------------------------------------------- --------- --------- ----
Underlying return on capital employed(4) 121% 64%
-------------------------------------------------- ----- ---- --------
1. Dampier Salt is reported in 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 gross
product sales, 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 (operating assets).
Financial performance
Our iron ore shipments from the Pilbara decreased by 3% compared
with 2020 first half, in line with lower production, which was
attributable to sustained wet weather, particularly at the West
Pilbara and Robe Valley operations, shutdowns to enable new
replacement mines to be tied in, processing plant availability and
cultural heritage management.
Underlying EBITDA of $16.1 billion was 109% higher than 2020
first half, reflective of higher prices driven by strong global
demand and constrained supply. This more than compensated for the
lower sales volumes and higher operating costs, which were driven
by a stronger Australian dollar.
2021 first half Pilbara unit cash costs of $17.9 per tonne (2020
first half: $14.5 per tonne) included $0.5 per tonne of COVID-19
costs. $2.4 per tonne of the half-on-half increase was attributable
to the 17% appreciation in the Australian dollar. Gudai-Darri
commissioning costs, a higher mining work index, increased plant
maintenance, and higher demurrage due to increased shipping rates
were also contributors.
Cost guidance for the full year of $18.0-$18.5 per tonne
represents an underlying cost increase of A$0.3 billion (on a 100%
basis) relative to previous guidance of $16.7-$17.7 per tonne, or
4%. The updated guidance reflects price escalation of key input
costs (diesel and labour), costs related to mine heritage
management and COVID-19-related costs (A$100 million, on a 100%
basis, or US$62 million our share were incurred in 2021 first half;
no COVID-19 costs included in previous guidance). Cost guidance
remains based on an A$:US$ exchange rate of 0.77.
Our Pilbara operations delivered an underlying FOB EBITDA margin
of 79%.
We price the majority of our iron ore sales (79%) by reference
to the average index price for the month of shipment. In 2021 first
half, we priced approximately 12% of sales by reference to the
prior quarter's average index lagged by one month, with the
remainder sold either on current quarter average or on the spot
market. We made approximately 71% of our sales including freight
and 29% on an FOB basis.
We achieved an average iron ore price in 2021 first half of
$154.9 per wet metric tonne on an FOB basis (2020 first half: $78.5
per wet metric tonne). This equates to $168.4 per dry metric tonne,
assuming 8% moisture, (2020 first half: $85.4 per dry metric tonne)
and compares to the monthly average Platts index for 62% fines
converted to an FOB basis of $172.6 per dry metric tonne.
Gross product sales for Pilbara operations included freight
revenue of $1.0 billion (2020 first half: $0.6 billion).
We continue to significantly increase port sales in China, with
5.4 million tonnes of sales in 2021 first half, doubling 2020's
volumes. Our portside operation handles product from our operations
in the Pilbara and in Canada as well as third party product, and
provides blending and screening capabilities. Approximately 85% of
products sold were either blended or screened in Chinese ports in
the first half of 2021.
Net cash generated from operating activities of $11.0 billion
was 102% higher than 2020 first half, driven by the higher
underlying EBITDA and associated higher tax payments.
Free cash flow of $9.1 billion was 114% higher than 2020 first
half, primarily reflecting the higher operating cash flow net of a
61% increase in capital investment. This included an increase in
sustaining capital and a step-up in development capital for
Gudai-Darri and the replacement mines at Robe Valley (Mesa B,C, H),
West Angelas (C, D) and Western Turner Syncline Phase 2.
Review of operations
Our Pilbara operations produced 152.3 million tonnes (our share
126.9 million tonnes), 5% lower than the first half of 2020 due to
above average rainfall, shutdowns to enable replacement mines to be
tied in, processing plant availability and cultural heritage
management. Ongoing COVID-19 restrictions and a tight labour market
have further impacted our ability to access experienced contractors
and particular skill sets.
Sustained wet weather had an estimated impact of around 3
million tonnes in the first half. Consistent and above average
rainfall impacted mine operations, particularly at West Pilbara and
Robe Valley operations. The recorded rainfall days were 30% and 70%
above the five year average at Paraburdoo and Karratha
respectively, while rainfall at Pannawonica was 60% above the five
year average.
The impact from shutdowns to enable replacement mines to be tied
in at Western Turner Syncline and Robe Valley, and reduced
processing plant availability, particularly at Yandicoogina, is
estimated to be 4 million tonnes in the first half. Execution of
shutdowns was also impacted by labour shortages due to COVID-19
restrictions and high labour demand.
We continue to prioritise engagement with Traditional Owners and
cultural heritage management in daily site operations. To date,
2021 production has been reduced by around 2 million tonnes as mine
plans have been amended, and buffers and exclusion zones have been
incorporated to protect areas of high cultural significance. Mine
plan changes have also resulted in increased production of
SP-10.
Blast management plans have been developed to create smaller,
higher controlled blasts to minimise vibration and protect heritage
sites (approximately 11% of blasts in the first half), which has
had some impact on mining productivity and materials handling.
Going forward, this will remain a risk factor, however we are
adapting mine practices and improving productivity.
Projects and growth options
Mining has commenced at the $2.6 billion Gudai-Darri mine with
more than nine million cubic metres of pre-stripping completed.
Labour shortages have impacted both steel fabrication and site
construction activities. First ore in the crusher is still expected
in 2021, although commissioning is later than originally planned.
The project is expected to ramp up in early 2022, consistent with
previous guidance, and reach full capacity in 2023. Once complete,
the initial mine development will have an annual capacity of 43
million tonnes.
The Robe River Joint Venture replacement mine sustaining
production projects are on track. First ore at West Angelas C, D
was achieved in June, with load commissioning expected later in the
year following delays related to heritage management. First ore at
Robe Valley (Mesa B, C, H) is still expected in 2021, consistent
with previous guidance.
Construction at the Western Turner Syncline Phase 2 project is
progressing, with first ore expected in 2021.
We continue to proactively manage COVID-19 and prioritise work
across critical projects, as challenges associated with interstate
border access continue, impacting the availability and movement of
people.
Aluminium
Six months ended 30 June 2021 2020 Change
------------------------------------------------- -------- -------- --------
Bauxite production (000 tonnes - Rio Tinto
share) 27,264 28,373 (4)%
------------------------------------------------- -------- -------- ----
Alumina production (000 tonnes - Rio Tinto
share) 4,047 4,000 1%
------------------------------------------------- -------- -------- ----
Aluminium production (000 tonnes - Rio Tinto
share)(1) 1,619 1,568 3%
------------------------------------------------- -------- -------- ----
Gross product sales (US$ millions) 5,932 4,487 32%
------------------------------------------------- -------- -------- ----
Average realised aluminium price (US$ per
tonne) 2,626 1,849 42%
------------------------------------------------- -------- -------- ----
Underlying EBITDA (US$ millions) 1,924 925 108%
------------------------------------------------- -------- -------- ----
Underlying EBITDA margin (integrated operations) 36% 23%
------------------------------------------------- --- --- --------
Underlying earnings (US$ millions) 921 193 377%
------------------------------------------------- -------- -------- ----
Net cash generated from operating activities
(US$ millions) 1,384 1,089 27%
------------------------------------------------- -------- -------- ----
Capital expenditure - excluding EAUs(1) (US$
millions) (487) (443) 10%
------------------------------------------------- -------- -------- ----
Free cash flow (US$ millions) 880 624 41%
------------------------------------------------- -------- -------- ----
Underlying return on capital employed(2) 12% 3%
------------------------------------------------- --- --- --------
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 (operating assets).
Financial performance
Our aluminium business delivered a significant uplift in
underlying EBITDA and a substantial increase in cash flow, with
free cash flow already at the same level as full year 2020. This
was driven by a rebound in sales prices and heightened demand for
value-added product (VAP) as markets recovered from the impact of
COVID-19.
Underlying EBITDA of $1.9 billion was more than double 2020
first half. The benefit from the stronger pricing environment, in
particular for primary metal and alumina, and higher aluminium
sales driven by the stability of our Canadian smelting business
were only partly offset by the impact of stronger local currencies,
lower bauxite shipments and some cost inflation for coke and
alloys. This increased our industry-leading underlying EBITDA
margin to 36%.
We achieved an average realised aluminium price of $2,626 per
tonne, 42% higher than 2020 first half ($1,849 per tonne). This
comprised the LME price, a market premium and a VAP premium. The
cash LME price averaged $2,245 per tonne, 41% higher than 2020
first half. In our key US market, the mid-West premium duty paid
recovered 28% to $318 per tonne (2020 first half: $249 per tonne).
In 2021 first half, VAP volumes recovered to represent 50% of the
primary metal we sold (2020 first half: 40%) and generated product
premiums averaging $207 per tonne of VAP sold (2020 first half:
$208 per tonne).
Although we are broadly balanced in alumina, approximately 2.1
million tonnes of our legacy alumina sales contracts are exposed to
a fixed linkage to the LME price. These contracts date back to 2005
or earlier, and the majority expire between 2023 and 2030. The
opportunity loss from these legacy contracts was negligible in 2021
first half, compared with around $50 million in 2020 first
half.
We generated $1.4 billion in net cash from operating activities,
27% higher than 2020 first half, reflective of the higher
underlying EBITDA achieved, net of a build in trade working
capital, driven by the higher pricing environment and supply chain
constraints, which compared with a reduction in working capital in
2020 first half. The rise in operating cash flow was reflected in
free cash flow of $0.9 billion, 41% higher than 2020 first half,
and already level with 2020 full year.
Review of operations
Bauxite production of 27.3 million tonnes was 4% lower than 2020
first half due to ongoing system instability following severe wet
weather in Eastern Australia earlier in the year. 2020 first half
had strong production due to deferrals of planned shutdowns from
COVID-19 restrictions.
Alumina production of 4.0 million tonnes was 1% higher than 2020
first half reflecting strong operational performance at the
refineries.
Aluminium production of 1.6 million tonnes was 3% higher than
2020 first half, underpinned by the ISAL smelter in Iceland and
Becancour smelter in Quebec operating at full capacity, and the
Kitimat smelter in British Columbia nearing completion of its pot
relining cycle. The Saguenay smelters had a strong performance in
2021 first half, with stable performance maintained across the
remaining portfolio.
On 26 July, we announced that we had begun reducing production
at the Kitimat smelter due to a strike initiated by the local
union, after negotiations failed to reach a new collective labour
agreement. Production will be reduced to around 35% of the
smelter's 432,000 tonne annual capacity, so that it can safely be
operated by staff and employees.
Projects and growth options
At the Kemano hydropower tunnel project in Kitimat in British
Columbia, Canada, works have resumed at full capacity and the
tunnel boring excavation is now 74% complete, having achieved a
total of 5,660 metres. The project is scheduled to complete in the
second half of 2022, subject to there being no further COVID-19
delays. Total approved capital is now $761 million, following the
approval of an additional $132 million by the Board in July.
ELYSIS, our joint venture with Alcoa, has selected our Alma
smelter in Saguenay-Lac-Saint-Jean, Quebec, for the first
installation and demonstration of its inert anode technology at a
commercial size of 450 kiloamperes (kA). Construction of the first
prototype cells has commenced. This will build on ongoing work at
the nearby ELYSIS Industrial Research and Development Centre. The
450 kA cells at Alma will be supported by investments of C$20
million from the Government of Quebec and C$20 million from the
Government of Canada.
Copper
Six months ended 30 June 2021 2020 Change
--------------------------------------------- ------- ------- ---------
Mined copper production (000 tonnes - Rio
Tinto share) 236.1 265.7 (11)%
--------------------------------------------- ------- ------- -----
Refined copper production (000 tonnes -
Rio Tinto share) 111.4 74.1 50%
--------------------------------------------- ------- ------- -----
Gross product sales (US$ millions) 3,779 1,983 91%
--------------------------------------------- ------- ------- -----
Average realised copper price (US cents
per pound)(1) 415 250 66%
--------------------------------------------- ------- ------- -----
Underlying EBITDA (US$ millions) 2,048 686 199%
--------------------------------------------- ------- ------- -----
Underlying EBITDA margin (product group
operations) 61% 43%
--------------------------------------------- --- --- ---------
Underlying earnings (US$ millions) 885 111 697%
--------------------------------------------- ------- ------- -----
Net cash generated from operating activities
(US$ millions)(2) 1,232 100 1,132%
--------------------------------------------- ------- ------- -----
Capital expenditure - excluding EAUs (US$
millions)(3) (668) (869) (23)%
--------------------------------------------- ------- ------- -----
Free cash flow (US$ millions) 561 (776) n/a
--------------------------------------------- ------- ------- ---------
Underlying return on capital employed(4) 13% 2%
--------------------------------------------- --- --- ---------
1. Average realised price for all units sold. Realised price
does not include the impact of the provisional pricing adjustments,
which positively impacted revenues in the first half by $202
million (first half 2020 negative impact of $26 million).
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 excluding net interest divided by average
capital employed (operating assets).
5. Following a reorganisation of the management team, the
Simandou iron ore project in Guinea is reported within Copper.
Financial performance
The improvement in our financial performance was primarily
driven by stronger market conditions. We also benefited from higher
refined sales volumes, driven by a solid smelter performance at
Kennecott and higher gold grades at Oyu Tolgoi. These compensated
for lower volumes at Escondida, where ongoing preventive measures
in response to the resurgence of COVID-19 continued to impact
workforce availability.
At $2.0 billion, our underlying EBITDA was almost three times
higher than 2020 first half. The stronger market environment, which
rebounded from the impact of the global COVID-19 pandemic, drove
underlying EBITDA $1.3 billion higher, with a 66% increase in our
realised copper price to 415 US cents per pound, before taking into
account the provisional pricing benefit to revenues of $202 million
in 2021 first half. We incurred additional costs related to our
response to COVID-19, higher energy costs, notably in the US driven
by weather conditions, and higher royalties at Oyu Tolgoi, in line
with higher volumes and prices. These were offset by an improvement
in refined copper volumes at Kennecott due to the non-recurrence of
two significant events in 2020 - the earthquake in March and the
planned smelter shutdown that commenced in May.
Our C1 copper unit costs, at 71 cents per pound in 2021 first
half, were 43% lower than in 2020 first half. Lower throughput and
grades at Escondida and higher royalties, in line with stronger
prices, at Kennecott and Oyu Tolgoi were offset by higher
production of copper and, in particular, gold at Oyu Tolgoi, driven
by higher grades.
We continued to advance our future copper evaluation projects,
in particular at Resolution Copper in Arizona and Winu in Western
Australia.
Strong cash from our operating activities of $1.2 billion
benefited from the same drivers as underlying EBITDA and $0.5
billion higher dividends from Escondida. This was partly offset by
a tax payment of $0.4 billion in Mongolia that is being disputed by
Oyu Tolgoi, including through international arbitration. Free cash
flow of $0.6 billion was net of $0.7 billion of capital
expenditure, which included ongoing activities at the Oyu Tolgoi
underground project.
Review of operations
Copper
Mined copper production of 236.1 thousand tonnes was 11% lower
than 2020 first half, attributable to lower recoveries, throughput
and grade at Escondida, partly offset by marginally higher
production at Oyu Tolgoi.
Refined copper production was 50% higher than 2020 first half,
reflecting Kennecott's full recovery from the earthquake in March
2020 and the planned smelter shutdown which commenced in May
2020.
Kennecott
Mined copper production was 6% lower than 2020 first half
primarily due to a planned relocation of the in-pit crusher in
April and a slope failure in May. The successful relocation of the
crusher to a new area outside of the pit is a significant milestone
as it enables access to additional ore and reduces the risk of a
potential geotechnical event on key mine infrastructure. On 31 May
2021, an anticipated slope failure occurred in the south east wall
of the Bingham Canyon pit. There were no injuries or damage to
equipment as the slope deformation had been methodically tracked
since May 2020 and the timing of the slide was accurately predicted
by our best-in-class slope monitoring systems and geotechnical
team.
Escondida
In first half 2021, Escondida's mined copper production was 17%
lower than 2020 first half, due to lower concentrator throughput,
lower grade in ore feed to concentrators and lower recoverable
copper in ore stacked for leaching. This was as a result of ongoing
preventive measures in response to the resurgence of COVID-19 in
the region, which has continued to impact workforce
availability.
On 1 April 2021, Escondida successfully completed negotiations
for a new collective agreement that applies to the Intermel Union
of Operators and Maintainers, effective for 24 months from 1 April
2021. Escondida's collective agreement with Union No1 of Operators
and Maintainers expires on 1 August 2021 and negotiations commenced
in June 2021.
Oyu Tolgoi
Mined copper production from the open pit was 15% higher than
2020 first half with higher head grades and copper recovery, partly
offset by lower manning levels due to COVID-19.
First half shipments were affected by Chinese border
restrictions due to increased cases of COVID-19 in Mongolia. Force
majeure was declared on shipments from 30 March and remains in
place. Shipments resumed with some measures in place to transport
greater volumes in a safe and efficient manner.
Oyu Tolgoi underground project(1)
Project progress has been significantly affected by heightened
COVID-19 constraints in Mongolia. To comply with COVID-19
restrictions, site manning levels were less than 25% of planned
requirements. Despite these restrictions, as the Material Handling
System 1 had been ahead of the definitive estimate schedule
(sustainable production for Panel 0 expected in October 2022 and
development capital of $6.75 billion(2) ), it is now 90% complete
with technical criteria achieved to support undercut commencement,
subject to the ongoing impacts of COVID-19 and satisfactory
resolution of the non-technical undercut criteria.
The impact of the additional restrictions experienced in the
first half is ongoing and still to be determined.
Following the Presidential election, engagements continue and
the negotiation team is in the process of remobilising to continue
formal discussions with the Government of Mongolia. All
stakeholders remain committed to moving the project forward and
ensuring a long-term solution to the issues under discussion. As
previously reported, a number of additional milestones need to be
met in order to ensure that the project can commence caving
operations (undercut) including: key regulatory milestones
including registration of the updated Resources and Reserves and
acceptance of the updated Feasibility Study (OTFS20) by the
relevant governmental agencies of Mongolia; project budget uplift
in line with the definitive estimate to be approved by the Oyu
Tolgoi board; funding plan in line with the Heads of Agreement
signed in April between Rio Tinto and Turquoise Hill Resources to
be approved by the Oyu Tolgoi Board; and milestones for the power
solution.
Other projects and growth options
The $0.9 billion investment in phase one of the south wall
pushback project at Kennecott, which will extend mine life to 2026,
remains on track. We expect to gradually access higher grades made
available from this project from 2021. The $1.5 billion investment
in phase two will further extend strip waste rock mining and
support additional infrastructure development, allowing mining to
continue into a new area of the ore body between 2026 and 2032 and
continue to generate attractive returns for Kennecott.
On 22 July, we announced the approval of a $108 million
investment for underground characterisation studies to support an
underground mine below the existing open pit at Kennecott.
Potential underground mining would occur concurrently with open pit
operations and result in increased copper output.
At our Resolution Copper project in Arizona, we are continuing
to assist the US Forest Service with its review of the Final
Environmental Impact Statement and draft Record of Decision. Mine
studies continue to progress in parallel.
At the Winu project in Western Australia, we continue to
actively engage with the Traditional Owners and we plan to commence
discussions on the initial scope and mine design, also in
consultation with the Western Australian Environmental Protection
Authority, with sanction now targeted for next year and first
production in 2025 partly due to COVID-19 constraints. Drilling,
fieldwork and study activities continue to progress.
At the Simandou iron ore project in Guinea, we are reviewing
results from the technical optimisation of the infrastructure
studies, and product test sample analysis is now underway. A new
office was established in Conakry in the second quarter as we
expand our in-country team.
1. Project baseline reporting has been updated following
endorsement of the definitive estimate by Rio Tinto Board and
Turquoise Hill Resources (pending Oyu Tolgoi board approval). The
definitive estimate assumed COVID-19 restrictions in 2021 that were
no more stringent than those experienced in September 2020 and
noted that should COVID-19 constraints continue beyond 2021 or
should the COVID-19 situation escalate further in 2021 leading to
tougher restrictions, additional costs and schedule impacts will
arise. Since the definitive estimate, at the end of 2020, Mongolia
implemented additional restrictions in response to community
transmission cases, and in March 2021 the first cases of COVID-19
were identified at Oyu Tolgoi resulting in temporary site shutdown,
quarantine measures and further travel and movement restrictions.
The impact of these additional restrictions, which have continued
throughout this period and are beyond those experienced in
September 2020, is ongoing and still to be determined.
2. This estimate is at a "better than feasibility study" level
of accuracy.
Minerals
Six months ended 30 June 2021 2020 Change
---------------------------------------------------- ------- ------- --------
Iron ore pellets and concentrates production(1)
(000 tonnes - Rio Tinto share) 5,066 5,322 (5)%
---------------------------------------------------- ------- ------- ----
Titanium dioxide slag production (000 tonnes
- Rio Tinto share) 577 555 4%
---------------------------------------------------- ------- ------- ----
Borates production (000 tonnes - Rio Tinto
share) 248 258 (4)%
---------------------------------------------------- ------- ------- ----
Diamonds production (000 carats - Rio Tinto
share)(2) 1,858 1,820 2%
---------------------------------------------------- ------- ------- ----
Gross product sales (US$ millions) 3,270 2,322 41%
---------------------------------------------------- ------- ------- ----
Underlying EBITDA (US$ millions) 1,398 712 96%
---------------------------------------------------- ------- ------- ----
Underlying EBITDA margin (product group operations) 46% 33%
---------------------------------------------------- --- --- --------
Underlying earnings (US$ millions) 498 190 162%
---------------------------------------------------- ------- ------- ----
Net cash generated from operating activities
(US$ millions) 582 396 47%
Capital expenditure (US$ millions)(3) (209) (147) 42%
---------------------------------------------------- ------- ------- ----
Free cash flow (US$ millions) 362 242 50%
---------------------------------------------------- ------- ------- ----
Underlying return on capital employed(4) 19% 8%
---------------------------------------------------- --- --- --------
1. Iron Ore Company of Canada continues to be reported within
Minerals. Following a reorganisation of the management team, the
Diamonds business is reported within Minerals and the Simandou iron
ore project in Guinea is reported within Copper.
2. Diamonds production solely relates to Diavik, following the
closure of Argyle in 2020. The 2020 comparative for production has
been restated. Financial comparatives include the results of the
whole Diamonds business.
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 (operating assets).
Our colleague Nico Swart was tragically killed in a shooting
incident whilst driving to work at RBM on 24 May. Our sympathies
are with Nico's family and we are offering ongoing support to his
family, friends and colleagues.
Financial performance
The business was generally stable from an operational
perspective, while continuing to comply with government-imposed
COVID-19 restrictions, notably in Canada.
The one significant exception was at Richards Bay Minerals (RBM)
in South Africa where operations were significantly hampered by a
deterioration in the security situation. As a result, we declared
force majeure on 30 June, with the cessation of mining activities
and curtailment of the smelter. On 21 July, we announced that we
would shut one of the four furnaces due to depletion of available
feedstock. We continue to work with national and provincial
governments as well as community structures to find a lasting
solution to the current situation. However, if the situation does
not improve, then we could be forced to progressively shut down the
other furnaces by the end of August.
Underlying EBITDA of $1.4 billion was almost double 2020 first
half, primarily reflecting a $0.9 billion benefit from higher
pricing across the portfolio, with prices achieved for iron ore
pellets and concentrates for sale being the main contributor.
We generated net cash of $0.6 billion from our operating
activities and $0.4 billion of free cash flow, 47% and 50% higher,
respectively, reflecting the strong pricing environment and our
operational performance.
Review of operations
Iron Ore Company of Canada (IOC)
IOC production of pellets and concentrate was 5% lower than 2020
first half due to labour and equipment
availability issues impacting product feed. Force majeure
declared in April was lifted 9 weeks later following the temporary
cessation of ship loading due to a fire in March at one shiploader
when the second shiploader was undergoing planned maintenance
activities .
Total shipments of pellets and concentrates were 8.3 million
tonnes (our share 4.8 million tonnes), 12% lower than 2020 first
half.
Minerals
Titanium dioxide feedstock production was 4% higher than 2020
first half, with consistent production at the Fer et Titane (RTFT)
metallurgical complex in Quebec.
Borates production was 4% lower than 2020 first half. Completion
of planned major maintenance in May, combined with productivity
initiatives will help support system stability in the second
half.
Diamonds
Diamond production at Diavik was 2% higher than 2020 first half,
driven by a 9% uplift in tonnes processed, due to plant
productivity improvements.
Projects and growth options
The Zulti South project at RBM in South Africa is on full
suspension.
On 27 July, the Board committed funding for the Jadar
lithium-borates project in Serbia: we are ready to invest $2.4
billion in one of the world's largest greenfield lithium projects,
subject to receiving all relevant approvals, permits and licences
and ongoing engagement with local communities, the Government of
Serbia and civil society. The asset is expected to operate in the
first quartile of the cost curve, with a 40-year mine life. First
saleable production is expected to take place in mid-2026 at a time
of strong market fundamentals with lithium demand forecast to grow
25-35% per year over the next decade. Following ramp-up to full
production in 2029, the mine is expected to produce 58,000 tonnes
of battery-grade lithium carbonate, 160,000 tonnes of boric acid
(B(2) O(3) units) and 255,000 tonnes of sodium sulphate
annually.(3) Jadar could supply all the necessary lithium to power
over one million electric vehicles per year.(4)
The Jadar development will include an underground mine with
associated infrastructure and equipment, including electric haul
trucks, as well as a beneficiation chemical processing plant. To
minimise the impact to communities, it will be built to the highest
environmental standards, including utilising dry stacking of
tailings. This innovative method allows the dry tailings to be
progressively reclaimed with vegetation and soil with no need for a
tailings dam. Water management will be state of the art with a
dedicated facility resulting in approximately 70% of raw water
coming from recycled sources or treated mine water.
Jadar will be a significant investment for Serbia and has the
potential to make a 1% direct and 4% indirect contribution to the
country's GDP, with many Serbian suppliers being involved in the
construction of the mine. We are committed to help develop local
businesses so that they can support the operation over the coming
decades. It will also be a significant employer, creating 2,100
jobs during construction and 1,000 mining and processing jobs once
in production.
Footnotes are set out on page 25.
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
Average on
published full year 2021
price/exchange underlying EBITDA
rate for of a 10% change
2021 first in prices/exchange
half rates
------------------------------------------------------ --------------- ---------------------
Aluminium - US$/t $2,245 784
------------------------------------------------------ --------------- -------------------
Copper - US cents per pound 413c 478
------------------------------------------------------ --------------- -------------------
Gold - US$/ounce $1,805 77
------------------------------------------------------ --------------- -------------------
Iron ore realised price (62% Fe CFR freight-adjusted)
- US$ per dry metric tonne $168.4 4,180
------------------------------------------------------ --------------- -------------------
Australian dollar against the US dollar 0.77 665
------------------------------------------------------ --------------- -------------------
Canadian dollar against the US dollar 0.80 249
------------------------------------------------------ --------------- -------------------
Oil (Brent) - US$ per barrel $65 112
------------------------------------------------------ --------------- -------------------
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 $1,262 per tonne in 2021
first half:
US$/t
------------------------------ -------
Alumina (FOB) 191
------------------------------ -----
Green petroleum coke (FOB) 27
------------------------------ -----
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.
Capital projects
Approved
Total approved capital
capital remaining
Projects cost to be
(Rio Tinto 100% (100% unless spent from
owned unless otherwise 1 July
otherwise stated) stated) 2021 Status/Milestones
--------------------------------- -------------- ----------- --------------------------------------
Ongoing and approved
--------------------------------- -------------- ----------- --------------------------------------
Iron ore
--------------------------------- -------------- ----------- --------------------------------------
Investment in the Robe $0.9bn $0.2bn Approved in October 2018,
River Joint Venture (RT share) (RT share) the investments will enable
(West Angelas C and us to sustain production
D and Mesa B, C and of our Pilbara Blend(TM)
H at Robe Valley) in and Robe Valley products.
the Pilbara region An additional $0.1 billion
of Western Australia (100% basis) was approved
to sustain production by the joint venture partners
capacity. in the first half of 2021.
First ore at West Angelas
(C, D) was achieved in June
with load commissioning expected
later in the year following
delays related to heritage
management. First ore at
Robe Valley (Mesa B, C, H)
is still expected in 2021,
consistent with previous
guidance.
--------------------------------- -------------- ----------- --------------------------------------
Investment in Gudai-Darri, $2.6bn $0.6bn Approved in November 2018.
a new production hub Mining has commenced, with
in the Pilbara region more than nine million cubic
of Western Australia. metres of pre-stripping completed.
The investment incorporates Labour shortages have impacted
a processing plant both steel fabrication and
and infrastructure site construction activities.
including a 166-kilometre First ore is expected in
rail line connecting 2021, although commissioning
the mine to our existing is later than originally
network. Once complete, planned. The project is expected
the mine will have to ramp up in early 2022,
an initial annual capacity consistent with previous
of 43 million tonnes. guidance, and reach full
capacity in 2023.
--------------------------------- -------------- ----------- --------------------------------------
Investment in the Greater $0.8bn $0.3bn Approved in November 2019,
Tom Price operations the investment will enable
(Western Turner Syncline us to sustain production
phase 2) to sustain of our Pilbara Blend(TM)
production capacity. and facilitate mining of
existing and new deposits
around Tom Price. It includes
construction of a new crusher
and a 13-kilometre conveyor.
First ore is still expected
in 2021, consistent with
previous guidance.
--------------------------------- -------------- ----------- --------------------------------------
Aluminium
--------------------------------- -------------- ----------- --------------------------------------
Investment in a second $0.8bn $0.3bn The project was approved
tunnel at the 1000MW in 2017, with $155 million
Kemano hydropower facility of additional capital approved
at Kitimat, British in 2020 and a further $132
Columbia, Canada, which million approval in July
will ensure the long-term 2021. Works resumed at full
reliability of the capacity in 2021 first half
power supply to the and the tunnel boring excavation
Kitimat smelter. is now 74% complete, having
achieved a total of 5,660
metres. The project is scheduled
to complete in the second
half of 2022, subject to
there being no further COVID-19
delays.
--------------------------------- -------------- ----------- --------------------------------------
Copper
--------------------------------- -------------- ----------- --------------------------------------
Investment in the south $0.9bn <$0.1bn Funding for the continuation
wall pushback, to extend of open pit mining via the
mine life at Kennecott, push back of the south wall:
Utah, US, from 2019 the project is largely complete
to 2026. with some simple mine stripping
activities remaining.
--------------------------------- -------------- ----------- --------------------------------------
Phase two of the south $1.5bn $1.3bn 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
development. This will allow
mining to continue into a
new area of the orebody between
2026 and 2032.
--------------------------------- -------------- ----------- --------------------------------------
Development of the $6.75bn(2) $2.15bn The project was originally
Oyu Tolgoi underground approved in May 2016 for
copper/gold mine in $5.3bn, with an additional
Mongolia (Rio Tinto $1.45 billion approval by
34%), which is expected the Rio Tinto Board in December
to produce 480,000 2020, following completion
tonnes(1) of copper of the definitive estimate.
per year on average Sustainable production for
from 2028 to 2036 (open Panel 0 is expected to be
pit and underground), achieved by October 2022,
compared with 149,600 subject to the ongoing impacts
tonnes in 2020 (open of COVID-19(2) and satisfactory
pit). resolution of the non-technical
undercut criteria.
--------------------------------- -------------- ----------- --------------------------------------
Minerals
--------------------------------- -------------- ----------- --------------------------------------
Development of the $0.5bn $0.3bn Approved in April 2019, the
Zulti South project investment will underpin
at Richards Bay Minerals RBM's supply of zircon and
(RBM) in South Africa ilmenite over the life of
(Rio Tinto 74%), to the mine. Construction remains
sustain current capacity on full suspension, pending
and extend mine life. normalisation of operations.
--------------------------------- -------------- ----------- --------------------------------------
Development of the $2.4bn $2.4bn The project was approved
greenfield Jadar lithium-borates in July 2021. It remains
project in Serbia. subject to receiving all
The development will relevant approvals, permits
include an underground and licences and ongoing
mine with associated engagement with local communities,
infrastructure and the Government of Serbia
equipment, including and civil society. First
electric haul trucks, saleable production is expected
as well as a beneficiation in 2026 with ramp-up to full
chemical processing production of 58,000 tonnes
plant. of battery-grade lithium
carbonate, 160,000 tonnes
of boric acid (B(2) O(3)
units) and 255,000 tonnes
of sodium sulphate per year
in 2029.(3)
1. This production target (stated as recovered metal) for the
Oyu Tolgoi underground and open pit mines was previously reported
in a release to the market on 16 December 2020 (market release).
All material assumptions underpinning the production target
continue to apply and have not materially changed
2. These estimates include the known impacts of COVID-19. The
definitive estimate assumes restrictions in 2021 that are no more
stringent than those experienced in September 2020. Mongolia
implemented further restrictions at the end of 2020 in response to
a re-emergence of COVID-19. Should COVID-19 constraints be
maintained at December 2020 levels, escalate further in 2021
leading to tougher restrictions, or continue beyond 2021,
additional costs and schedule impacts will arise.
3. These production targets were previously reported in a
release to the Australian Securities Exchange (ASX) dated 10
December 2020, "Rio Tinto declares maiden Ore Reserve at Jadar"
(for battery-grade lithium carbonate it was 55,000 tonnes). All
material assumptions underpinning the production targets continue
to apply and have not materially changed.
4. Assuming 60kWh battery size.
DIRECTORS' REPORT
for the half year ended 30 June 2021
Review of operations and important events
A detailed review of the Group's operations, the results of
those operations during the half year ended 30 June 2021 and likely
future developments are given on pages 1 to 25. Important events
that have occurred during the period and up until the date of this
report are set out below.
Financial
On 2 March 2021, we announced that the Australian Taxation
Office (ATO) had issued Rio Tinto Limited with amended assessments
of A$359.4m (US$279.8m) primary tax and A$47.1m (US$36.7m) of
interest.
On 8 April 2021, we published our latest Taxes paid report
detailing the $8.4 billion of taxes and royalties paid globally in
2020, up from $7.6 billion in 2019. The majority of taxes were paid
in Australia ($6.8 billion), home to the largest part of our
business. We also made significant payments in Canada ($651
million), Mongolia ($277 million), Chile ($246 million), UK ($132
million), United States ($111 million), and South Africa ($61
million).
On 27 May 2021 we announced that we had published a report on
payments to governments made by us and our subsidiary undertakings
for the year ended 31 December 2020 as required under the UK's
Report on Payments to Governments Regulations 2014 (as amended in
December 2015). We paid US$8.4 billion of taxes and royalties and a
further US$1.4 billion on behalf of our employees during 2020.
On 1 June 2021 we announced that we had made an application to
the Financial Conduct Authority and the London Stock Exchange for
the block listing of 30,000 ordinary shares of 10 pence each in the
Company to be admitted to the Official List and to be traded on the
Main Market of the London Stock Exchange.
Operations
On 17 February 2021 we announced changes to estimates of Mineral
Resources and Ore Reserves: Mineral Resources and Ore Reserves at
Rio Tinto's Pilbara iron ore deposits in Western Australia, Mineral
Resources and Ore Reserves at Rio Tinto Aluminium (RTA) Pacific
Operations' Weipa and Gove assets in Australia and Mineral
Resources at the Kennecott Copper operation in Utah.
On 23 March 2021 we announced how we will work in partnership
with Traditional Owners, host communities and independent groups to
strengthen and improve our approach to cultural heritage and
community relations.
On 9 April 2021 we announced that we had entered into a binding
Heads of Agreement with Turquoise Hill Resources for an updated
funding plan for the completion of the Oyu Tolgoi Underground
Project in Mongolia.
On 30 June 2021 we announced that we had declared force majeure
on customer contracts at Richards Bay Minerals in South Africa due
to an escalation in the security situation at the operations. This
led to the decision to cease operations until the safety and
security position improved.
On 21 July 2021 we announced that we had reached an agreement to
identify and assess legacy impacts of the former Panguna copper
mine in Bougainville with Bougainville community members,
represented by the Human Rights Law Centre.
On 21 July 2021 we announced that the Richards Bay Minerals
(RBM) operation in South Africa will shut one of its four furnaces
due to the depletion of available feedstock at the plant.
People
On 3 March 2021 we announced that Chairman Simon Thompson would
not seek re-election at the 2022 annual general meetings (AGMs) of
Rio Tinto plc and Rio Tinto Limited. It was also announced that
Michael L'Estrange, a non-executive director, would retire from the
Board at the conclusion of the 2021 AGMs.
On 27 April 2021 we announced that Barbara Levi, Chief Legal
Officer & External Affairs, had accepted the position of Group
General Counsel at UBS and will leave Rio Tinto by the end of
October 2021.
On 4 June 2021 we announced that we had appointed Ben Wyatt as a
non-executive director effective September 2021.
On 17 June 2021 we announced the appointment of Peter Cunningham
as Chief Financial Officer with immediate effect. Peter, who had
been Interim Chief Financial Officer since 1 January 2021, also
joined the Rio Tinto Board as an executive director at the same
time.
On 7 July 2021 we announced that we had appointed Isabelle
Deschamps to succeed Barbara Levi as Chief Legal Officer &
External Affairs.
Rio Tinto 2021 Annual General Meetings ("AGMs")
The annual general meetings of Rio Tinto plc and Rio Tinto
Limited were held on 9 April 2021 and 6 May 2021 respectively.
Under Rio Tinto's dual listed companies structure established in
1995, decisions on significant matters affecting shareholders of
Rio Tinto plc and Rio Tinto Limited in similar ways are taken
through a joint electoral procedure.
Resolutions 3 ("Approval of the Directors' Remuneration Report:
Implementation Report") and 4 ("Approval of the Directors'
Remuneration Report"), put to the joint electorate, were not passed
as ordinary resolutions. As more than 25% of the votes cast were
against resolution 4, this constitutes a "first strike" for the
purposes of section 250U of the Australian Corporations Act 2001.
The Board acknowledged that the executive pay outcomes in relation
to the tragic events at Juukan Gorge are sensitive and contentious
issues. During the course of 2021, the Remuneration Committee will
engage further with shareholders in response to the 2020
Remuneration Report vote. The Committee will take time to reflect
further on the feedback already received and on any new input
obtained from this subsequent engagement, in particular as it
considers the implementation of the new Remuneration Policy.
Resolution 5 ("To re-elect Megan Clark AC as a director"), put
to the joint electorate, was passed as an ordinary resolution with
73.52% votes in favour. Rio Tinto acknowledged that the reduced
vote for Dr Clark's re-election compared to previous years reflects
the fact that, as Chair of the Sustainability Committee at the time
that the rock shelters at Juukan Gorge were destroyed, Dr Clark
shares accountability for the failings in the areas of communities
and social performance that led to those events occurring. In light
of the support provided by almost 75% of shareholders, Dr Clark and
the Board carefully weighed the need for accountability for the
events at Juukan Gorge against the significant contribution,
experience and continuity that Dr Clark brings to the Board and the
Group's relationship with Traditional Owners, and concluded that
she should remain on the Board in order to provide stability at
this important time for Rio Tinto. In view of the reduced vote, the
Board will continue to consult with shareholders and will consider
their feedback as it continues to oversee the implementation of the
Group's priorities in social performance and cultural heritage
management.
At Rio Tinto plc's AGM on 9 April 2021, Resolution 21
("Authority to purchase Rio Tinto plc shares"), put to Rio Tinto
plc shareholders only, was passed with less than 80% of votes in
favour. Shining Prospect (a subsidiary of the Aluminium Corporation
of China "Chinalco") voted against it. Chinalco has not sold any of
its shares in Rio Tinto plc and now has a holding of over 14% given
its non-participation in the Company's significant share buy-back
programmes. This places Chinalco close to the 14.99% holding
threshold agreed with the Australian Government at the time of its
original investment in Rio Tinto.
Directors
The directors serving on the Boards of Rio Tinto plc and Rio
Tinto Limited as at 30 June 2021 were:
Notes Date of appointment
Chairman
(R, N and
Simon Thompson S) 1 April 2014
Executive directors
Jakob Stausholm, Chief Executive Officer 3 September 2018
Peter Cunningham, Chief Financial Officer 17 June 2021
Non-executive directors
Sam Laidlaw (senior independent director, (R, N and
Rio Tinto plc) S) 10 February 2017
Simon McKeon (senior independent director, (A, R and
Rio Tinto Limited) N) 1 January 2019
(R, N and
Megan Clark S) 20 November 2014
(A, N and
Hinda Gharbi S) 1 March 2020
(A, N and
Simon Henry S) 1 April 2017
(R, N and
Jennifer Nason S) 1 March 2020
(R, N and
Ngaire Woods S) 1 September 2020
Notes
(A) Audit Committee, (R) Remuneration Committee, (N) Nominations
Committee, (S) Sustainability Committee
Dividend
The 2020 final dividend was paid on 15 April 2021 to holders of
Rio Tinto plc and Rio Tinto Limited ordinary shares and Rio Tinto
plc ADR holders. The 2020 final dividend, equivalent to 309 US
cents per share was determined by the board on 17 February 2021.
Rio Tinto plc shareholders received 221.86 pence per share and Rio
Tinto Limited shareholders received 397.48 Australian cents per
share, based on the applicable exchange rates on 16 February 2021.
Rio Tinto plc ADR holders received 309 US cents per ADR for the
final dividend.
The 2021 interim dividend, equivalent to 376 US cents per share,
and the special dividend, equivalent to 185 US cents per share will
be paid on 23 September 2021 to Rio Tinto Limited, Rio Tinto plc
and Rio Tinto plc ADR shareholders on the register at the close of
business on 13 August 2021. The ex-dividend date for both the 2021
interim dividend and the special dividend for Rio Tinto Limited,
Rio Tinto plc and Rio Tinto plc ADR shareholders is 12 August 2021.
Rio Tinto plc shareholders will receive 270.84 pence per share for
the interim dividend and 133.26 pence per share for the special
dividend and Rio Tinto Limited shareholders will receive 509.42
Australian cents per share for the interim dividend and 250.64
Australian cents per share for the special dividend based on the
applicable exchange rates on 27 July 2021. ADR holders receive
dividends at the declared rate in US dollars.
Principal risks and uncertainties
The principal risks and uncertainties that could materially
affect our results and operations are set out on
pages 92 to 108 of the 2020 Annual Report. For the remaining six
months of the financial year, these remain broadly consistent with
the trends reported in the Annual Report. We continue to monitor
areas of uncertainty in the short to medium term, namely the
effectiveness of COVID-19 vaccinations, reform of the Aboriginal
Heritage Act 1972 in Western Australia and our Richards Bay
Minerals operation.
Impact of the pandemic continues to evolve as optimism from
vaccine rollouts are countered by resurgence of the virus in some
regions we operate. Unfortunately, our progress on projects
continue to be impacted by COVID-19 related travel
restrictions.
The future impact of the Aboriginal Heritage Act 1972 reform in
Western Australia on our Pilbara mine developments and heritage
approach remains unknown. In 2020, 54 million dry tonnes of iron
ore were removed from Reserves. Our iron ore reserves totalled 3
billion tonnes at the end of 2020 across our Pilbara mines.
Quantification of impact of heritage exclusions on Pilbara's
reserve base continues as part of our mine replenishment planning
and ongoing Traditional Owner engagement. We have committed to
establishing an Indigenous Advisory Group to help us to better
manage policies and positions that are important to Indigenous
Australia and our business.
We have been saddened by loss of our colleague from Richards Bay
Minerals operation in South Africa. We are focused on restoring
safe operations at Richards Bay Minerals as soon as possible and we
continue to monitor the local situation closely.
Living our corporate values
Living our values (Safety, Teamwork, Respect, Integrity and
Excellence) goes to the heart of our Group's performance, future
prospects and reputation.
Geopolitics impacting trade and/or investment
International geopolitics may impact our ability to operate
effectively and/or invest.
Transition to a low-carbon future
Climate change is a systemic challenge and will require
co-ordinated actions between nations, industries and society. Our
risk is that we do not adapt competitively to the requirements of a
low-carbon future.
Execution of acquisitions and divestments
Acquisitions' (or divestments') actual realised value may vary
materially from original business case.
New ore resources
The success of exploration programmes and/or acquisitions may be
insufficient to offset depletion.
Strategic partnerships
Strategic partnerships play a material role in delivering our
growth, production, cash or market positioning,
and these may not always develop as planned.
Relationships with communities
We may not be viewed as a trusted partner by society and
governments, affecting our ability to operate and
grow through collaborative and mutually beneficial
partnerships.
Attract and retain requisite skilled people
Our ability to maintain our competitive position is dependent on
attracting, developing and retaining services of a wide range of
internal and external skilled and experienced personnel and
contracting partners.
Commodity economics
Commodity prices, driven by demand for and supply of our
products, vary and may not be as expected over time.
Access to capital through economic cycles
External events and financial discipline may impact our ability
to access capital and support our strategy.
Resources to reserves
Our estimates of ore resources and reserves may vary.
Capital project delivery
Large capital investments require multi-year execution plans and
are complex.
Change in tax regulations
The international tax policy landscape is becoming increasingly
volatile.
Safety incident or major hazard event
Our operations and projects are inherently hazardous, with the
potential to cause illness or injury, damage to the environment,
and disruption to communities.
Cyber breach
Cyber risk may disrupt our operations, affect how our employees
work and/or breach data privacy and other sensitive information
related to customers, contractors and suppliers.
Physical impacts from climate change
Our operating sites may be vulnerable to the physical impacts of
climate change.
Water scarcity and management
Water is a key part of our operational environmental footprint
and a critical, shared resource for people, the environment and
economic prosperity.
Natural disaster exposure
A natural disaster occurs with significant operational
interruption or damage to our assets and/or communities.
Closure, reclamation and rehabilitation
Estimated costs and liabilities for our sites after they cease
operating may vary.
Civil unrest
Civil unrest may expose our employees and/or operations to
significant threats or impact our key markets and customers,
potentially resulting in compromised employee safety, and damage to
or loss of assets.
COVID-19
The potential for transmission across our teams, communities and
supply chains continues to be a threat.
Breach of our policies, standards and procedures, laws or
regulations
This risk may greatly impact our reputation, licence to operate,
and potentially exposes us financially.
Publication of half year results
In accordance with the UK Financial Conduct Authority's
Disclosure Guidance & Transparency Rules and the Australian
Securities Exchange Listing Rules, the half year results will be
made public and are available on the Rio Tinto Group website.
Auditor's independence declaration
KPMG, the auditors of Rio Tinto Limited, have provided the
auditor's independence declaration as required under section 307C
of the Corporations Act 2001 in Australia. This has been reproduced
on page 69 and forms part of this report.
The Directors' report is made in accordance with a resolution of
the Board.
Simon Thompson
Chairman
28 July 2021
Group income statement
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
------------------------------------------------------- ---------- ----------
Consolidated operations
Consolidated sales revenue 33,083 19,362
Net operating costs (excluding items shown separately) (15,322) (12,217)
Impairment charges(a) - (1,015)
Exploration and evaluation costs (324) (280)
Operating profit 17,437 5,850
Share of profit after tax of equity accounted
units 556 198
Impairment of investments in equity accounted
units(a) - (119)
------------------------------------------------------- ---------- ----------
Profit before finance items and taxation 17,993 5,929
Finance items
Net exchange gains/(losses) on net external and
intragroup debt balances 375 (165)
Net losses on derivatives not qualifying for hedge
accounting (63) (206)
Finance income 42 104
Finance costs(b) (91) (169)
Amortisation of discount on provisions (207) (214)
------------------------------------------------------- ---------- ----------
56 (650)
------------------------------------------------------- ---------- ----------
Profit before taxation 18,049 5,279
------------------------------------------------------- ---------- ----------
Taxation (4,981) (1,828)
------------------------------------------------------- ---------- ----------
Profit after tax for the period 13,068 3,451
- attributable to owners of Rio Tinto (net earnings) 12,313 3,316
- attributable to non-controlling interests 755 135
------------------------------------------------------- ---------- ----------
Basic earnings per share(c) 761.0c 205.0c
Diluted earnings per share(c) 756.1c 203.6c
------------------------------------------------------- ---------- ----------
(a) Refer to Impairment charges note on pages 45 and 46.
(b) Finance costs in the income statement include hedging
adjustments and are net of amounts capitalised of US$174 million
(30 June 2020: US$175 million).
(c) For the purpose of calculating basic earnings per share, the
weighted average number of Rio Tinto plc and Rio Tinto Limited
shares outstanding during the period was 1,618.1 million (30 June
2020: 1,617.3 million), being the weighted average number of Rio
Tinto plc shares outstanding of 1,246.9 million (30 June 2020:
1,246.5 million), plus the weighted average number of Rio Tinto
Limited shares outstanding of 371.2 million (30 June 2020: 370.8
million). The profit figures used in the calculation of basic and
diluted earnings per share are the profits attributable to owners
of Rio Tinto.
For the purpose of calculating diluted earnings per share, the
effect of dilutive securities is added to the weighted average
number of shares. This effect is calculated under the treasury
stock method.
Group statement of comprehensive income
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
-------------------------------------------------------- ---------- ----------
Profit after tax for the period 13,068 3,451
Other comprehensive income/(loss)
Items that will not be reclassified to profit
or loss:
Actuarial gains/(losses) on post-retirement benefit
plans 712 (283)
Changes in the fair value of equity investments
held at fair value through other comprehensive
income (FVOCI) 12 (4)
Tax relating to these components of other comprehensive
income (219) 75
Share of other comprehensive income/(losses) of
equity accounted units, net of tax 12 (6)
-------------------------------------------------------- ---------- ----------
517 (218)
Items that have been/may be subsequently reclassified
to profit or loss:
Currency translation adjustment(a) (365) (945)
Fair value movements:
- Cash flow hedge (losses)/gains (142) 69
- Cash flow hedge (gains)/losses transferred to
the income statement (20) 21
Net change in costs of hedging (20) 10
Tax relating to these components of other comprehensive
loss/(income) 55 (46)
Share of other comprehensive income/(losses) of
equity accounted units, net of tax 10 (32)
======================================================== ---------- ----------
Other comprehensive income/(loss) for the period,
net of tax 35 (1,141)
======================================================== ---------- ----------
Total comprehensive income for the period 13,103 2,310
======================================================== ---------- ----------
- attributable to owners of Rio Tinto 12,342 2,289
- attributable to non-controlling interests 761 21
-------------------------------------------------------- ---------- ----------
(a) Excludes a currency translation loss of US$82 million for
the period ended 30 June 2021 (30 June 2020: loss of US$75 million)
arising on Rio Tinto Limited's share capital, which is recognised
in the Group statement of changes in equity on pages 37 and 38.
Group cash flow statement
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
---------------------------------------------------------- ---------- ----------
Cash flows from consolidated operations(a) 18,179 8,643
Dividends from equity accounted units 726 183
---------------------------------------------------------- ---------- ----------
Cash flows from operations 18,905 8,826
Net interest paid (208) (258)
Dividends paid to holders of non-controlling interests
in subsidiaries (407) (215)
Tax paid (4,629) (2,725)
---------------------------------------------------------- ---------- ----------
Net cash generated from operating activities 13,661 5,628
Cash flows from investing activities
Purchases of property, plant and equipment and
intangible assets (3,336) (2,693)
Disposals of subsidiaries, joint ventures, unincorporated
joint operations and associates 10 10
Purchases of financial assets(b) (18) (20)
Sales of financial assets(b) 16 87
Sales of property, plant and equipment and intangible
assets 26 28
Net receipts/(funding) from/of equity accounted
units 28 (14)
Other investing cash flows(c) (33) (333)
---------------------------------------------------------- ---------- ----------
Net cash used in investing activities (3,307) (2,935)
Cash flows before financing activities 10,354 2,693
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (6,435) (3,607)
Proceeds from additional borrowings 137 38
Repayment of borrowings and associated derivatives(d) (257) (593)
Lease principal payments (170) (154)
Proceeds from issue of equity to non-controlling
interests 28 79
Own shares purchased from owners of Rio Tinto - (208)
Other financing cash flows 6 -
---------------------------------------------------------- ---------- ----------
Net cash flows used in financing activities (6,691) (4,445)
Effects of exchange rates on cash and cash equivalents (21) (21)
---------------------------------------------------------- ---------- ----------
Net increase/(decrease) in cash and cash equivalents 3,642 (1,773)
---------------------------------------------------------- ---------- ----------
Opening cash and cash equivalents less overdrafts 10,381 8,027
---------------------------------------------------------- ---------- ----------
Closing cash and cash equivalents less overdrafts(e) 14,023 6,254
---------------------------------------------------------- ---------- ----------
(a) Cash flows from consolidated operations
------------------------------------------------------ ------ -------
Profit after tax for the period 13,068 3,451
Adjustments for:
- Taxation 4,981 1,828
- Finance items (56) 650
- Share of profit after tax of equity accounted
units (556) (198)
- Impairment charges of investments in equity
accounted units after tax - 119
- Impairment charges - 1,015
- Depreciation and amortisation 2,307 2,092
- Provisions (including exchange differences on
provisions) 485 336
- Pension settlement(f) (291) -
Utilisation of provisions (349) (254)
Utilisation of provision for post-retirement benefits (76) (97)
Change in inventories (518) (289)
Change in receivables and other assets(g) (966) 508
Change in trade and other payables 250 (262)
Other items(h) (100) (256)
------------------------------------------------------ ------ -------
18,179 8,643
------------------------------------------------------ ------ -------
Group cash flow statement (continued)
(b) During the six months to 30 June 2021, the Group invested a
further US$15 million (30 June 2020: received net proceeds of US$84
million) 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) During 2020, Energy Resources of Australia Ltd (ERA)
deposited US$299 million into a trust fund controlled by the
Government of Australia. ERA is entitled to reimbursement from the
fund once specific phases of rehabilitation relating to the Ranger
Project are completed. The fund is outside of the scope of IFRS 9 -
'Financial Instruments' and therefore classified as an "other
receivable" within 'Receivables and other assets'. At 30 June 2021
the total amount held in the trust fund was US$402 million (31
December 2020: US$410 million).
(d) During 2020, we repaid our EUR402 million (nominal value)
Rio Tinto Finance plc Euro Bonds on their maturity. The cash
outflow relating to the repayment of the bond and the realised loss
on the derivatives were recognised within 'Repayment of borrowings
and associated derivatives' and totalled US$526 million.
(e) Closing cash and cash equivalents less overdrafts for the
purposes of the cash flow statement differs from cash and cash
equivalents on the Group balance sheet as per the following
reconciliation:
Closing cash and cash equivalents 30 June 31 December 30 June
less overdrafts 2021 2020 2020
--------------------------------------
US$m US$m US$m
-------------------------------------- ------- ----------- -------
Balance per Group balance sheet 14,027 10,381 6,269
Bank overdrafts repayable on demand
(unsecured) (4) - (15)
Balance per Group cash flow statement 14,023 10,381 6,254
-------------------------------------- ------- ----------- -------
(f) During the period ended 30 June 2021, the Group entered into
an agreement to transfer its partially funded pension obligations
in France to an external insurer. The insurance premium was paid by
the transfer of the existing pension assets valued at US$89 million
plus an additional cash payment of EUR247 million (US$294 million),
of which US$3 million is included in 'Profit after tax'. The Group
has no further legal or constructive obligation relating to the
insured pensions and has reflected this transaction as a
settlement.
(g) 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) Includes realised gains on currency forward contracts not
designated in a hedge relationship of US$10 million (30 June 2020:
realised losses of US$200 million).
Group balance sheet
30 June 31 December
2021 2020
US$m US$m
---------------------------------------------- -------- -----------
Non-current assets
Goodwill 945 946
Intangible assets 2,809 2,755
Property, plant and equipment 63,835 62,882
Investments in equity accounted units 3,660 3,764
Inventories 174 174
Deferred tax assets 3,400 3,385
Receivables and other assets 2,139 1,796
Tax recoverable 27 4
Other financial assets 687 829
---------------------------------------------- -------- -----------
77,676 76,535
Current assets
Inventories 4,448 3,917
Receivables and other assets 4,322 3,644
Tax recoverable 55 62
Other financial assets 2,913 2,851
Cash and cash equivalents 14,027 10,381
---------------------------------------------- -------- -----------
25,765 20,855
Total assets 103,441 97,390
---------------------------------------------- -------- -----------
Current liabilities
Borrowings and other financial liabilities (704) (607)
Trade and other payables (7,523) (7,421)
Tax payable (2,015) (1,850)
Provisions including post-retirement benefits (1,834) (1,729)
---------------------------------------------- -------- -----------
(12,076) (11,607)
Non-current liabilities
Borrowings and other financial liabilities (13,210) (13,408)
Trade and other payables (796) (820)
Tax payable (613) (477)
Deferred tax liabilities (3,501) (3,239)
Provisions including post-retirement benefits (15,076) (15,936)
---------------------------------------------- -------- -----------
(33,196) (33,880)
Total liabilities (45,272) (45,487)
---------------------------------------------- -------- -----------
Net assets 58,169 51,903
---------------------------------------------- -------- -----------
Capital and reserves
Share capital(a)
- Rio Tinto plc 207 207
- Rio Tinto Limited 3,699 3,781
Share premium account 4,320 4,314
Other reserves 11,509 11,960
Retained earnings 33,240 26,792
---------------------------------------------- -------- -----------
Equity attributable to owners of Rio Tinto 52,975 47,054
Attributable to non-controlling interests 5,194 4,849
---------------------------------------------- -------- -----------
Total equity 58,169 51,903
---------------------------------------------- -------- -----------
Group balance sheet (continued)
(a) At 30 June 2021, Rio Tinto plc had 1,247.8 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 period presented.
As required to be disclosed under the ASX Listing Rules, the net
tangible assets per share amounted to US$30.40 (31 December 2020:
US$26.79).
Group statement of changes in equity
Attributable to owners of Rio
Tinto
-------------------------------------------------
Share Non-
Share premium Other Retained controlling Total
Six months ended 30 June capital account reserves earnings Total interests equity
2021 US$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 period(a) - - (466) 12,808 12,342 761 13,103
Currency translation
arising on
Rio Tinto Limited's
share capital (82) - - - (82) - (82)
Dividends - - - (6,435) (6,435) (407) (6,842)
Own shares purchased
from Rio Tinto
shareholders to satisfy
share awards to
employees(b) - - (13) (4) (17) - (17)
Change in equity interest
held by Rio Tinto - - - 37 37 (37) -
Treasury shares reissued
and other
movements - 6 - - 6 - 6
Equity issued to holders
of non-controlling
interests - - - - - 28 28
Employee share options
and other IFRS 2
charges to the income
statement - - 28 42 70 - 70
Closing balance 3,906 4,320 11,509 33,240 52,975 5,194 58,169
--------------------------- -------- -------- --------- --------- ------- ------------ -------
Six months Six months
ended 30 ended 30
June 2021 June 2020
Dividends per share: Ordinary - paid during the
period 309.0c 231.0c
Dividends per share: Special - paid during the
period 93.0c -
---------------------------------------------------------- ---------- ----------
Ordinary dividends per share: proposed in the
announcement of the results for the period 376.0c 155.0c
Special dividends per share: proposed in the announcement
of the results for the period 185.0c -
---------------------------------------------------------- ---------- ----------
(a) Refer to Group statement of comprehensive income for further details.
(b) Net of contributions received from employees for share awards to employees.
Group statement of changes in equity (continued)
Attributable to owners of Rio
Tinto
-------------------------------------------------
Share Non-
Share premium Other Retained controlling Total
Six months ended 30 June capital account reserves earnings Total interests equity
2020 US$m US$m US$m US$m US$m US$m US$m
--------------------------- -------- -------- --------- --------- ------- ------------ -------
Opening balance 3,655 4,313 9,177 23,387 40,532 4,710 45,242
Total comprehensive income
for the period(a) - - (818) 3,107 2,289 21 2,310
Currency translation
arising on
Rio Tinto Limited's
share capital (75) - - - (75) - (75)
Dividends - - - (3,607) (3,607) (320) (3,927)
Share buy-back(b) - - - (1) (1) - (1)
Own shares purchased
from Rio Tinto
shareholders to satisfy
share awards to
employees(c) - - (12) (18) (30) - (30)
Change in equity interest
held by Rio Tinto - - - 58 58 (58) -
Treasury shares reissued
and other
movements - 1 - - 1 - 1
Equity issued to holders
of non-controlling
interests - - - - - 79 79
Employee share options
and other IFRS 2
charges to the income
statement - - 23 34 57 - 57
Closing balance 3,580 4,314 8,370 22,960 39,224 4,432 43,656
--------------------------- -------- -------- --------- --------- ------- ------------ -------
(a) Refer to Group statement of comprehensive income for further details.
(b) In 2020, the amount of US$1 million together with the
amounts paid during the period in respect of an irrevocable
contract in place at the beginning of the year to cover the share
buy-back programme totalled US$208 million as reported in the cash
flow statement.
(c) Net of contributions received from employees for share awards to employees.
Notes to the interim financial statements
Basis of preparation
The condensed consolidated interim financial statements included
in this interim report have been prepared in accordance with:
International Accounting Standard ('IAS') 34 'Interim financial
reporting' as issued by the International Accounting Standards
Boards (IASB) and adopted by the European Union ('EU') before 1
January 2021 and as adopted for use in the United Kingdom ('UK')
thereafter under the European Union (Withdrawal) Act 2018; the
Disclosure Guidance and Transparency Rules sourcebook ('DTR') of
the Financial Conduct Authority ('FCA') applicable to interim
financial reporting; and an Order under section 340 of the
Australian Corporations Act 2001 issued by the Australian
Securities and Investments Commission on 16 July 2021.
These condensed consolidated interim financial statements
represent a 'condensed set of financial statements' as referred to
in the DTR issued by the FCA. Accordingly, they do not include all
of the information required for a full annual financial report and
are to be read in conjunction with the Group's annual financial
statements for the year ended 31 December 2020 and any public
announcements made by the Group during the interim reporting
period.
The 2020 annual financial statements were 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 24 July 2020 and Article 4 of
the European Union IAS regulation and in accordance 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) both as adopted by the European Union (EU IFRS) and which
were mandatory for EU reporting as at 31 December 2020 and:
- International Financial Reporting Standards as issued by the
IASB and interpretations issued from time to time by the IFRS IC
which were mandatory as at 31 December 2020.
These condensed consolidated financial statements are unaudited
and do not constitute statutory accounts as defined in Section 434
of the United Kingdom Companies Act 2006. The financial information
as at 31 December 2020 included in this report has been extracted
from the full financial statements filed with the Registrar of
Companies. The Auditors' report on these full financial statements
was unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis of matter and
did not contain statements under section 498 (2) (regarding
adequacy of accounting records and returns), or under section 498
(3) (regarding provision of necessary information and explanations)
of the Companies Act 2006.
Notes to the interim financial statements (continued)
Accounting policies
The condensed consolidated interim financial statements have
been drawn up on the basis of accounting policies, methods of
computation and presentation consistent with those applied in the
financial statements for the year ended 31 December 2020, and in
the corresponding interim period, except for the modifications set
out below. This basis of accounting is referred to as 'IFRS' in
this report. Adoption of changes to IFRS applicable in 2021 did not
have a significant impact on the Group's financial statements.
During the six months to 30 June 2021, the Group did not early
adopt any amendments, standards or interpretations that have been
issued but are not yet mandatory.
The UK's transition period for leaving the EU ended on 31
December 2020 ('the transition date'). In accordance with
consequent changes to applicable UK law, the financial statements
basis of preparation has been updated to replace International
Financial Reporting Standards as issued by the International
Accounting Standards Board and interpretations issued from time to
time by the IFRS Interpretations Committee as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
(EU IFRS), with issued standards and interpretations as adopted for
use in the United Kingdom (UK IFRS). Provisions in the European
Union (Withdrawal) Act 2018 result in UK IFRS at the transition
date being identical to EU IFRS in force at the end of the
transition period. Adoptions, interpretations and amendments of
IFRS made in the EU after the transition date do not apply in the
UK.
The Group adopted Interest Rate Benchmark Reform - Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) at 1
January 2021. The amendments address the financial reporting impact
from reform of the London Interbank Offered Rate (LI BOR) and other
benchmark interest rates (collectively "IBOR reform"). Financial
authorities have asked market participants to complete the
transition to alternative Risk Free Rates (RFR). On 5 March 2021
LIBOR's administrator, ICE Benchmarks Administration (IBA) and its
supervisor, the UK Financial Conduct Authority (FCA), issued
statements which provide the dates that all LIBOR settings will
either cease to be provided by any administrator or will no longer
be representative. This will occur: immediately after 31 December
2021, for all GBP, Euro, CHF and JPY LIBOR settings, and for 1-week
and 2-month USD LIBOR settings; and immediately after 30 June 2023,
for the remaining USD LIBOR settings. The Group will take relevant
Phase 2 practical reliefs from certain requirements in IFRS 9, IFRS
7, IFRS 4 and IFRS 16 relating to changes in the basis for
determining contractual cash flows of financial assets, financial
liabilities and hedge accounting.
Our hedging arrangements impacted by the reform of US LIBOR are
part of the International Swaps and Derivatives Association
("ISDA") Fallbacks Protocol, which provides a global standardised
mechanism for replacement of the current benchmark. At 30 June
2021, the Group has interest rate risk exposure including US$7.3
billion nominal values of fixed-rate borrowings swapped to US
dollar rates in fair value hedge relationships. We expect
application of the Phase 2 reliefs to result in continuation of the
Group's pre-existing hedge accounting upon amendment of designated
arrangements in response to the replacement of IBOR with new
benchmarks.
In addition, the Group has a number of arrangements which
reference IBOR benchmarks and extend beyond 2021. These include
third-party borrowings relating to the Oyu Tolgoi LLC project
finance facility and other secured loans, a number of intragroup
balances and certain commercial contracts. Other arrangements which
currently reference IBOR benchmarks include accessible revolving
lines of credit, and shareholder loan facilities. As a result of
the Phase 2 relief the Group expects that no material gain or loss
will arise from these updates.
Notes to the interim financial statements (continued)
Accounting policies (continued)
Principal accounting policies
Principal accounting policy information has also been expanded
to reflect changes in 2021 to the following policy:
Financial instruments - Derivatives and hedge accounting - refer
to note 1(q)(iv) to the 2020 Annual Report:
The Group adopted Interest rate benchmark reform - Phase 1
(Amendments to IFRS 9, IAS 39, and IFRS 7) during the year ended 31
December 2019, and adopted Interest Rate Benchmark Reform - Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) from 1
January 2021. Phase 1 amendments allow temporary relief from
applying specific hedge accounting requirements to hedging
arrangements directly impacted by IBOR reform. Application of the
temporary reliefs mean that IBOR reform does not result in
termination of hedging relationships referencing an IBOR during the
period of IBOR-related uncertainty. Phase 2 amendments allow relief
from certain requirements in IFRS 9, IFRS 7, IFRS 4 and IFRS 16
relating to changes in the basis for determining contractual cash
flows of financial assets, financial liabilities and hedge
accounting. The principal Phase 1 relief which the Group has
applied to its hedging portfolio is in the assumption that US LIBOR
remains a separately identifiable component for the duration of the
hedge; and the US LIBOR rates referenced by fixed-to-floating rate
swaps in fair value hedge relationships do not change as the result
of IBOR reform, preserving the economic relationship and allowing
the related hedges to remain effective. This temporary relief
ceases, on a hedge-by-hedge basis, when the designated hedge
relationship is amended and application of Phase 2 reliefs begins,
which will be by 30 June 2023. As a result of the Phase 2 reliefs
the Group expects that no material gain or loss will arise from the
IBOR reform.
International financial reporting standards mandatory beyond
2021
The Group disclosed information relatin g to standards and
pronouncements mandatory beyond 2021 in the financial statements
for the year ended 31 December 2020, Amendments to IAS 16 Property,
Plant and Equipment: Proceeds before Intended Use and IAS 37
Provisions, Contingent Liabilities and Contingent Assets: Cost of
Fulfilling a Contract are mandatory in 2022. Amendments to IAS 12
Income Taxes - Deferred Tax related to Assets and Liabilities
arising from a Single Transaction and IFRS 17 Insurance Contracts
are mandatory in 2023. Amendments to IAS 1 Presentation of
financial statements: classification of liabilities is now unlikely
to be mandatory any earlier than 2024. Work is underway to identify
arrangements affected by adoption of these amendments and the new
insurance standard and to quantify corresponding adjustments to
retained earnings and restatement of previously reported amounts
where applicable. Initial stages of the impact assessment have been
completed, comprising internal research and consultation. We are
presently undertaking detailed review and ongoing monitoring of
arrangements, transactions and contracts identified as potentially
impacted by these changes to IFRS. Our approach assumes that UK
endorsement will result in mandatory application on a timeframe
equivalent to that under IFRS and AIFRS. The Group does not propose
the early adoption of any of these pronouncements.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use (mandatory in 2022 and not yet endorsed by the
UK) prohibit 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 such proceeds are recognised in profit and loss together
with the costs of producing those items. The amendments will result
in higher reported revenue, operating costs, inventory and property
plant and equipment balances (capital works in progress) relating
to major development projects completed after 1 January 2020. IAS 2
Inventories will apply to the measurement of pre-production
inventory and identifying the related cost may require significant
estimation and judgment in the selection of an appropriate method
for allocating development expenditure to such inventory.
Adjustments to Group retained earnings at 1 January 2020, and
restatement of the 2020 Group Income Statement and Balance Sheet
upon adoption of the amendments in 2022 in respect of such projects
are not expected to be material. We continue to monitor the
progress of major projects under development in 2021 for relevant
pre-production revenue and associated cost; more information
relating to ongoing and approved capital projects at 30 June 2021
is provided on page 24.
Notes to the interim financial statements (continued)
International financial reporting standards mandatory beyond
2021 (continued)
Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: Cost of Fulfilling a Contract (mandatory in 2022
and not yet endorsed by the UK) specify which costs an entity
includes in determining the cost of fulfilling a contract for the
purpose of assessing whether the contract is onerous. Under the
amendment the cost of fulfilling a contract comprises all directly
related costs, comprising both incremental amounts and an
allocation of other directly related expenditure. The Group
currently makes provision for onerous contracts when the assets
dedicated to the contract are fully impaired or the contract
becomes stranded as a result of a business decision (refer to note
1(i) on page 215 of the 2020 Annual Report). From 2022, the Group
will 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. As required by the
amendment's transition arrangements, the Group will apply the
amendments in its 2022 Financial Statements without restatement,
with an adjustment to retained earnings at 1 January 2022 if
required.
Our impact assessment has confirmed that no adjustments in
respect of the amendments will be needed to arrangements for which
an onerous contract provision has already been recorded. No further
arrangements have been identified to date which would be treated as
onerous contracts under the revised guidance on cost of fulfilling
a contract; this assessment may change if key input assumptions for
contract valuation move significantly. In particular, the Group has
approximately 2.1 million tonnes per annum of short- and long-term
legacy alumina sales contracts which are exposed to a fixed linkage
to the LME Aluminium price, with about 30% of volume commitments
expiring by the end of 2023. Opportunity loss relating to these
sales contracts does not indicate that they are onerous, and we
estimate that a reduction of 10% in the LME Aluminium index would,
other factors remaining unchanged, not result in a material
adjustment at 1 January 2022. Other input price variables in
alumina production, including cost of bauxite production and
procurement of caustic and energy, could also have an impact on
whether an adjustment to recognise an onerous contract provision is
required. More information on these alumina sales contracts is
provided on page 48 of the 2020 Annual Report. Other than these
contracts, our impact assessment has not, to date, identified any
arrangements potentially giving rise to significant onerous
contract provisions under the revised cost of fulfilment
approach.
This assessment reflects our current expectations as to how to
apply the amendments to IAS 37. Practical application of the
amendments continues to develop, and the Group continues to monitor
this.
IAS 12 Income Taxes - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction , mandatory in 2023
and not yet endorsed by the UK. Narrow-scope amendments to IAS 12
introduce an exception to the initial recognition exemption for
transactions that give rise to equal taxable and deductible
temporary differences. The most significant impact from
implementing these amendments is expected to be from temporary
differences related to the Group's provisions for close-down and
restoration / environmental and lease obligations and corresponding
capitalised closure costs and right-of-use assets.
Our existing accounting policy states that "where the
recognition of an asset and liability from a single transaction
gives rise to equal and off-setting 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 amendment, deferred tax assets and liabilities will be
required to be recognised in respect of such temporary differences.
Upon transition in 2023, the Group anticipates material adjustments
(prior to required offsetting within the same tax jurisdiction) as
at 1 January 2021 to deferred tax assets and deferred tax
liabilities with the net difference recorded in reserves. Work is
ongoing to quantify the impact, including appropriate offsets
against existing deferred tax liabilities or assets in various
jurisdictions. There will be no impact on tax cash flows or balance
sheet tax recoverable or payable as a result of implementing these
amendments and the unwind of the newly recognised deferred tax is
not expected to materially impact annual profits and losses.
IFRS 17 Insurance Contracts (mandatory in 2023 and not yet
endorsed by the UK) provides consistent principles for all aspects
of accounting for insurance contracts. The Group continues to
evaluate the impacts of this pronouncement.
The effective date for amendments to IAS 1 Presentation of
financial statements: classification of liabilities has been
tentatively deferred to no earlier than 1 January 2024 and is not
yet endorsed by the UK. This amendment sets out specific guidance
for determining the classification of liabilities as current or
non-current, based on whether an entity has a substantive right to
payment deferral at the reporting date. The Group continues to
evaluate the impact of this amendment.
Notes to the interim financial statements (continued)
COVID-19 impact
As announced in our second quarter Operations Review on 16 July
2021, we continue to prioritise the safety of our employees,
contractors, their families and the communities where we
operate.
During the six months to 30 June 2021 there has been a
resurgence of the virus, including second and third waves in
regions where we have assets and offices including Mongolia, India,
the Americas and South Africa, and we have continued to implement a
range of preventive measures to keep our people safe, in accordance
with government guidance. As a company, we also benefited from our
host governments recognising mining as an essential business, and
allowing us to continue operating. This meant people remained
employed, suppliers had our business, and taxes and royalties
continued to be paid.
Ongoing travel restrictions and tight labour markets add further
pressure on the business and limit our ability to access additional
people, particularly in Western Australia, Canada, and the asset
locations most affected by virus resurgence, referred to above.
However, there has been no material adverse impact to our
operations and associated financial results year-to-date as a
result of COVID-19. At our Oyu Tolgoi operations, shipments have
been affected by Chinese border restrictions due to increased cases
of COVID-19 in Mongolia. We continue to work closely with
authorities and our customers to manage the risk of supply chain
disruptions.
The potential impact of COVID-19 over the next the 12 months
remains uncertain, and a risk we continue to closely monitor and
proactively manage.
Potential impacts may include:
-- changes in the market resulting in lower demand and/or commodity prices.
-- impact on shipments in response to market demand or in
response to government directives restricting the movement of goods
(e.g. Chinese border restrictions due to COVID-19 cases in Mongolia
impacting shipments from Oyu Tolgoi).
-- additional costs associated with preventative, monitoring and
management measures introduced across our operations.
-- labour shortages and restrictions on the movement of people
and goods may inhibit our ability to progress some of our projects
at planned pace.
Recognising the broad and complex impacts of the pandemic on our
markets, operations and financial performance, we have chosen not
to segregate COVID-19 related costs from our underlying performance
metrics.
Full details of initiatives taken to date can be found on our
website. However, the contents of the Rio Tinto website are not
part of these condensed consolidated interim financial
statements.
Going concern
Management has prepared detailed cash flow forecasts for the
next six months and has updated life of mine plans 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 the Group to meet its obligations as
they fall due. As such the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the
interim financial information.
Notes to the interim financial statements (continued)
Alternative performance measures
The Group presents certain Alternative performance measures
(APMs), including underlying earnings, which are reconciled to
directly comparable IFRS financial measures. The reconciliations
included on pages 74 to 79 of this report do not form part of these
condensed consolidated interim financial statements. 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
The Group's financial statements have been prepared in
accordance with IFRS as defined on page 39, which differs in
certain respects from the version of IFRS that is applicable in
Australia, referred to as Australian Accounting Standards
('AAS').
Prior to 1 January 2004, the Group's 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$376
million at 30 June 2021 (31 December 2020: US$374 million).
Save for the exception described above, the Group's financial
statements drawn up in accordance with IFRS are consistent with the
requirements of AAS.
Notes to the interim financial statements (continued)
Impairment charges
Six months Six months
ended ended
30 June 30 June
2021 2020
------------------------------------------------------ ----------
Pre-tax Pre-tax
US$m US$m
Aluminium - Pacific Aluminium - (489)
Aluminium - ISAL - (204)
Minerals - Diavik - (441)
------------------------------------------------------ ----------- ----------
Total impairment charge - (1,134)
------------------------------------------------------ ----------- ----------
Allocated as:
Intangible assets - (4)
Property, plant and equipment - (1,011)
Investment in equity accounted units ('EAUs') - (119)
====================================================== ----------- ----------
Total impairment charge - (1,134)
------------------------------------------------------ ----------- ----------
Comprising:
Impairment charges of consolidated balances - (1,015)
Impairment charges related to EAUs (pre-tax) - (148)
------------------------------------------------------ ----------- ----------
Total impairment charges in the financial information
by business unit (page 70) - (1,163)
Taxation (including related to EAUs) - 130
Total impairment in the income statement - (1,033)
------------------------------------------------------ ----------- ----------
2021
There were no impairment charges or reversals during the six
months ended 30 June 2021.
2020
Aluminium - Pacific Aluminium, Australia and New Zealand
On 9 July 2020, we announced the conclusion of the NZAS
strategic review and gave Meridian Energy 14 months' notice for the
termination of the power contract. As a result of the decision to
wind-down operations an impairment trigger was identified. The net
present value of post-tax cash flows over the remaining life for
this cash-generating unit was negative and therefore the
non-current assets of the smelter were fully impaired.
The high operating costs and challenging outlook for the
aluminium industry also resulted in impairment triggers being
identified at the Bell Bay aluminium smelter in Tasmania, Australia
and at Boyne Smelter in Queensland, Australia. Bell Bay has a power
contract to 2025 with Hydro Tasmania and with the current market
context the forecast net present value of cash flows over that
period was negative. The property, plant and equipment of the Bell
Bay smelter was fully impaired. The recoverable amount for our
share of the Boyne Smelter cash-generating unit which also included
the Gladstone Power Station was determined as US$273 million based
on post-tax cash flows expressed in real-terms and discounted at
6.6%. Accordingly our share of impairment after tax in the equity
accounted unit was US$119 million (US$148 million pre-tax) related
to the smelter and US$26 million (US$36 million pre-tax) related to
the power station.
Notes to the interim financial statements (continued)
Impairment charges (continued)
Aluminium - ISAL Smelter, Iceland
In February 2020 we announced a strategic review of the ISAL
smelter in Iceland and the challenging market conditions were
identified as an impairment trigger. The net present value of cash
flows projected over the remaining life for this CGU did not
support retaining any carrying value for the non-current
assets of the CGU, which were fully impaired following a pre-tax
impairment charge of US$204 million in the first half of 2020.
During subsequent negotiations Landsvirkjun tabled an improved
offer for power delivery, restoring the competitiveness of the
smelter over its remaining life. At 31 December 2020, we concluded
these updated circumstances, represented an indicator of partial
impairment reversal. When combined with improved pricing since 30
June 2020 we calculated a post-tax recoverable amount for the CGU
of US$139 million based on the IAS 36 fair value less cost of
disposal (FVLCD) methodology, discounted using a post-tax discount
rate of 6.6% expressed in real terms and recorded a pre-tax
impairment reversal of US$111 million. As a consequence, the full
year results for the year ended 31 December 2020 included a net
pre-tax impairment charge of US$93 million.
Minerals (previously under Copper & Diamonds) - Diavik,
Canada
The COVID-19 pandemic significantly disrupted the global demand
for diamonds with many countries restricting the movement of
citizens and closing retail outlets. Our 40% joint venture partner
at the Diavik diamond mine filed for creditor protection in April
2020 and defaulted on its cash calls. Together these circumstances
were identified as an impairment trigger. The net present value of
post-tax cash flows projected over the remaining life of the Diavik
diamond mine to 2025 did not support retaining any carrying value
for the property, plant and equipment and intangible assets of the
cash generating unit, which were fully impaired.
Notes to the interim financial statements (continued)
Prima facie tax reconciliation
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
------------------------------------------------------------ ---------- ------------
Profit before taxation 18,049 5,279
Deduct: share of profit after tax of equity accounted
units(a) (556) (198)
Add back: impairment of investments in equity
accounted units(a) - 119
------------------------------------------------------------ ---------- ------------
Parent companies' and subsidiaries' profit before
tax 17,493 5,200
------------------------------------------------------------ ---------- ------------
Prima facie tax payable at UK rate of 19% (2020:
19%) 3,324 988
Higher rate of taxation on Australian underlying
earnings 1,609 707
Impact of items excluded in arriving at underlying
earnings(b) :
- Impairment charges(c) - 92
- Exchange and gains/losses on derivatives (34) 18
- Losses from increases to closure estimates (non-operating
and fully impaired sites) (9) (21)
Other tax rates applicable outside the UK and
Australia on underlying earnings 77 (79)
Amounts under/(over) provided in prior years 43 (6)
Recognition of previously unrecognised deferred
tax assets(d) (77) -
Write-down of previously recognised deferred tax
assets 8 12
Other items 40 117
------------------------------------------------------------ ---------- ------------
Total taxation charge(a) 4,981 1,828
------------------------------------------------------------ ---------- ------------
(a) This tax reconciliation relates to the Group's parent
companies, subsidiaries and joint operations, and excludes equity
accounted units. The Group's share of profit of equity accounted
units is net of tax charges of US$318 million (30 June 2020: US$111
million). In 2020, impairments of investments in equity accounted
units were net of tax credits of US$29 million.
(b) The impact for each item includes the effect of tax rates applicable outside the UK.
(c) In 2020, the tax impact of impairments included the write
down of deferred tax assets at ISAL and NZAS and non-recognition of
deferred tax on those impairments. The tax impact also included
recognition at local tax rates of deferred tax assets arising on
the impairments of Bell Bay, Gladstone Power Station and Diavik.
Refer to the Impairment charges note on pages 45 and 46.
(d) The recognition of previously unrecognised deferred tax
assets relates to the recognition of prior year deferred tax assets
on losses and on impaired assets at Oyu Tolgoi due to improved
deferred tax asset recovery expectations.
Notes to the interim financial statements (continued)
Consolidated net (debt)/cash
Financing liabilities Other assets
---------------------------- ---------------------- ---------------
Debt-related
derivatives
(included
Borrowings Lease in Other Cash and
excluding Liabilities financial cash Other
overdrafts(a) (b) liabilities/assets)(c) equivalents(d) Investments(e) Net (debt)/cash
For the six US$m US$m US$m US$m US$m US$m
months
ended 30 June
2021
--------------- -------------- ------------ ---------------------- -------------- -------------- ---------------
Analysis of
changes
in consolidated
net
(debt)/cash
Opening balance (12,653) (1,178) 248 10,381 2,538 (664)
Foreign
exchange
adjustment 5 1 (3) (21) - (18)
Cash movements
excluding
exchange
movements 120 170 (1) 3,663 (15) 3,937
Other non-cash
movements(b) 125 (94) (133) - (13) (115)
--------------- -------------- ------------ ---------------------- -------------- -------------- ---------------
Closing balance (12,403) (1,101) 111 14,023 2,510 3,140
--------------- -------------- ------------ ---------------------- -------------- -------------- ---------------
(a) Borrowings excluding overdrafts (including lease
liabilities) of US$13,504 million at 30 June 2021 (31 December
2020: US$13,831 million) differ from total borrowings and other
financial liabilities of US$13,914 million (31 December 2020:
US$14,015 million) on the balance sheet as they exclude overdrafts
of US$4 million (31 December 2020: US$nil), other current financial
liabilities of US$150 million (31 December 2020: US$23 million) and
other non-current financial liabilities of US$256 million (31
December 2020: US$161 million).
(b) Other non-cash movements in lease liabilities include the
net impact of additions, modifications and terminations during the
period.
(c) Included within "Debt-related derivatives" are interest rate
and cross currency interest rate swaps that are in hedge
relationships with the Group's debt.
(d) At 30 June 2021, we held US$1,800 million (31 December 2020:
US$1,200 million) of reverse repurchase agreements, measured at
amortised cost and reported within cash and cash equivalents as
they are highly liquid products maturing within three months.
(e) Other investments comprise US$2,510 million (31 December
2020: US$2,538 million) of highly liquid financial assets held in
managed investment funds classified as held for trading.
Notes to the interim financial statements (continued)
Provisions and post-retirement benefits
Pensions Close-down
and post-retirement Other employee and restoration/
healthcare(a) entitlements(b) environmental(c) Other Total
For the six months ended
30 June 2021 US$m US$m US$m US$m US$m
--------------------------------- -------------------- ---------------- ----------------- ----- ------
Opening balance 3,055 419 13,335 856 17,665
Adjustment on currency
translation 41 (10) (133) (7) (109)
Adjustments to mining
properties/right of use
assets:
- changes in estimate - - 21 3 24
Charged/(credited) to
profit:
- increases to existing
and new provisions 82 60 265 95 502
- decreases to existing
provisions and
unused amounts reversed - (10) (2) (12) (24)
- exchange losses on
provisions - - 7 - 7
- amortisation of discount - - 206 1 207
Utilised in the period (76) (63) (231) (55) (425)
Actuarial gains recognised
in equity (616) - - - (616)
Transfers and other movements(a) (291) - (1) (29) (321)
--------------------------------- -------------------- ---------------- ----------------- ----- ------
Closing balance 2,195 396 13,467 852 16,910
--------------------------------- -------------------- ---------------- ----------------- ----- ------
Balance sheet analysis:
Current 71 306 917 540 1,834
Non-current 2,124 90 12,550 312 15,076
--------------------------------- -------------------- ---------------- ----------------- ----- ------
Total 2,195 396 13,467 852 16,910
--------------------------------- -------------------- ---------------- ----------------- ----- ------
(a) During the period ended 30 June 2021, the Group entered into
an agreement to transfer its partially funded pension obligations
in France to an external insurer. The insurance premium was paid by
the transfer of the existing pension assets valued at US$89 million
plus an additional cash payment of EUR247 million (US$294 million),
of which US$3 million was taken to the income statement. The Group
has no further legal or constructive obligation relating to the
insured pensions and has reflected this transaction as a
settlement.
(b) The provision for other employee entitlements includes a
provision for long service leave of US$275 million (31 December
2020: US$283 million), based on the relevant entitlements in
certain Group operations and includes US$52 million (31 December
2020: US$62 million) of provision for redundancy and severance
payments.
(c) Close-down and restoration/environmental liabilities at 30
June 2021 have not been adjusted for closure related receivables
amounting to US$595 million (31 December 2020: US$574 million) due
from the ERA trust fund, the co-owners of the Diavik Joint Venture
and other financial assets held for the purposes of meeting closure
obligations. These are included within "Receivables and other
assets" in the balance sheet.
Notes to the interim financial statements (continued)
Financial instruments disclosures
Except where stated, the information given below relates to the
financial instruments of the parent companies and their
subsidiaries and joint operations, and excludes those of equity
accounted units.
Fair values disclosure of financial instruments
The following table shows the carrying amounts and fair values
of our borrowings including those which are not carried at an
amount which approximates their fair value at 30 June 2021 and 31
December 2020. The fair values of our cash equivalents, loans to
equity accounted units and other financial liabilities approximate
their carrying values because of their short maturity, or because
they carry floating rates of interest.
30 June 2021 31 December 2020
-----------
Carrying Fair Carrying Fair
value value value value
US$m US$m US$m US$m
----------- -------- ------ ---------- ------
Borrowings 12,405 14,558 12,653 15,076
----------- -------- ------ ---------- ------
Total borrowings with a carrying value of US$7.4 billion (31
December 2020: US$7.6 billion) relate to listed bonds. These have a
fair value of US$9.0 billion (31 December 2020: US$9.5 billion) and
are categorised as level 1 in the fair value hierarchy.
Borrowings with a carrying value of US$4.2 billion (31 December
2020: US$4.2 billion) relate to project finance drawn down by Oyu
Tolgoi, with a fair value of US$4.7 billion (31 December 2020:
US$4.7 billion) and are categorised as level 3 in the fair value
hierarchy. We use different valuation inputs for the pre-and
post-completion phases to reflect Rio Tinto's completion support
guarantee during the pre-completion phase. To measure the fair
value of the project finance pre-completion our valuation input
includes market yield over the pre-completion period, the
variability of which we consider a reasonable indicator of fair
value movements on amounts outstanding under the project finance
facility. Post-completion, we estimate the fair value with
reference to the annual interest rate on each tranche of the
facility, and after considering factors that could indicate a
change in the credit assessment of Oyu Tolgoi LLC as a counterparty
to project finance. These factors include in-country risk relating
to the Oyu Tolgoi project, and the assumed date of transition from
pre-completion to post-completion. These valuation inputs are
considered to be level 3. Transition from pre-completion to
post-completion is determined by a set of tests for both
completion of physical infrastructure and the ability to extract
and process ore of defined grades over a defined period.
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.
Debt maturity
During the six months to 30 June 2021, we have not entered into
any new interest rate swaps. During 2020, we entered into US$1.5
billion of interest rate swaps to convert the remaining fixed Alcan
debt to floating interest rates. This is in accordance with our
floating interest rate policy. We have put these swaps into fair
value hedge relationships with the respective tranches of debt.
The main sources of ineffectiveness of the fair value hedges
include changes in the timing of the cash flows of the hedging
instrument compared to the underlying hedged item, and changes in
the credit risk of parties to the hedging relationships. The
changes in fair value of the bonds and the swaps as well as the
ineffectiveness recorded in the income statement is not material to
the Group.
The fair value of interest rate and cross currency interest rate
swaps at 30 June 2021 was US$273 million (31 December 2020: US$388
million) asset and US$162 million (31 December 2020: US$140
million) liability, respectively. These are included within "Other
financial assets" and "Other financial liabilities" in t he balance
sheet.
Notes to the interim financial statements (continued)
Financial instruments disclosures (continued)
The effective interest rate of our borrowings, impacted by
swaps, are summarised below. All nominal values are fully hedged
unless otherwise stated:
Carrying Carrying
Value Value
Weighted average at 30 at 31
Nominal interest rate Swap June December
value after swaps maturity 2021 2020
Borrowings in a hedge relationship US$m Year US$m US$m
------- ---------------- --------- -------- ---------
Rio Tinto Finance plc Euro 3 month LIBOR
Bonds 2.875% due 2024 546 +1.64% 2024 530 555
Rio Tinto Finance (USA) Limited 3 month LIBOR
Bonds 3.75% 2025 1,200 +1.39% 2025 1,268 1,299
Rio Tinto Finance (USA) Limited 3 month LIBOR
Bonds 7.125% 2028 750 +3.27% 2028 960 1,005
Alcan Inc. Debentures 7.25% 3 month LIBOR
due 2028 100 +5.43% 2024 107 109
Rio Tinto Finance plc Sterling 3 month LIBOR
Bonds 4.0% due 2029 807 +2.65% 2024 713 717
Alcan Inc. US$400m Debentures 3 month LIBOR
7.25% due 2031(a) 400 +5.72% 2025 427 438
Alcan Inc. US$750m Global 3 month LIBOR
Notes 6.125% due 2033(a) 750 +5.67% 2025 732 744
Alcan Inc. US$300m Global 3 month LIBOR
Notes 5.75% due 2035(a) 300 +5.18% 2025 287 292
Rio Tinto Finance (USA) Limited 3 month LIBOR
Bonds 5.2% 2040 1,150 +3.79% 2022 1,168 1,173
Rio Tinto Finance (USA) plc 3 month LIBOR
Bonds 4.75% 2042 500 +3.42% 2023 500 501
Rio Tinto Finance (USA) plc 3 month LIBOR
Bonds 4.125% 2042 750 +2.83% 2023 742 743
----------------------------------- ------- ---------------- --------- -------- ---------
(a) In 2020 we entered into new swaps to convert the interest
payable in relation to these bonds from fixed to floating
rates.
Valuation hierarchy of financial instruments carried at fair
value on a recurring basis
The table below shows the financial instruments carried at fair
value by valuation method in accordance with IFRS 9 at 30 June
2021:
Held at fair value
----------------------
Held at
Level Level Level amortised
Total 1(a) 2(b) 3(c) cost
At 30 June 2021 US$m US$m US$m US$m US$m
------------------------------------ ------- ------ ------ ------ ----------
Assets
Cash and cash equivalents(d) 14,027 7,198 - - 6,829
Investments in equity shares
and funds 113 67 - 46 -
Other investments, including
loans and pooled funds(e) 2,955 2,531 - 240 184
Trade and other financial
receivables(f) 3,794 2 2,122 - 1,670
------------------------------------ ------- ------ ------ ------ ----------
Derivatives (net)
Forward contracts and option
contracts: designated as hedges(g) (118) - - (118) -
Forward contracts and option
contracts, not designated
as hedges(g) 133 - 54 79 -
Derivatives related to net
debt(h) 111 - 111 - -
------------------------------------ ------- ------ ------ ------ ----------
Liabilities
Trade and other financial
payables (5,767) - (167) - (5,600)
------------------------------------ ------- ------ ------ ------ ----------
Total 15,248 9,798 2,120 247 3,083
------------------------------------ ------- ------ ------ ------ ----------
Notes to the interim financial statements (continued)
Financial instruments disclosures (continued)
Held at fair value
----------------------
Held at
Level Level Level amortised
Total 1(a) 2(b) 3(c) cost
At 31 December 2020 US$m US$m US$m US$m US$m
------------------------------------ ------- ------ ------ ------ ----------
Assets
Cash and cash equivalents(d) 10,381 6,411 - - 3,970
Investments in equity shares
and funds 75 35 - 40 -
Other investments, including
loans and pooled funds(e) 2,899 2,563 - 198 138
Trade and other financial
receivables(f) 3,286 5 1,802 - 1,479
------------------------------------ ------- ------ ------ ------ ----------
Derivatives (net)
Forward contracts and option
contracts: designated as hedges(g) 53 - 7 46 -
Forward contracts and option
contracts, not designated
as hedges(g) 180 - 69 111 -
Derivatives related to net
debt(h) 248 - 248 - -
Liabilities
Trade and other financial
payables (5,847) - (30) - (5,817)
------------------------------------ ------- ------ ------ ------ ----------
Total 11,275 9,014 2,096 395 (230)
------------------------------------ ------- ------ ------ ------ ----------
(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 for the asset or liability that
are not based on observable market data (unobservable inputs).
(d) Cash and cash equivalents include 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) Other investments, including loans and pooled funds,
comprise: cash deposits in rehabilitation funds, government bonds,
managed investment funds and royalties. The royalties receivable
are valued based on expected mine production as well as forward
commodity prices.
(f) 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 are recorded
separately within 'Other revenue'. The selling price can be
measured reliably for the Group's products, as it operates in
active and freely traded commodity markets. At 30 June 2021,
US$1,940 million (31 December 2020: US$1,671 million) of
provisionally priced receivables were recognised.
(g) Level 3 derivatives mainly consist of derivatives embedded
in electricity purchase contracts linked to the LME with terms
expiring between 2025 and 2036 (31 December 2020: 2025 and 2029).
The embedded derivatives are measured using discounted cash flows
and option model valuation techniques.
(h) Interest rate and currency interest rate swaps are valued
using applicable market quoted swap yield curves adjusted for
relevant basis and credit default spreads. Currency interest rate
swap valuations also use market quoted foreign exchange rates. A
discounted cash flow approach is used to derive fair value from
these inputs to the underlying cash flows.
Notes to the interim financial statements (continued)
Financial instruments disclosures (continued)
Level 3 Financial instruments
The table below shows the summary of changes in the fair value
of the Group's Level 3 financial assets and financial liabilities
for the six months to 30 June 2021.
30 June
2021
Level 3 Financial assets and liabilities US$m
------------------------------------------------------------ -------
Opening balance 395
Currency translation adjustments (3)
Total realised gains/(losses) included in:
- consolidated sales revenue 15
- net operating costs (18)
Total unrealised gains included in:
- net operating costs 33
Total unrealised gains transferred into other comprehensive
income (172)
Disposals/maturity of financial instruments (3)
Closing balance 247
------------------------------------------------------------ -------
Net gains included in the income statement for assets
and liabilities held at period end 26
------------------------------------------------------------ -------
Sensitivity analysis in respect of level 3 financial
instruments
Forward contracts and options whose fair value is determined
using unobservable inputs are calculated using appropriate
discounted cash flow and option model valuation techniques.
To value the aluminium embedded derivatives, we use unobservable
inputs when the term of the derivative extends beyond observable
market prices. In 2021 and 2020, 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. The fair value of the aluminium
embedded derivatives are US$92 million in a net liability position
at 30 June 2021 (31 December 2020: US$126 million in a net asset
position).
We also have royalty receivables, with a carrying value of
US$155 million (31 December 2020: US$113 million), arising from the
sale of our coal assets in prior periods. These are classified as
'Other investments, including loans' within 'Other financial
assets'. The fair values are determined using level 3 unobservable
inputs. This receivable includes US$56 million that relates to
royalties from thermal coal production beyond 2030 and has not been
adjusted for potential changes in production rates that could occur
due to climate change targets.
The main unobservable input is the long-term coal price used
over the life of the royalty receivable. A 15% increase in the coal
spot price would result in a US$149 million increase (31 December
2020: US$198 million increase) in the carrying value. A 15%
decrease in the coal spot price would result in a US$41 million
decrease (31 December 2020: US$46 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).
Notes to the interim financial statements (continued)
Segmental information
The Group's reportable segments are based on principal product
groups and are consistent with the internal reporting structure as
at 30 June 2021. Business units (BUs) are allocated to PGs based on
management structure. The reportable segments are described as
follows:
Reportable segment Principal activities
------------------ -------------------------------------------------------------------
Iron Ore Iron ore mining and salt and gypsum production in
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 is the
responsibility of Copper product group chief executive.
Minerals Includes businesses with products such as borates,
titanium dioxide feedstock together with the Iron
Ore Company of Canada (iron ore mining and iron concentrate/pellet
production). Also includes diamond mining, sorting
and marketing.
------------------ -------------------------------------------------------------------
The financial information by business unit has been recast in
accordance with the organisational restructure announced on 28
January 2021.The main impacts are as follows: Simandou has moved
from the previous Energy & Minerals product group to the Copper
product group; Uranium has moved from the previous Energy &
Minerals product group to Other Operations; Diamonds has moved from
the previous Copper & Diamonds product group to the Minerals
product group; the Minerals product group retains the Argyle
Residual operations and from 1 January 2021, Argyle Closure has
moved to Other Operations. Argyle Residual operations includes
activity relating to the sale of remaining diamond inventory and
property held. Argyle Closure includes activity relating to the
management and execution of the Argyle mine closure obligations and
management of entities with interests in state and traditional
owner agreements and licences. As a result of these changes, the
Copper & Diamonds segment is renamed Copper and the Energy
& Minerals segment is renamed Minerals from 2021.
The Rio Tinto financial information by business unit provided on
pages 70 to 73 of these interim financial statements provides
additional voluntary business unit disclosure which the Group
considers useful to the users of the financial statements.
Gross product Underlying Underlying Capital Depreciation
Six months ended 30 June sales(b) EBITDA(c) earnings(d) expenditure(e) and amortisation(f)
2021 US$m US$m US$m US$m US$m
---------------------------- ------------- ---------- ------------ --------------- ----------------------
Iron Ore 21,707 16,060 10,216 1,912 1,022
Aluminium 5,932 1,924 921 524 645
Copper 3,779 2,048 885 750 523
Minerals 3,270 1,398 498 209 232
---------------------------- ------------- ---------- ------------ --------------- --------------------
Reportable segments total 34,688 21,430 12,520 3,395 2,422
Other Operations 85 (4) (51) - 92
Inter-segment transactions (145) (6) (3) - -
---------------------------- ------------- ---------- ------------ --------------- --------------------
Product group total 34,628 21,420 12,466 3,395 2,514
Other items - - - 35 42
Share of equity accounted
units(a) (1,545) - - (120) (249)
Proceeds from disposal
of property, plant and
equipment - - 26 -
Central pensions,
share-based
payments, insurance and
derivatives 119 120 - -
Restructuring, project
and one-off costs (36) (23) - -
Central costs (346) (294) - -
Central exploration and
evaluation (120) (100) - -
Net interest - (3) - -
---------------------------- ------------- ---------- ------------ --------------- --------------------
Consolidated sales
revenue/Capital
expenditure/Depreciation
and amortisation(g) 33,083 3,336 2,307
---------------------------- ------------- ---------- ------------ --------------- --------------------
Underlying EBITDA/Underlying
earnings 21,037 12,166
---------------------------- ------------- ---------- ------------ --------------- ----------------------
Notes to the interim financial statements (continued)
Gross product Underlying Underlying Capital Depreciation
Six months ended 30 June sales(b) EBITDA(c) earnings(d) expenditure(e) and amortisation(f)
2020 US$m US$m US$m US$m US$m
---------------------------- ------------- ---------- ------------ --------------- ----------------------
Iron Ore 11,465 7,698 4,563 1,185 840
Aluminium 4,487 925 193 482 594
Copper (Adjusted) 1,983 686 111 987 568
Minerals (Adjusted) 2,322 712 190 147 266
---------------------------- ------------- ---------- ------------ --------------- --------------------
Reportable segments total 20,257 10,021 5,057 2,801 2,268
Other Operations (Adjusted) 158 1 (29) 1 99
Inter-segment transactions (82) (18) (6) - -
---------------------------- ------------- ---------- ------------ --------------- --------------------
Product group total 20,333 10,004 5,022 2,802 2,367
Other items - - - 22 39
Share of equity accounted
units(a) (971) - - (159) (314)
Proceeds from disposal
of property, plant and
equipment - - 28 -
Central pensions,
share-based
payments, insurance and
derivatives 102 97 - -
Restructuring, project
and one-off costs (72) (53) - -
Central costs (273) (233) - -
Central exploration and
evaluation (121) (97) - -
Net interest - 14 - -
---------------------------- ------------- ---------- ------------ --------------- --------------------
Consolidated sales
revenue/Capital
expenditure/Depreciation
and amortisation(g) 19,362 2,693 2,092
---------------------------- ------------- ---------- ------------ --------------- --------------------
Underlying EBITDA/Underlying
earnings 9,640 4,750
---------------------------- ------------- ---------- ------------ --------------- ----------------------
(a) For Gross product sales - share of equity accounted units also includes adjustments for intra-subsidiary/equity accounted units sales.
(b) Gross product sales includes the Group's proportionate share
of product sales by equity accounted units (after adjusting for
sales to subsidiaries) of US$1,567 million (30 June 2020: US$986
million) which are not included in consolidated sales revenue.
Consolidated sales revenue includes subsidiary sales of US$22
million (30 June 2020: US$15 million) to equity accounted units
which are not included in gross product sales.
(c) Underlying EBITDA represents profit before tax, net finance
items, depreciation and amortisation excluding the EBITDA impact of
the same items that are excluded in arriving at underlying earnings
(as defined below). The reconciliation of underlying EBITDA to
profit before taxation can be found on page 56.
(d) Underlying earnings represent net earnings attributable to
the owners of Rio Tinto, adjusted to exclude items which 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 or size to require exclusion in order to provide additional
insight into underlying business performance.
The following items are excluded from net earnings in arriving
at underlying earnings in each period irrespective of the
magnitude:
- Net gains/(losses) on disposal and consolidation of interests in businesses.
- Impairment charges and reversals.
- Profit/(loss) after tax from discontinued operations.
- Certain exchange and derivative gains and losses.
The reconciliation of underlying earnings to net earnings can be
found on pages 56 and 57.
Notes to the interim financial statements (continued)
(e) Capital expenditure for reportable segments comprises 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 and equity accounted
units.
(f) Product group depreciation and amortisation for reportable
segments include 100% of subsidiaries' depreciation and
amortisation and Rio Tinto's share of the depreciation and
amortisation of equity accounted units. Rio Tinto's share of the
depreciation and amortisation charge of equity accounted units is
deducted to arrive at depreciation and amortisation as shown in the
cash flow statement. These figures do not include impairment
charges and reversals, which are excluded from underlying
earnings.
(g) Capital expenditure and Depreciation and amortisation as reported in the cash flow statement.
Reconciliation of underlying EBITDA to profit before
taxation
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
Underlying EBITDA 21,037 9,640
(Losses)/gains on embedded commodity derivatives
not qualifying for hedge accounting (including
exchange) (2) 53
Change in closure estimates (non-operating
and fully impaired sites) (175) (172)
Depreciation and amortisation in subsidiaries
and equity accounted units(a) (2,502) (2,288)
Impairment charges - (1,163)
Taxation and finance items in equity accounted
units (365) (141)
Finance items 56 (650)
------------------------------------------------- ---------- ----------
Profit before taxation 18,049 5,279
------------------------------------------------- ---------- ----------
(a) Depreciation and amortisation in subsidiaries and equity
accounted units for the period ended 30 June 2021 is net of
capitalised depreciation of US$54 million (30 June 2020: US$118
million).
Reconciliation of underlying earnings to net earnings
Underlying earnings are reported by Rio Tinto to provide greater
understanding of the underlying business performance of its
operations. Underlying earnings and net earnings both represent
amounts attributable to owners of Rio Tinto. Exclusions from
underlying earnings relating to equity accounted units are stated
after tax and included in the column 'Pre-tax'. Items (a) to (e)
below are excluded from net earnings in arriving at underlying
earnings.
Net
Net amount
amount for for six
Non- six months months
controlling ended 30 ended 30
Pre-tax Taxation interests June 2021 June 2020
US$m US$m US$m US$m US$m
----------------------------------------- ------- -------- ------------ ----------- ----------
Underlying earnings 17,918 (4,999) (753) 12,166 4,750
----------------------------------------- ------- -------- ------------ ----------- ----------
Items excluded from underlying
earnings:
Impairment charges(a) - - - - (1,033)
Exchange and derivative gains/(losses):
- Exchange gains/(losses)
on net debt and intragroup
balances(b) 374 (34) 7 347 (149)
- Losses on currency and
interest rate derivatives
not qualifying for hedge accounting(c) (52) 10 (3) (45) (167)
- (Losses)/gains on embedded
commodity derivatives not
qualifying for hedge accounting(d) (16) - (6) (22) 33
Net losses from movements
to closure estimates (non-operating
and fully impaired sites)(e) (175) 42 - (133) (118)
Total excluded from underlying
earnings 131 18 (2) 147 (1,434)
----------------------------------------- ------- -------- ------------ ----------- ----------
Net earnings 18,049 (4,981) (755) 12,313 3,316
----------------------------------------- ------- -------- ------------ ----------- ----------
Notes to the interim financial statements (continued)
(a) Refer to Impairment charges note on pages 45 and 46.
(b) Exchange gains/(losses) on external net debt and intragroup
balances for the period ended 30 June 2021 comprise of post-tax
foreign exchange losses on net debt of US$4 million and post-tax
gains of US$351 million on intragroup balances, primarily as a
result of the Australian dollar weakening against the US dollar and
the Canadian dollar strengthening against the US dollar.
Exchange (losses)/gains on external net debt and intragroup
balances for the period ended 30 June 2020 comprise post-tax
foreign exchange losses on net debt of US$170 million and post-tax
gains of US$21 million on intragroup balances, primarily as a
result of the Australi an and Canadian dollars both weakening
against the US dollar.
(c) 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.
(d) 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.
(e) In 2021, this amount includes an increase in Diavik's
closure provision to reflect the completion of the Pre-Feasibility
Study that was in progress when the asset was fully impaired in
2020. As the assets at Diavik had previously been fully impaired
this increase has been recognised through the income statement and
has been excluded from underlying earnings in line with past
practice when impairments have been recorded based on provisional
closure estimates. The 2021 charge also includes closure provision
increases at some of the Group's legacy sites where the
environmental damage preceded ownership by Rio Tinto.
In 2020, the Pre-Feasibility Study for the Gove refinery closure
was completed, resulting in an increase to the closure provision.
As a non-operating asset, this increase was recognised through the
income statement. Also in 2020, the feasibility study for the
Argyle mine closure was completed, resulting in a decrease to the
closure provision. As the assets at Argyle had previously been
fully impaired this decrease was recognised through the income
statement, in line with previous movements to the closure
provision. These movements were excluded from underlying
earnings.
Notes to the interim financial statements (continued)
Segmental information - additional information
Geographical analysis (by destination)
Six months Six months Six months Six months
ended 30 ended 30 ended 30 ended 30
June 2021 June 2020 June 2021 June 2020
Consolidated sales revenue by % % US$m US$m
destination(a)
------------ ------------ ---------- ----------
China 59.9% 54.9% 19,805 10,633
Asia (excluding China and Japan) 9.5% 11.1% 3,157 2,155
United States of America 11.5% 12.4% 3,816 2,392
Japan 7.2% 8.3% 2,373 1,598
Europe (excluding UK) 5.0% 5.9% 1,667 1,143
Canada 2.4% 2.9% 793 585
Australia 1.6% 1.8% 519 351
UK 0.5% 0.6% 166 112
Other countries 2.4% 2.1% 787 393
--------------------------------- -------- -------- ---------- ----------
Consolidated sales revenue 100.0% 100.0% 33,083 19,362
--------------------------------- -------- -------- ---------- ----------
(a) Consolidated sales revenue by geographical destination is
based on the ultimate country of destination of the product, if
known. If the eventual destination of the product sold through
traders is not known then revenue is allocated to the location of
the product at the time when control is transferred. Rio Tinto is
domiciled in both the UK and Australia.
Product analysis (by revenue type)
Six months ended 30 June Six months ended 30 June
2021 2020
Revenue Revenue
from contracts Other Consolidated from contracts Other Consolidated
Consolidated sales with customers revenue(a) sales revenue with customers revenue(a) sales revenue
revenue by product US$m US$m US$m US$m US$m US$m
-------------------------- --------------- ----------- -------------- --------------- ----------- --------------
Iron ore 21,964 1,108 23,072 12,182 82 12,264
Aluminium, Alumina
and Bauxite 5,733 84 5,817 4,454 (19) 4,435
Copper 1,472 77 1,549 642 (9) 633
Industrial minerals 1,141 4 1,145 991 (7) 984
Gold 506 (6) 500 214 4 218
Diamonds 160 - 160 141 - 141
Other products(b) 827 13 840 692 (5) 687
-------------------------- --------------- ----------- -------------- --------------- ----------- --------------
Consolidated sales
revenue 31,803 1,280 33,083 19,316 46 19,362
Share of equity
accounted unit
sales and
intra-subsidiary/equity
accounted unit
sales 1,545 971
-------------------------- --------------- ----------- -------------- --------------- ----------- --------------
Gross product sales 34,628 20,333
-------------------------- --------------- ----------- -------------- --------------- ----------- --------------
(a) Certain of the Group's products may be provisionally priced
at the date revenue is recognised based on forward rates. The
subsequent changes in value of provisionally priced receivables
through to settlement is classified as 'Other revenue' above.
(b) "Other products" includes metallic co-products, molybdenum,
silver and other commodities. This category also now includes
uranium sales of US$76 million (30 June 2020: US$149 million) that
were previously disclosed separately.
Notes to the interim financial statements (continued)
Other disclosures
Capital commitments at 30 June 2021
Capital commitments, excluding the Group's share of joint
venture capital commitments, were US$3,059 million (31 December
2020: US$3,152 million). Our capital commitments include open
purchase orders for managed operations and expenditure on major
projects authorised by our Investment Committee for non-managed
operations. On a legally enforceable basis, capital commitments
would be approximately US$1.7 billion (31 December 2020: US$1.5
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$9
million (31 December 2020: US$9 million).
Contingent liabilities (subsidiaries and joint operations)
Contingent liabilities, indemnities and other performance
guarantees were US$140 million at 30 June 2021 (31 December 2020:
US$146 million).
Performance guarantees
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 guarantees or
indemnities being called is assessed as possible rather than
probable or remote. There were no material contingent liabilities
arising in relation to the Group's joint ventures and
associates.
Rio Tinto Coal Mozambique
In October 2017, Rio Tinto announced that it had been notified
by the U.S. Securities and Exchange Commission (SEC) that the SEC
had filed a complaint 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 case is with the trial
court for further consideration.
In March 2018, the Australian Securities and Investments
Commission (ASIC) filed civil proceedings in the NSW District
Registry of the Federal Court of Australia against Rio Tinto
Limited, Albanese, and Elliott. On 1 May 2018, ASIC expanded its
proceedings. ASIC alleges that Rio Tinto committed violations of
the disclosure, accounting, and misleading or deceptive conduct
provisions of the Corporations Act by making misleading or
deceptive statements related to RTCM in its 2011 Annual Report and
its 2012 interim financial statements, not complying with
accounting standards in respect of its 2012 interim financial
statements, and not disclosing an impairment of RTCM in its 2012
interim financial statements. ASIC further alleges Albanese and
Elliott breached their duties as directors or officers, and failed
to take all reasonable steps to comply with relevant accounting
requirements.
Rio Tinto believes that the SEC case and the ASIC proceedings
are unwarranted and will defend the allegations vigorously. Hence,
no provisions have been recognised for these cases.
Simandou
Rio Tinto continues to co-operate fully with relevant
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.
The outcomes of these matters remain uncertain, but they could
ultimately expose the Group to material financial cost. The Board
is giving these matters its full and proper attention and a
dedicated Board committee continues to monitor the progress of
these matters, as appropriate.
Notes to the interim financial statements (continued)
Other disclosures (continued)
Other legal matters
The Group has 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
Group 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
judgements may at times occur. The Group may incur, in the future,
judgements or enter into settlements of claims that could lead to
material cash outflows. However, at present, we do not believe that
any of these proceedings will have a materially adverse effect on
our financial position.
Related party matters
Transactions and balances with equity accounted units are
summarised below. Purchases, trade and other receivables, and trade
and other payables relate largely to amounts charged by equity
accounted units for toll processing of alumina and purchasing of
bauxite and aluminium. Sales relate largely to sales of alumina to
equity accounted units for smelting into aluminium. Details of the
Group's principal equity accounted units are given in the 2020
Annual report.
Six months Six months
ended 30 ended 30
June 2021 June 2020
------------------------------------------------
Income statement items US$m US$m
------------------------------------------------ ---------- ----------
Purchases from equity accounted units (543) (519)
Sales to equity accounted units 205 119
Cash flow statement items
------------------------------------------------ ---------- ----------
Dividends from equity accounted units 726 183
Net receipts/(funding) from/of equity accounted
units 28 (14)
------------------------------------------------ ---------- ----------
30 June 31 December
2021 2020
Balance sheet items US$m US$m
------------------------------------------------ ------- -----------
Investments in equity accounted units(a) 3,660 3,764
Loans to equity accounted units - 41
Trade and other receivables: amounts due from
equity accounted units(b) 246 251
Trade and other payables: amounts due to equity
accounted units (240) (241)
------------------------------------------------ ------- -----------
(a) Investments in equity accounted units include quasi equity loans.
(b) This includes prepayments of tolling charges.
Rio Tinto plc has provided a number of guarantees in relation to
various pension funds. Subject to certain conditions, Rio Tinto plc
would pay any contributions due from Group companies participating
in these funds in the event that the companies fail to meet their
contribution requirements.
Notes to the interim financial statements (continued)
Other disclosures (continued)
Summary financial information for subsidiaries that have
non-controlling interests that are material to the Group
This summarised financial information is shown on a 100% basis.
It represents the amounts shown in the subsidiaries' financial
statements prepared in accordance with IFRS under Group accounting
policies, including fair value adjustments, and before intercompany
eliminations
Iron Ore Iron Ore
Company Company
of of Turquoise Turquoise
Canada Canada Hill (a)(b)(c) Hill (a)(b)(c)
2021 2020 2021 2020
Income statement summary for six months US$m US$m US$m US$m
ended 30 June
-------------------------------------------- -------- ----------- --------------- ---------------
Revenue 1,718 1,011 844 409
Profit/(loss) after tax 654 257 426 (23)
- attributable to non-controlling interests 271 106 211 (89)
- attributable to Rio Tinto 383 151 215 66
Other comprehensive income/(loss) 96 (91) 5 (2)
-------------------------------------------- -------- ----------- --------------- ---------------
Total comprehensive income/(loss) 750 166 431 (25)
30 June 31 December 30 June 31 December
2021 2020 2021 2020
Balance sheet summary as at: US$m US$m US$m US$m
-------------------------------------------- -------- ----------- --------------- ---------------
Non-current assets 2,879 2,733 11,789 10,930
Current assets 840 670 1,033 1,496
Current liabilities (493) (462) (530) (540)
Non-current liabilities (1,034) (993) (4,392) (4,404)
============================================ ======== =========== =============== ===============
Net assets 2,192 1,948 7,900 7,482
- attributable to non-controlling interests 907 804 2,600 2,424
- attributable to Rio Tinto 1,285 1,144 5,300 5,058
-------------------------------------------- -------- ----------- --------------- ---------------
2021 2020 2021 2020
Cash flow statement summary for six US$m US$m US$m US$m
months ended 30 June
-------------------------------------------- -------- ----------- --------------- ---------------
Cash flow from operations 964 403 95 29
Dividends paid to non-controlling interests (206) - - -
-------------------------------------------- -------- ----------- --------------- ---------------
(a) Turquoise Hill Resources Ltd holds a controlling interest in Oyu Tolgoi LLC ("OT").
(b) Under the terms of the project finance facility held by OT,
there are certain restrictions on the ability of OT to make
shareholder distributions.
(c) Since 2011, Turquoise Hill has funded common share
investments in OT on behalf of Erdenes Oyu Tolgoi LLC ("Erdenes").
In accordance with the Amended and Restated Shareholders Agreement
dated 8 June 2011, such funded amounts earn interest at an
effective annual rate of LIBOR plus 6.5% and are repayable to them
via a pledge over Erdenes' share of future OT common share
dividends. Erdenes also has the right to reduce the outstanding
balance by making payments directly to Turquoise Hill. Common share
investments funded on behalf of Erdenes are recorded as a reduction
to the net carrying value of non-controlling interests. As at 30
June 2021, the cumulative amount of such funding was US$1,399
million (31 December 2020: US$1,378 million), excluding accrued
interest of US$877 million (31 December 2020: US$804 million)
relating to this funding.
Notes to the interim financial statements (continued)
Other disclosures (continued)
Summary financial information for subsidiaries that have
non-controlling interests that are material to the Group
(continued)
Robe
River Robe River Other Other
Mining Mining companies companies
Co Co and and Robe
Pty Pty eliminations(d) eliminations(d) River Robe River
2021 2020 2021 2020 2021 2020
Income statement summary US$m US$m US$m US$m US$m US$m
for six months ended
30 June
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
Revenue 1,289 734 1,504 851 2,793 1,585
Profit after tax 752 403 841 424 1,593 827
- attributable to non-controlling
interests 301 158 - - 301 158
- attributable to Rio
Tinto 451 245 841 424 1,292 669
Other comprehensive
loss (80) (88) (37) (38) (117) (126)
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
Total comprehensive
income 672 315 804 386 1,476 701
30 June 31 December 30 June 31 December 30 June 31 December
2021 2020 2021 2020 2021 2020
Balance sheet summary US$m US$m US$m US$m US$m US$m
as at:
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
Non-current assets 3,535 3,452 4,238 4,247 7,773 7,699
Current assets 1,134 865 1,870 2,239 3,004 3,104
Current liabilities (583) (380) (339) (414) (922) (794)
Non-current liabilities (424) (255) (4,234) (4,752) (4,658) (5,007)
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
Net assets 3,662 3,682 1,535 1,320 5,197 5,002
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
- attributable to non-controlling
interests 1,463 1,397 - - 1,463 1,397
- attributable to Rio
Tinto 2,199 2,285 1,535 1,320 3,734 3,605
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
2021 2020 2021 2020 2021 2020
Cash flow statement US$m US$m US$m US$m US$m US$m
summary for six months
ended 30 June
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
Cash flow from operations 1,134 665 1,643 1,066 2,777 1,731
Dividends paid to non-controlling
interests (201) (211) - - (201) (211)
---------------------------------- ------- ------------ ---------------- ---------------- ------- -----------
(d) "Other companies and eliminations" includes North Mining
Limited (a wholly-owned subsidiary of the Group which accounts for
its interest in Robe River) and goodwill of US$375 million at 30
June 2021 (31 December 2020: US$383 million) that arose on the
Group's acquisition of its interest in Robe River.
Notes to the interim financial statements (continued)
Other disclosures (continued)
Summary information for joint ventures that are material to the
Group
This summarised financial information is shown on a 100% basis.
It represents the amounts shown in the joint ventures' financial
statements prepared in accordance with IFRS under Group accounting
policies, including fair value adjustments and amounts due to and
from Rio Tinto.
Sohar
Minera Escondida Minera Escondida Sohar Aluminum Aluminum
Ltda(a) Ltda(a) Co. L.L.C.(b) Co. L.L.C.(b)
2021 2020 2021 2020
Income statement summary for US$m US$m US$m US$m
six months ended 30 June
------------------------------------ ---------------- ---------------- -------------- --------------
Revenue 4,953 3,137 420 325
Depreciation and amortisation (580) (797) (60) (55)
Other operating costs (1,506) (1,243) (245) (225)
------------------------------------ ---------------- ---------------- -------------- --------------
Operating profit 2,867 1,097 115 45
Finance expense (73) (70) (10) (15)
Income tax (1,034) (370) (15) (5)
------------------------------------ ---------------- ---------------- -------------- --------------
Profit after tax 1,760 657 90 25
Other comprehensive income/(loss) 40 (27) - -
------------------------------------ ---------------- ---------------- -------------- --------------
Total comprehensive income 1,800 630 90 25
------------------------------------ ---------------- ---------------- -------------- --------------
30 June 31 December 30 June 31 December
2021 2020 2021 2020
Balance sheet summary as at: US$m US$m US$m US$m
------------------------------------ ---------------- ---------------- -------------- --------------
Non-current assets 11,710 11,833 1,805 1,850
Current assets 3,010 3,107 420 270
Current liabilities (1,777) (1,813) (150) (675)
Non-current liabilities (4,796) (4,560) (745) (200)
------------------------------------ ---------------- ---------------- -------------- --------------
Net assets 8,147 8,567 1,330 1,245
Assets and liabilities above
include:
- cash and cash equivalents 887 1,103 145 30
- current financial liabilities (577) (790) (55) (565)
- non-current financial liabilities (2,800) (2,560) (575) (30)
------------------------------------ ---------------- ---------------- -------------- --------------
2021 2020 2021 2020
Cash flow statement summary US$m US$m US$m US$m
for six months ended 30 June
------------------------------------ ---------------- ---------------- -------------- --------------
Dividends received from joint
venture (Rio Tinto share) 720 183 - -
------------------------------------ ---------------- ---------------- -------------- --------------
(a) In addition to its "Investment in equity accounted units",
the Group recognises deferred tax liabilities of US$334 million (31
December 2020: US$358 million) relating to tax that would be
payable if the Group's share of the earnings retained in Minera
Escondida Ltda were remitted to the Group.
(b) Under covenants stipulated in the agreement to Sohar
Aluminium Co. L.L.C.'s secured loan facilities, there are certain
restrictions on the ability of Sohar Aluminium Co. L.L.C to make
shareholder distributions.
Events after the balance sheet date
There were no significant events identified after the balance
sheet date.
Directors' declaration
Directors' statement of responsibility
In the directors' opinion:
The condensed consolidated interim financial statements on pages
31 to 64 including the notes have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted by the European
Union before 1 January 2021 and applicable in the United Kingdom
('UK') thereafter under the European Union (Withdrawal) Act 2018,
the Disclosure Guidance and Transparency Rules sourcebook ('DTR')
of the Financial Conduct Authority in the United Kingdom,
applicable accounting standards and the Australian Corporations Act
2001 as modified by an order of the Australian Securities and
Investments Commission issued on 16 July 2021, using the most
appropriate accounting policies for Rio Tinto's business and
supported by reasonable and prudent judgements.
The condensed consolidated interim financial statements give a
true and fair view of the Rio Tinto Group's financial position as
at 30 June 2021 and of its performance, as represented by the
results of its operations, comprehensive income and expense and its
cash flows for the six months then ended. There are reasonable
grounds to believe that each of the Rio Tinto Group, Rio Tinto
Limited and Rio Tinto plc will be able to pay its debts as and when
they become due and payable.
The interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
Signed in accordance with a resolution of the Board of
Directors.
Simon Thompson
Chairman
28 July 2021
Jakob Stausholm
Chief executive
28 July 2021
Peter Cunningham
Chief financial officer
28 July 2021
Independent Auditors' Review Reports of KPMG LLP ("KPMG UK") to
Rio Tinto plc and of KPMG ("KPMG Australia") to the members of Rio
Tinto Limited
Conclusions
For the purposes of these reports, the terms 'we' and 'our'
denote KPMG UK in relation to UK responsibilities and reporting
obligations to Rio Tinto plc, and KPMG Australia in relation to
Australian responsibilities and reporting obligations to the
members of Rio Tinto Limited.
We have reviewed the accompanying interim financial information
("Interim Financial Statements") in the Interim Results 2021
("Interim Report") of the Rio Tinto Group ("the Group") as at and
for the six months ended 30 June 2021 which comprises the:
-- Group income statement
-- Group statement of comprehensive income;
-- Group cash flow statement;
-- Group balance sheet;
-- Group statement of changes in equity; and
-- The explanatory notes to the Interim Financial Statements on
pages 39 to 64 (including the Rio Tinto financial information by
business unit on pages 70 to 73).
The Rio Tinto Group consists of Rio Tinto plc, Rio Tinto Limited
and the entities they controlled at 30 June 2021 or during the six
months ended 30 June 2021. KPMG Australia considers the Directors'
Declaration to be part of the Interim Financial Statements when
forming its conclusion.
Review conclusion by KPMG UK
Based on our review, nothing has come to our attention that
causes us to believe that the Interim Financial Statements are not
prepared, in all material respects, in accordance with
International Accounting Standard ('IAS') 34 Interim Financial
Reporting as adopted for use in the UK and the Disclosure Guidance
and Transparency Rules ("the DTR") of the UK's Financial Conduct
Authority ("the UK FCA").
Review conclusion by KPMG Australia
Based on our review, which is not an audit, we have not become
aware of any matter that makes us believe that the Interim
Financial Statements, including the Directors' Declaration, are not
in accordance with an Order under section 340 of the Australian
Corporations Act 2001 issued by the Australian Securities and
Investments Commission on 16 July 2021, including:
-- giving a true and fair view of the Group's financial position
as at 30 June 2021 and of its performance for the six months ended
on that date; and
-- complying with International Accounting Standard ('IAS') 34
'Interim Financial Reporting' as adopted for use in the UK and the
Australian Corporations Regulations 2001.
Basis for Conclusions
KPMG UK conducted its review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK.
In conducting its review, KPMG UK has complied with the ethical
and independence requirements of the UK FRC Ethical Standard as
applied to listed public interest entities.
KPMG Australia conducted its review in accordance with Auditing
Standard on Review Engagements ASRE 2410 Review of a Financial
Report Performed by the Independent Auditor of the Entity ("ASRE
2410"), as issued by the Australian Auditing and Assurance
Standards Board.
KPMG Australia is independent of the Group in accordance with
the auditor independence requirements of the Australian
Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board's APES 110 Code
of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to its audit of the annual
consolidated financial report in Australia. In conducting its
review, KPMG Australia has also fulfilled its other ethical
responsibilities in accordance with the Code.
KPMG UK's and KPMG Australia's responsibilities are further
described in the Auditors' Responsibilities for the Review of the
Interim Financial Statements section of our report.
Responsibilities of the Directors for the Interim Financial
Statements and Interim Report
The Interim Report is the responsibility of, and has been
approved by, the Directors of Rio Tinto plc and the Directors of
Rio Tinto Limited.
The Directors of Rio Tinto plc are responsible for:
-- preparing the Interim Report in accordance with the DTR of the UK FCA; and
-- the preparation of Interim Financial Statements in accordance
with IAS 34 as adopted for use in the UK. The latest annual
financial statements of the Group were prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The
next annual financial statements will be prepared in accordance
with UK-adopted international accounting standards.
The Directors of Rio Tinto Limited are responsible for:
-- the preparation of Interim Financial Statements, including
the Directors' Declaration, that give a true and fair view in
accordance with International Accounting Standard 34 Interim
Financial Reporting as adopted for use in the UK and the Australian
Corporations Act 2001 as amended by the Australian Securities and
Investments Commission Order dated 16 July 2021; and
-- such internal control as the Directors of Rio Tinto Limited
determine is necessary to enable the preparation of the Interim
Financial Statements, including the Directors' Declaration, that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Auditors' Responsibilities for the Review of the Interim
Financial Statement s
KPMG UK's responsibility is to express to Rio Tinto plc a
conclusion on the Interim Financial Statements based on its
review.
KPMG Australia's responsibility is to express a conclusion on
the Interim Financial Statements, including the Directors'
Declaration, based on its review.
ASRE 2410 requires KPMG Australia to conclude whether we have
become aware of any matter that makes us believe that the Interim
Financial Statements, including the Directors' Declaration, do not
comply with the Corporations Act 2001 as amended by the Australian
Securities and Investments Commission Order dated 16 July 2021
including giving a true and fair view of the Group's financial
position as at 30 June 2021 and its performance for the six months
ended on that date, and complying with International Accounting
Standard 34 Interim Financial Reporting as adopted for use in the
UK and the Corporations Regulations 2001.
A review of Interim Financial Statements consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information that accompanies the
Interim Financial Statements and is contained in the Interim Report
and consider whether it contains any apparent misstatements or
material inconsistencies with the information in the Interim
Financial Statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) or
Australian Auditing Standards and consequently does not enable us
to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
The purpose of our review work and to whom we owe our
responsibilities
KPMG UK's report is made solely to Rio Tinto plc in accordance
with the terms of KPMG UK's engagement to assist Rio Tinto plc in
meeting the requirements of the DTR of the UK FCA. Our review work
has been undertaken so that we might state to Rio Tinto plc those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than Rio Tinto plc
for our review work, for this report, or for the conclusions we
have reached.
KPMG Australia's report is made solely to Rio Tinto Limited's
members, as a body, in accordance with the Australian Corporations
Act 2001 as amended by the Australian Securities and Investments
Commission Order dated 16 July 2021. Our review work has been
undertaken so that we might state to the members of Rio Tinto
Limited those matters we are required to state to them in this
report, and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other
than Rio Tinto Limited's members, as a body, for our review work,
for this report, or for the conclusion we have reached.
Jonathan Downer Trevor Hart
for and on behalf of KPMG LLP Partner
Chartered Accountants Perth
London 28 July 2021
28 July 2021
KPMG
28 July 2021
KPMG, an Australian partnership and KPMG LLP, a UK limited liability
partnership, are member firms of the KPMG global organisation of
independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. KPMG
Australia's liability limited by a scheme approved under Professional
Standards Legislation.
Lead Auditor's Independence Declaration under Section 307C of
the Australian Corporations Act 2001
To the Directors of Rio Tinto Limited
I declare that, to the best of my knowledge and belief, in
relation to the review of Rio Tinto Limited for the half-year ended
30 June 2021 there have been:
a) no contraventions of the auditor independence requirements as
set out in the Australian Corporations Act 2001 in relation to the
review; and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Rio Tinto Limited and the
entities it controlled during the financial period.
KPMG
Trevor Hart
Partner
Perth
28 July 2021
Liability limited by a scheme approved under Professional
Standards Legislation
Rio Tinto financial information by business unit
Gross product Underlying EBITDA(b) Underlying earnings(c)
sales(a)
for the 6 months for the 6 months for the 6 months
ended ended ended
----------------------------- --------- ------------------------
Adjusted Adjusted Adjusted
Rio
Tinto
interest 30 June 30 June 30 June 30 June 30 June 30 June
% 2021 2020 2021 2020 2021 2020
US$m US$m US$m US$m US$m US$m
----------------------------- -------- -------- ---------- ---------- ----------- -----------
Iron Ore
Pilbara (d) 21,476 11,246 16,207 7,702 10,348 4,628
Dampier Salt 68.4 145 112 21 25 5 8
Evaluation projects/other (e) 1,003 252 161 (37) 110 (77)
Intra-segment (e) (917) (145) (329) 8 (247) 4
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Total Iron Ore 21,707 11,465 16,060 7,698 10,216 4,563
Aluminium
Bauxite 1,082 1,170 338 514 105 257
Alumina 1,359 1,096 295 115 155 38
Primary Metal 3,193 2,111 1,101 284 564 (59)
Pacific Aluminium 1,285 965 273 5 174 (50)
Intra-segment and other (1,391) (1,262) (36) 33 (40) 24
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Integrated operations 5,528 4,080 1,971 951 958 210
Other product group Items 404 407 17 3 12 (3)
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Product group operations 5,932 4,487 1,988 954 970 207
Evaluation projects/other - - (64) (29) (49) (14)
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Total Aluminium 5,932 4,487 1,924 925 921 193
Copper
Rio Tinto Kennecott 100.0 1,318 635 676 193 323 (12)
Escondida 30.0 1,486 941 1,033 564 537 204
Oyu Tolgoi and Turquoise
Hill (f) 844 409 528 89 152 11
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Product group operations 3,648 1,985 2,237 846 1,012 203
Simandou iron ore project (g) - - (6) (2) (2) (1)
Evaluation projects/other 131 (2) (183) (158) (125) (91)
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Total Copper 3,779 1,983 2,048 686 885 111
--------- -------- --------
Minerals
Iron Ore Company of Canada 58.7 1,807 1,086 1,105 473 398 156
Rio Tinto Iron & Titanium (h) 973 773 305 222 146 80
Rio Tinto Borates 100.0 300 293 64 83 34 47
Diamonds (i) 160 141 16 (12) 5 (40)
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Product group operations 3,240 2,293 1,490 766 583 243
Evaluation projects/other 30 29 (92) (54) (85) (53)
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Total Minerals 3,270 2,322 1,398 712 498 190
--------- -------- --------
Other operations (j) 85 158 (4) 1 (51) (29)
Inter-segment transactions (145) (82) (6) (18) (3) (6)
-----------------------------
Product group total 34,628 20,333 21,420 10,004 12,466 5,022
Central pensions, share-based
payments, insurance and derivatives 119 102 120 97
Restructuring, project
and one-off costs (36) (72) (23) (53)
Central costs (k) (346) (273) (294) (233)
Central exploration and
evaluation (120) (121) (100) (97)
Net interest (3) 14
----------------------------- --------- -------- -------- ---------- ---------- ----------- -----------
Underlying EBITDA/earnings 21,037 9,640 12,166 4,750
Items excluded from
underlying
EBITDA/earnings (177) (119) 147 (1,434)
Reconciliation to Group
income statement
Share of equity accounted unit
sales and intra-subsidiary/equity
accounted unit sales (1,545) (971)
Impairment charges - (1,163)
Depreciation and amortisation
in subsidiaries excluding capitalised
depreciation (2,253) (1,974)
Depreciation and amortisation
in equity accounted units (249) (314)
Taxation and finance items
in equity accounted units (365) (141)
Finance items 56 (650)
----------------------------- -------- --------
Consolidated sales revenue/profit
before taxation/net earnings 33,083 19,362 18,049 5,279 12,313 3,316
Rio Tinto financial information by business unit (continued)
Capital expenditure(l) Depreciation Operating assets(m)
and amortisation
for the 6 months for the 6 months As at
ended ended
Adjusted Adjusted Adjusted
Rio
Tinto
interest 30 June 30 June 30 June 30 June 30 June 31 December
% 2021 2020 2021 2020 2021 2020
US$m US$m US$m US$m US$m US$m
----------- ----------- -------- --------- --------
Iron Ore
Pilbara (d) 1,907 1,179 1,011 831 16,558 16,253
Dampier Salt 68.4 5 6 11 9 169 163
Evaluation projects/other (e) - - - - 833 338
Intra-segment (e) - - - - (351) (104)
----------- ----------- -------- --------- --------
Total Iron Ore 1,912 1,185 1,022 840 17,209 16,650
----------- ----------- -------- --------- --------
Aluminium
Bauxite 67 53 165 139 2,551 2,593
Alumina 113 74 80 59 2,116 2,294
Primary Metal 285 303 347 325 9,506 9,361
Pacific Aluminium 58 54 53 71 409 455
Intra-segment and other 1 (2) - - 875 662
Total Aluminium 524 482 645 594 15,457 15,365
Copper
Rio Tinto Kennecott 100.0 203 320 249 223 2,282 2,317
Escondida 30.0 83 118 174 239 2,663 2,726
Oyu Tolgoi and Turquoise
Hill (f) 460 548 98 104 8,854 8,111
----------- ----------- -------- --------- --------
Product group operations 746 986 521 566 13,799 13,154
Simandou iron ore project (g) - (2) - - 19 16
Evaluation projects/other 4 3 2 2 154 192
----------- ----------- -------- --------- --------
Total Copper 750 987 523 568 13,972 13,362
----------- ----------- -------- --------- --------
Minerals
Iron Ore Company of Canada 58.7 90 51 96 88 1,052 1,009
Rio Tinto Iron & Titanium (h) 83 60 109 95 3,538 3,390
Rio Tinto Borates 100.0 17 16 25 25 487 502
Diamonds (i) 11 20 2 58 191 (7)
----------- ----------- -------- --------- --------
Product group operations 201 147 232 266 5,268 4,894
Evaluation projects/other 8 - - - 37 33
----------- ----------- -------- --------- --------
Total Minerals 209 147 232 266 5,305 4,927
Other operations (j) - 1 92 99 (848) (550)
Inter-segment transactions (36) 129
----------- ----------- -------- --------- --------
Product group total 3,395 2,802 2,514 2,367 51,059 49,883
Other items 35 22 42 39 (1,224) (2,165)
Less: equity accounted
units (120) (159) (249) (314) - -
----------- ----------- -------- --------- --------
Total 3,310 2,665 2,307 2,092 49,835 47,718
----------- ----------- -------- --------- --------
Add back: Proceeds from
disposal of property,
plant and equipment 26 28
Total capital expenditure
per cash flow statement 3,336 2,693
----------- ----------- -------- --------- --------
Less: Net cash/(debt) 3,140 (664)
Equity attributable to
owners of Rio Tinto 52,975 47,054
Notes to financial information by business unit
Business units are classified according to the Group's
management structure.
The financial information by business unit has been recast in
accordance with the organisational restructure announced on 28
January 2021.The main impacts are as follows: Simandou has moved
from the previous Energy & Minerals product group to the Copper
product group; Uranium has moved from the previous Energy &
Minerals product group to Other Operations; Diamonds has moved from
the previous Copper & Diamonds product group to the Minerals
product group; the Minerals product group retains the Argyle
Residual operations and from 1 January 2021, Argyle Closure has
moved to Other Operations. Argyle Residual operations includes
activity relating to the sale of remaining diamond inventory and
property held. Argyle Closure includes activity relating to the
management and execution of the Argyle mine closure obligations and
management of entities with interests in state and traditional
owner agreements and licences. As a result of these changes, the
Copper & Diamonds segment is renamed Copper and the Energy
& Minerals segment is renamed Minerals from 2021.
The disclosures in this note include certain Alternative
performance measures (APMs). For more information on the APMs used
by the Group, including definitions and calculations, please refer
to pages 74 to 79.
(a) Gross product sales includes the sales revenue of equity
accounted units on a proportionately consolidated basis (after
adjusting for sales to subsidiaries) in addition to consolidated
sales. Consolidated sales revenue includes subsidiary sales to
equity accounted units which are not included in gross product
sales.
(b) Underlying EBITDA of subsidiaries and the Group's share
relating to equity accounted units represents profit before: tax,
net finance items, depreciation and amortisation charged to the
income statement in the period. Underlying EBITDA excludes the
EBITDA impact of the same items that are excluded from underlying
earnings.
(c) Underlying earnings represent net earnings attributable to
the owners of Rio Tinto, adjusted to exclude items which do not
reflect the underlying performance of the Group's operations.
Business unit earnings are stated before finance items but after
the amortisation of discount related to provisions. Earnings
attributed to business units do not include amounts that are
excluded in arriving at underlying earnings.
(d) Pilbara represents the Group's 100% holding in Hamersley,
50% holding of Hope Downs Joint Venture and 65% holding of Robe
River Iron Associates. The Group's net beneficial interest in Robe
River Iron Associates is 53% as 30% is held through a 60% owned
subsidiary and 35% is held through a 100% owned subsidiary.
(e) Gross product sales, Underlying EBITDA, Net 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 the Pilbara and our portside trading business are
eliminated through the Iron Ore "intra-segment" line and
transactions between IOC and the portside trading business are
eliminated through "inter-segment transactions".
(f) Our interest in Oyu Tolgoi is held indirectly through our
50.8% investment in Turquoise Hill Resources Ltd (TRQ), where TRQ's
principal asset is its 66% investment in Oyu Tolgoi LLC, which owns
the Oyu Tolgoi copper-gold mine.
(g) 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 mining 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.
(h) Includes our interests in Rio Tinto Fer et Titane (100%),
QIT Madagascar Minerals (QMM, 80%) and Richards Bay Minerals
(attributable interest of 74%).
(i) Includes our interests in Argyle (100%), mainly the Argyle
Residual Operations which relates to the sale of remaining
inventory and Diavik (60%). From 1 June 2021, management
responsibility for the Argyle site moved from Minerals to Rio Tinto
Closure (RTC), hence, Argyle Closure is reported in Other
operations effective from 1 January 2021. Refer to (j) below.
(j) Other operations include our 100% interest in the Gove
alumina refinery (under rehabilitation), Rio Tinto Marine, and the
remaining legacy liabilities of Rio Tinto Coal Australia. These
include provisions for onerous contracts, in relation to rail
infrastructure capacity, partly offset by financial assets and
receivables relating to contingent royalties and disposal proceeds.
From 1 January 2021, Uranium moved from Minerals to Other
operations. From 1 January 2021, Argyle Closure is reported as part
of Other Operations.
Notes to financial information by business unit (continued)
(k) 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 have been
reclassified from Central costs and are now included in Central
pensions, share based payments, insurance & derivatives, in
order to provide a better understanding of Central costs. The
impact of this change on the reported comparatives is
insignificant, and therefore the comparatives have not been
restated.
(l) 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. The
details provided include 100% of subsidiaries' capital expenditure
and Rio Tinto's share of the capital expenditure of joint
operations and equity accounted units.
(m) Operating assets of the Group comprise equity attributable
to Rio Tinto before deducting net cash/(debt). Operating assets of
business units are comprised of net assets excluding
post-retirement assets and liabilities, net of tax, and before
deducting net debt. Operating assets are stated after the deduction
of non-controlling interests - these are calculated by reference to
the net assets of the relevant companies (i.e. inclusive of such
companies' debt and amounts due to or from Rio Tinto Group
companies).
Alternative performance measures
The Group presents certain alternative performance measures
("APMs") which are reconciled to directly comparable IFRS financial
measures below. These APMs are used by management to assess the
performance of the business and provide additional information
which investors may find useful. APMs are presented in order to
give further insight into the underlying business performance of
the Group's operations.
APMs are not consistently defined and calculated by all
companies, including those in the Group's industry. Accordingly,
these measures used by the Group may not be comparable with
similarly titled measures and disclosures made by other companies.
Consequently, these APMs should not be regarded as a substitute for
the IFRS measures and should be considered supplementary to those
measures.
The following tables present the Group's key financial measures
not defined according to IFRS and a reconciliation between those
APMs and their nearest respective IFRS measure.
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.
Gross product sales
Gross product sales includes the sales revenue of equity
accounted units on a proportionately consolidated basis (after
adjusting for sales to subsidiaries) in addition to consolidated
sales. Consolidated sales revenue includes subsidiary sales to
equity accounted units which are not included in gross product
sales.
Gross product sales measures revenue on a basis that is
comparable to our Underlying EBITDA metric.
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
-----------------------------------------------------------------
Consolidated sales revenue 33,083 19,362
Share of equity accounted unit sales and intra-subsidiary/equity
accounted unit sales 1,545 971
---------- ----------
Gross product sales 34,628 20,333
---------- ----------
Alternative performance measures (continued)
Underlying EBITDA
Underlying EBITDA represents profit before tax, net finance
items, depreciation and amortisation excluding the EBITDA impact of
the same items that are excluded in arriving at underlying earnings
(as defined on page 55).
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
Profit after tax 13,068 3,451
Depreciation and amortisation in subsidiaries excluding
capitalised depreciation 2,253 1,974
Depreciation and amortisation in equity accounted
units 249 314
Finance items in subsidiaries (56) 650
Taxation in subsidiaries 4,981 1,828
Taxation and finance items in equity accounted
units 365 170
Impairment charges - 1,134
Losses/(gains) on embedded commodity derivatives
not qualifying for hedge accounting (including
exchange) 2 (53)
Change in closure estimates (non-operating and
fully impaired sites) 175 172
Underlying EBITDA 21,037 9,640
Underlying EBITDA margin
Underlying EBITDA margin is defined as Group underlying EBITDA
divided by gross product sales.
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
-------------------------
Underlying EBITDA 21,037 9,640
Gross product sales 34,628 20,333
Underlying EBITDA margin 61% 47%
---- ----- ----
Pilbara underlying FOB EBITDA margin
The Pilbara underlying free on board (FOB) EBITDA margin is
defined as Pilbara underlying EBITDA divided by Pilbara gross
product sales, excluding freight revenue.
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
-----------------------------------------------
Pilbara
Underlying EBITDA 16,207 7,702
-----------------------------------------------
Pilbara gross product sales 21,476 11,246
-----------------------------------------------
Freight revenue 1,023 590
-----------------------------------------------
Pilbara gross product sales, excluding freight
revenue 20,453 10,656
-----------------------------------------------
Pilbara underlying FOB EBITDA margin 79% 72%
----------------------------------------------- ---- ----
Alternative performance measures (continued)
Underlying EBITDA margin from Aluminium integrated
operations
Underlying EBITDA margin from integrated operations is defined
as underlying EBITDA divided by gross product sales.
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
----------------------------------------------------
Aluminium
Underlying EBITDA - integrated operations 1,971 951
----------------------------------------------------
Gross product sales - integrated operations 5,528 4,080
----------------------------------------------------
Underlying EBITDA margin from integrated operations 36% 23%
---------------------------------------------------- ---- ----
Underlying EBITDA margin (product group operations)
Underlying EBITDA margin (product group operations) is defined
as underlying EBITDA divided by gross product sales.
Adjusted
Six months Six months
ended 30 ended 30
June 2021 June 2020(a)
US$m US$m
----------------------------------------------------
Copper
Underlying EBITDA - product group operations 2,237 846
----------------------------------------------------
Gross product sales - product group operations 3,648 1,985
----------------------------------------------------
Underlying EBITDA margin - product group operations 61% 43%
---------------------------------------------------- ---- -----
Adjusted
Six months Six months
ended 30 ended 30
June 2021 June 2020(a)
US$m US$m
----------------------------------------------------
Minerals
Underlying EBITDA - product group operations 1,490 766
----------------------------------------------------
Gross product sales - product group operations 3,240 2,293
----------------------------------------------------
Underlying EBITDA margin - product group operations 46% 33%
---------------------------------------------------- ---- -----
(a) The comparatives have been recast in accordance with the
organisational restructure announced on 28 January 2021.The main
impacts are as follows: Simandou has moved from the previous Energy
& Minerals product group to the Copper product group; Uranium
has moved from the previous Energy & Minerals product group to
Other Operations; Diamonds has moved from the previous Copper &
Diamonds product group to the Minerals product group; the Minerals
product group retains the Argyle Residual operations and from 1
January 2021, Argyle Closure has moved to Other Operations. Argyle
Residual operations includes activity relating to the sale of
remaining diamond inventory and property held. Argyle Closure
includes activity relating to the management and execution of the
Argyle mine closure obligations and management of entities with
interests in state and traditional owner agreements and licences.
As a result of these changes, the Copper & Diamonds segment is
renamed Copper and the Energy & Minerals segment is renamed
Minerals from 2021.
Underlying Earnings
Underlying earnings represent net earnings attributable to the
owners of Rio Tinto, adjusted to exclude items which 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.
Alternative performance measures (continued)
The following items are excluded from net earnings in arriving
at underlying earnings in each period irrespective of the
magnitude:
- Net gains/(losses) on disposal and consolidation of interests
in businesses.
- Impairment charges and reversals.
- Profit/(loss) after tax from discontinued operations.
- Certain exchange and derivative gains and losses.
The reconciliation of underlying earnings to net earnings can be
found on segmental information note on pages 56 to 57.
Basic underlying earnings per share
Basic underlying earnings per share is calculated as underlying
earnings divided by the weighted average number of shares
outstanding during the period.
On a per share basis, this allows the comparability of
underlying financial performance adjusted to exclude items which do
not reflect the underlying performance of the Group's
operations.
Six months Six months
ended 30 ended 30
June 2021 June 2020
cents cents
-------------------------------------------------- ---------- ----------
Basic earnings per ordinary share 761.0c 205.0c
Items excluded from underlying earnings per share (9.1)c 88.7c
Basic underlying earnings per ordinary share 751.9c 293.7c
---------- ----------
APMs derived from Cash flow statement
Capital expenditure
Capital expenditure comprises 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', hence,
presented gross, before taking into account any cash received from
disposals 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.
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.
Six months Six months
ended 30 ended 30
June 2021 June 2020
US$m US$m
------------------------------------------------ ---------- ----------
Net cash generated from operating activities 13,661 5,628
Less: Purchase of property, plant and equipment
and intangible assets (3,336) (2,693)
Less: Lease principal payments (170) (154)
Add: Sales of property, plant and equipment and
intangible assets 26 28
---------- ----------
Free cash flow 10,181 2,809
Alternative performance measures (continued)
APMs derived from the Balance sheet
Net cash/(debt)
Net cash/(debt) is total borrowings plus lease liabilities less
cash and cash equivalents and other liquid investments, adjusted
for derivatives related to net debt.
Net cash/(debt) measures how we are managing our balance sheet
and capital structure. Refer to Consolidated net debt note for the
reconciliation on page 48.
Net gearing ratio
Net gearing ratio is defined as net cash/(debt) divided by the
sum of net cash/(debt) and total equity at the end of each period.
It demonstrates the degree to which the Group's operations are
funded by debt versus equity.
30 June 31 December
2021 2020
US$m US$m
----------------------------------
Net cash/(debt) 3,140 (664)
Net cash/(debt) 3,140 (664)
Total equity (58,169) (51,903)
Net cash/(debt) plus total equity (55,029) (52,567)
Net gearing ratio (6)% 1%
------
Operating assets
The Group's Operating assets comprises of our share of net
assets before deducting net cash/(debt).
This measure shows the net value of assets and liabilities used
to generate profits.
30 June 31 December
2021 2020
US$m US$m
-------------------------------------------
Equity attributable to owners of Rio Tinto 52,975 47,054
Add: Net cash/(debt) 3,140 (664)
Operating assets 49,835 47,718
------- -----------
Alternative performance measures (continued)
Underlying return on capital employed
Underlying return on capital employed ("ROCE") is defined as
annualised underlying earnings excluding net interest divided by
average capital employed (operating assets).
Underlying ROCE measures how efficiently we generate profits
from investment in our portfolio of assets.
30 June 30 June
2021 2020
US$m US$m
-------------------------------------------------------
Net earnings 12,313 3,316
Items added back to derive underlying earnings
(refer to page 56) (147) 1,434
Underlying earnings 12,166 4,750
Adjusted for 'Net interest':
Finance income per the income statement (42) (104)
Finance costs per the income statement 91 169
Tax on finance cost (10) (41)
Non-controlling interest share of net finance
costs (52) (54)
Net interest cost in Equity Accounted Units (Rio
Tinto Share) 16 16
Net interest 3 (14)
Adjusted underlying earnings 12,169 4,736
Annualised adjusted underlying earnings 24,338 9,472
Equity attributable to owners of Rio Tinto - beginning
of the period 47,054 40,532
Net debt - beginning of the period 664 3,651
Capital employed - beginning of the period 47,718 44,183
Equity attributable to owners of Rio Tinto - end
of the period 52,975 39,224
Net (cash)/debt - end of the period (3,140) 4,826
Capital employed - end of the period 49,835 44,050
Average capital employed 48,777 44,117
Underlying return on capital employed 50% 21%
Summary financial data in Australian dollars, Sterling and US
dollars
30 June 30 June 30 June 30 June 30 June 30 June
2021 2020 2021 2020 2021 2020
A$m A$m GBPm GBPm US$m US$m
44,879 30,894 24,935 16,121 Gross product sales 34,628 20,333
42,876 29,418 23,823 15,351 Consolidated sales revenue 33,083 19,362
Profit before tax from continuing
23,392 8,021 12,997 4,185 operations 18,049 5,279
Profit for the period from
16,936 5,243 9,410 2,736 continuing operations 13,068 3,451
Net earnings attributable
15,958 5,038 8,866 2,629 to Rio Tinto shareholders 12,313 3,316
27,264 14,647 15,148 7,643 Underlying EBITDA 21,037 9,640
15,767 7,217 8,761 3,766 Underlying earnings(a) 12,166 4,750
Basic earnings per ordinary
986.2 311.5 548.0 162.6 share(b) 761.0 205.0
Basic underlying earnings
974.4 446.2 541.4 232.9 per ordinary share(a) (b) 751.9 293.7
Dividends per share to Rio
Tinto shareholders(c)
397.48c 349.74c 221.86p 177.47p - paid ordinary dividend 309.00c 231.00c
119.63c - 66.77p - - paid special dividend 93.00c -
- proposed interim ordinary
509.42c 216.47c 270.84p 119.74p dividend 376.00c 155.00c
- proposed interim special
250.64c - 133.26p - dividend 185.00c -
Cash flow before financing
13,419 4,092 7,456 2,135 activities 10,354 2,693
30 June 31 December 30 June 31 December 30 June 31 December
2021 2020 2021 2020 2021 2020
A$m A$m GBPm GBPm US$m US$m
4,179 (864) 2,270 (488) Net cash/(debt) 3,140 (664)
Equity attributable to Rio
70,497 61,252 38,295 34,592 Tinto shareholders 52,975 47,054
(a) A reconciliation of underlying earnings to net earnings can
be found on page 56.
(b) Basic earnings per ordinary share and basic underlying
earnings per ordinary share do not recognise the dilution resulting
from share options on issue.
(c) The Australian dollar and Sterling amounts are based on the
US dollar amounts, retranslated at average or closing rates as
appropriate, except for the dividends which are the actual amounts
paid or payable.
Metal prices and exchange rates
Increase/
(Decrease)
Six months Six months Year to
HY 2021 31
to 30 June to 30 June Vs. December
2021 2020 HY 2020 2020
Metal prices - average for the
period
Copper - US cents/lb 413c 249c 66% 281c
Aluminium - US$/tonne $2,245 $1,595 41% $1,702
Gold - US$/troy oz $1,805 $1,645 10% $1,770
Average exchange rates against
the US dollar
Sterling 1.39 1.26 10% 1.28
Australian dollar 0.77 0.66 17% 0.69
Canadian dollar 0.80 0.73 9% 0.75
Euro 1.21 1.10 9% 1.14
South African rand 0.069 0.061 13% 0.061
Period end exchange rates against
the US dollar
Sterling 1.38 1.23 13% 1.36
Australian dollar 0.75 0.69 10% 0.77
Canadian dollar 0.81 0.73 10% 0.78
Euro 1.19 1.12 6% 1.23
South African rand 0.070 0.058 21% 0.068
Availability of this report
This report is available on the Rio Tinto website
(www.riotinto.com).
Forward-looking statements
This announcement 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 announcement, including, without limitation, those
regarding Rio Tinto's financial position, business strategy, plans
and objectives of management for future operations (including
development plans and objectives relating to Rio Tinto's products,
production forecasts and reserve and resource positions and any
statements related to the ongoing impact of the COVID-19 pandemic),
are forward-looking statements. The words "intend", "aim",
"project", "anticipate", "estimate", "plan", "believes", "expects",
"may", "would", "should", "could", "will", "target", "set to",
"seek", "risk" 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 are levels
of actual production during any period, levels of demand and market
prices, the ability to produce and transport products profitably,
the impact of foreign currency exchange rates on market prices and
operating costs, operational problems, political uncertainty and
economic conditions in relevant areas of the world, the actions of
competitors, activities by governmental authorities such as changes
in taxation or regulation, the risks and uncertainties associated
with the ongoing impacts of COVID-19 or other pandemic and such
other risk factors 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. The above list is not
exhaustive. Forward-looking statements should, therefore, be
construed in light of such risk factors and undue reliance should
not be placed on forward-looking statements, particularly in light
of the current economic climate and the significant volatility,
uncertainty and disruption caused by the outbreak of COVID-19.
These forward-looking statements speak only as of the date of this
announcement. 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 announcement 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.
LEI: 213800YOEO5OQ72G2R82
Classification: 1.2 Half year financial reports and audit
reports
Contacts
media.enquiries@riotinto.com
www.riotinto.com
Follow @riotinto on Twitter
Media Relations, United Kingdom Media Relations, Australia
Illtud Harri Jonathan Rose
M +44 7920 503 600 M +61 447 028 913
David Outhwaite Matt Chambers
M +44 7787 597 493 M +61 433 525 739
Media Relations, Americas Jesse Riseborough
Matthew Klar M +61 436 653 412
T +1 514 608 4429
Investor Relations, United Kingdom Investor Relations, Australia
Menno Sanderse Natalie Worley
M +44 7825 195 178 M +61 409 210 462
Amar Jambaa
David Ovington M +61 472 865 948
M +44 7920 010 978
Clare Peever
M +44 7788 967877
Group Company Secretary Joint Company Secretary
Steve Allen Tim Paine
Rio Tinto plc Rio Tinto Limited
6 St James's Square Level 7, 360 Collins Street
London SW1Y 4AD Melbourne 3000
United Kingdom Australia
T +44 20 7781 2000 T +61 3 9283 3333
Registered in England Registered in Australia
No. 719885 ABN 96 004 458 404
This announcement is authorised for release to the market by Rio
Tinto's Group Company Secretary.
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